It’s no secret that the UK Government has been trying to get a bit more of a handle on gambling issues. The country has experienced a bit of a surge in gambling related problems, including more people being diagnosed as addicted and an increase in minors accessing gambling products. Of course, this isn’t something that is such an easy task to undertake. While the move to reduce the maximum bets placed on fixed odds betting terminals (FOBTs) was brought into effect, this hasn’t been enough according to many.
With various different problems and sectors to focus on, the Government has had its work cut out for it. The issue for many people is that the current Gambling Act, which was introduced in 2005, has very little to do with today’s internet and mobile gambling sector. Therefore, it’s quite difficult to govern over when there are few laws that really place enough focus on it.
However, in the recent House of Lords report, notes were made on a discussion that more needs to be done in order to prevent gambling-related harm. Changes are something that various parties and individuals have been calling for in the past few years. With a potential new gambling act being brought into effect though, what could those changes be? Well, as it happens, quite a lot of focus was placed on the banning of white labels, and this could spell a bit of upset for sportsbook and casino operators.
Why is the Government taking aim at white labels? And what is it about these third parties that makes them a necessary target when it comes to gambling related harm?
A Fine for FSB and Warnings for Third Parties
Gambling businesses operating in the United Kingdom were recently warned that regulatory action would be taken against them if they didn’t carefully manage all of their third-party websites. This notice came in May of 2020, following a £600,000 fine being handed out to FSB Technology. That fine was handed out to the operator for advertising, money laundering and social responsibility failings. Furthermore, it was ordered to operate under additional licence conditions by the Gambling Commission.
The business model of the brand includes contracting provisions of its licensed activities to third parties, too. It is this arrangement, which is frequently referred to as a ‘white label’, that places sole responsibility on the licensee to ensure that all third-party partners adhere to safe and fair gambling laws.
Unfortunately for FSB, the Commission discovered that it did not have sufficient oversight of three of its own third-party platforms. Furthermore, it didn’t have effective anti-money laundering and social responsibility policies and procedures in place between January 2017 and August 2019.
It was through this fine that the Gambling Commission took aim at other operators with white labels. The Commission Executive Director, Richard Watson said that they should all pay close attention to the FSB case. This, he said, showed that all licensees are fully responsible for third-party relationships that they have. Therefore, the Commission will act against any licensees not properly overseeing these relationships.
The extra condition added to FSB’s licence ensures that it conducts risk-based due diligence on both new and current third-party partners. The actions of personal management licence holders involved are still being reviewed.
The Issue with White Labels
As can be seen from the FSB Technology incident, white labels tend to be causing certain problems for operators. This is due to the fact that many operators run multiple sites, and this causes them to struggle when it comes to keeping up with proper practices. Monitoring customers should be a prime focus for online gambling sites, but if there are tens or hundreds of white labels that they also need to keep a track of, it can be exceptionally difficult.
Obviously, the operator is the one who holds the actual gambling licence, and they need to adhere to the laws of the country. Yet, the brand owner works with the marketing and advertising side of things. Therefore, it could be said that there’s quite the cross-purpose in operation at white labels. In essence, the brand owner is the one that is doing all the interaction with the customers and should theoretically ensure monitoring is taking place properly. However, it’s the licence holder who gets into trouble if it’s not done.
In that instance, there’s not as big an incentive for the brand owner to comply because they don’t really stand to be punished if due diligence isn’t carried out. It is for this reason that government reports and committees recently took aim at white labels.
What is it that they have discussed with regard to these sites? Well, one suggested change that could become a part of a new gambling act for the UK is to ban them altogether, this is due in early 2021 (although could be delayed due to corona virus and/or Brexit issues).
Could this really come into effect, though? After all, just about all new online casino sites in the country today are white labels. This means that there are hundreds of platforms all providing gaming locations for avid fans to sign up to and deposit at. In turn, the revenue that the sites make is taxed and a lot of income for the Government comes from there.
Would the UK Government really proceed with banning operators from possessing multiple sites as white labels? Could they successfully enforce something like this, and would they really want to part with such a big amount of money each year?
What Does the Report Suggest Specifically?
According to the report from the House of Lords, slot games in the UK should have mandatory stake limits of between £1 and £5, as well as a £100 monthly “soft cap” for deposits. Furthermore, the report suggests that the current white label system should be completely abolished. At the same time, suggestions for the Gambling Commission to be completely replaced by two separate bodies came into play. One of the bodies would handle licensing and compliance, while the other would work with customer protection.
Other key recommendations from The House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry included:
- A new system for testing all games against a series of harm indicators, including their addictiveness.
- The equalisation of speed of play and spin, so no game is able to be played quicker online than in a land-based establishment.
- Enhanced efforts of the Commission to explain minimum steps that operators should take when they consider customer affordability.
- The creation of a statutory independent Gambling Ombudsman Service.
- The inclusion of loot boxes and crates into the remit of gambling legislation and regulation.
- The removal of gambling operators being able to advertise on the kits of sports teams or in any sports grounds.
- The reinforcement of the NHS treating problem gambling as a common mental health disorder and proceeding with opening 15 new clinics before 2023.
