Gambling licensing Journal

law and procedure update

No decision yet on the Greene King’s bingo application, but plenty of developments on fixed odds betting terminals, as Nick Arron explains

There has been little gambling case law to excite in recent months. But there have been a number of policy developments within gambling regulation relating to gaming machines, with fixed odds betting terminals or B2 machines, as always, at the top of the agenda. 

There have also been developments regarding non-complex Category D gaming machines, and skill with prize machines, which are rarely discussed in the pages of the Journal, but which I will focus on in this article.

  Many licensing officers will either have considered or will be considering amendments to their Gambling Act 2005 Statement of Principles; and some may have been waiting for the Gambling Commission’s fifth edition of its Guidance to Licensing Authorities, which was considered at length in the previous edition.  There is no update regarding the draft edition, other than to say we are expecting the final version shortly.  The Gambling Commission published the the fifth edition on 29th September, just as the Journal went to press, and I have made some initial comments below.

  Nor have tThere have been any on developments regarding the litigation between the Gambling Commission and Greene King over Greene King’s application for a non-remote bingo operating licence.  The Gambling Commission’s appeal to the Upper Tribunal was due heard on 8th in early October, before we went to press, and the outcome of the appeal will be of significant interest to members, the industry and regulators. 

The Gambling Commission has publicly announced that is considering amendments to the relevant licence conditions and codes of practice and that, in the event that the Commission is unsuccessful in its appeal to the Upper Tribunal, it is likely to seek changes in the law and/or amendments to the regulatory regime.  The Government has supported the Commission’s position.  We are awaiting a further consultation from the Commission on primary activity and this may hint at these changes.

  So, there will be much to consider in the next edition but for now we will now focus on the policy developments regarding gaming machines.

Fixed Odds Betting Terminals
This summer, we have also had a Private Member’s Bill in England, sponsored by Lord Clement-Jones, which sought to reduce the maximum stake for FOBTs to £2.  The Bill does not appear to have gained sufficient support for debate. 

  On the same subject, during the summer the Government rejected a request by 93 councils in England and Wales, under the Sustainable Communities Act 2007, to reduce the maximum stake on fixed or betting terminals from £100 to £2. 

  The Sustainable Communities Act 2007 allows councils to petition Government to make changes to legislation to help them promote the sustainability of local communities.  The Government referred to a number of initiatives by both regulators and the industry in refusing the request.

  Over the summer, the Scottish Parliament issued a call for evidence regarding the Scotland Bill 2015 and specifically clause 45 of the Bill, which proposes devolving legislative competence in relation to gaming machines authorised by betting premises licence where the maximum charge for a single play is more than £10. 

The Bill followed the Smith Commission, set up to consider further Scottish devolution, whose recommendation at point 74 was that the “Scottish Parliament will have the power to prevent the proliferation of fixed odds betting terminals”. 

  The proposals in the Bill would amend the Gambling Act 2005 so the Scottish Ministers would be able to vary the number of machines allowed on betting premises.  As originally drafted, the amendment would only have applied to applications for new betting premises.

  The call for evidence followed concern from the Scottish Government that clause 45 of the Scotland Bill did not meet the Smith Commission recommendation.  A series of amendments to the Scotland Bill were lodged, on behalf of the Scottish Government, which if enacted would significantly extend the power of the Scottish licensing boards to limit gaming machines within gambling premises.

  The amendments at 31, 32, 146 and 163 would, together, create the power for licensing boards to limit machines of all categories, and allow them to introduce the limits retrospectively, will apply to all gambling premises and seek to limit the maximum stake to play B2 gaming machines to £2.

Understandably, there has been concern within the industry that the proposed amendments to the Bill would have significant impact on bingo and arcades, and go beyond the Smith Commission recommendation.  The closing date for receipt of responses to the call for evidence was at the end of August and we await the outcome.

Reclassification of Non-Complex Category D Gaming Machines
The Gambling Commission, the amusements organisation BACTA and a number of gaming machine suppliers have been working on the reclassification of non-complex Category D gaming machines since 2014.  They have now come to an agreement regarding the timetable for the implementation of the changes.  Licensing officers may have received applications for increases to licensed premises gaming machine permits, or new applications for unlicensed family entertainment centres to allow for the reclassification. 

  The reclassification relates specifically to machines which operate a mechanical arm, or similar type device, which allows the player to select a prize.  These machines also have a compensator unit, which determines the percentage of payout of the machine, or how often the player wins.  The compensator can be set so that the machine will only allow the player to win a number of times within a set limit, for instance, one time within 50 plays.  Thus, when a player approaches one of these machines, it may not be possible for them to win, even if they are most skillful, because the game has recently awarded a prize. 

These games, and there is a specific list available on the Gambling Commission’s advice document issued in August 2015, are to be reclassified as non-complex Category D gaming machines.  Previously, they had been considered to be skill with prize machines.  The majority of this type of machine will be operated in adult gaming centres, or family entertainment centres; for these machines, applications to allow them to be made available to the public will not be required.  You often will see these machines in shopping centres, motorway service stations and sometimes within the larger suburban pubs or bowling centres. 

  Applications for new permits or variations to existing permits should have been made by 31 August 2015, and the permit or premises licence must be in place by 31 December 2015. 

Gambling Commission
Sarah Harrison has been appointed Chief Executive of the Gambling Commission, following Jenny Williams’s departure.  Sarah, who took over on 1 October 2015, was previously a Senior Partner at OfGem where she headed the Sustainable Development division.  Other previous roles include Managing Director of Corporate Affairs at OfGem, Communications Director of Corporate Affairs at OfGem, Communications Director at OfGem and Chief Executive of ICSTIS, which regulates premium rate telephone services.

  You may also have seen the Gambling Commission publish its annual review during the summer.  As well as giving an overview of the year, one highlight in Chairman Philip Graf’s foreword was that the Commission will be considering to what extent anonymous cash-based play should continue to be accepted for higher stake gambling.  

  Finally, and directly related to anonymous cash play, in the summer the fourth Anti-Money Laundering Directive was published by the European Union.  The fourth Directive is significantly wider than the third Directive, as it proposes to cover all gambling services.  The third Directive, implemented in 2007, applies only to casinos.  Interestingly, the fourth Directive will potentially allow member states to exempt sectors of the gambling industry if they can demonstrate that the sector poses a low risk, by the nature and scale of their services, to money laundering.  It will be HM Treasury which is responsible for making the decision as to whether sectors are exempt, although it will be advised by the Gambling Commission. 

  The publication of the Directive begins a two-year process during which member states will consider how to legislate for the requirements in