Dr James Noyes, former advisor to Labour Party deputy leader Tom Watson, has compiled the Social Market Foundation document, with a blueprint for reform. This is set to be introduced prior to the upcoming review of the Gambling Act 2005. As noted, this is something that many people have been looking to take place for some time now. A new gambling act is what most think will curb the out of control industry.
“If integrity is to be brought back to the British gambling licence, there can be no more room for grey areas”, the document from Noyes states. “This means no more room for grey markets. One of the main drivers of the grey market is the continued existence of white labels”.
Difference Between White Labels & Third Party Sites
Just because a gambling operator runs a third-party platform, doesn’t mean that it is automatically a white label. Basically, the key difference all relates to the gambling licence itself. A white label is a company that essentially runs under the umbrella of someone else’s licence. If an operator has a licence and then allows 10 other brands to open under that licence, those 10 sites would be considered as white labels.
When you play or bet with a white label it is the operator not the brand owner that is responsible for you with regards to responsible gambling, monitoring and verification. They also hold your money and are responsible for managing payments.
A company utilising its own licence to run a third-party platform is not considered a white label. You only need to look at SBTech as an example, which hosts numerous third-party platforms, but each licensed by individual brand owners. This differs because the brand owner is the same as the licence owner. With white labels, these are two separate entities.
It is this difference that is causing the main problem, as white labels are less transparent and it is often difficult to know who the brand owner is. It is the licence holder which must ensure that these white labels are adhering to necessary monitoring practices. If an operator has multiple brands under its umbrella, it’s little wonder that this can be difficult to keep up with.
Closure Of So Many Bingo White Labels
It’s not only casino and sports betting sites that have a plethora of white labels, bingo is heavily dominated by them, with over 90% of sites being white labels. In the 2010s, white label bingo sites went through quite the boom. Why? Because they provided the easiest method for brands to launch on a budget. Additionally, if a company wanted to spin off ‘skins’ of existing sites, white labels were the best way to go about it.
The principle behind white labels is simple for bingo, casino, sportsbooks and so on. The operator of the white label provides the site, payment processing, network, games and gambling licence. The owner just works with the branding and marketing side of things (and potentially customer support). Therefore, by the end of the 2010s, white labels outnumbered independent sites by far.
However, with online gambling regulation having a prime focus placed on it in 2017-18, things started to change. It has become much more difficult for white label providers to proceed with such lately. Therefore, over the past couple of years, many have taken to closing down sites or networks quite rapidly.
In 2017, the Cozy Games brand was acquired by GVC and over the proceeding three years, most of their white labels were closed. This was so the network could be brought more “in-house”, and the software was re-branded as ElectraWorks.
Virtue Fusion, which was owned by Playtech, scaled back on white label operations in favour of B2B services. As of 2020, only a single brand remains active on the licence, with the sites run by Virtue Fusion either closing or migrating to other white label operators. Bucky Bingo also moved from the Virtue Fusion label to 888-owned Dragonfish in early 2020. Alongside Jumpman, Dragonfish is one of two continuing to expand by taking on brands dropped by other networks.
Several factors have caused bingo white labels in specific to be closed down, with the higher point of consumption tax introduced in 2019 being one of them. This went from 15% up to 21%, which had an obvious effect on profits for brand operators.
Of course, with there being so much competition in the bingo world, this has had its own effect. White labels often run with lower budgets, especially when it comes to bingo. They are not quite as able to compete with others when it comes to advertising and acquisition. This has led to many of them failing to maintain payments to site operators.
What’s more, the online market was quite relaxed 10 years ago. This is potentially what led to there being such a boom in white label bingo sites. Other than verifying that players were over 18, licensees didn’t really have much more to do. Of course, when problem gambling increased, the Commission did something about it and introduced more stringent procedures. White label operators now have much more responsibility when it comes to monitoring. It has been easier for a lot of them in the bingo world to simply shut down.
Will the Ban Come into Effect?
Despite the number of bingo white labels closing since the 2017-18 period, casino white labels seem to have battled through. Even with the increasing taxation since 2015, hundreds of them still exist, and this has doubtless led to a much more fruitful Government revenue figure. The question is, would the Government actually place a ban on these sites?
Asking us outright, we would probably say that a full-on ban is an unlikely route. We’re not saying that it won’t happen, but as we all know, the Government likes money. The gambling industry contributes a lot of that in taxes, and with fewer sites available for people to join, a lesser revenue figure should also be expected. There was already somewhat of a furore over the lowering of the maximum bets on FOBTs, and it was this that forced the Government to make some changes to cover the loss of income there.
Instead of white labels being fully banned, we’d probably expect them to go through some sort of dramatic change in the law. This should be done so as to ensure that proper monitoring is done by the brand owner, and that if there are any issues with this, the brand is penalised instead of the licence owner. Whether or not the Government would go ahead with something like this is also questionable.
Until the Gambling Act of 2005 is reviewed in full, it’s difficult to say what will or won’t happen. For now, everything is purely speculation. However, given new gambling laws on stake limits, monitoring and engagement with users that will also be part of a new act it will make the UK less profitable and so it is likely we will see less white labels either way.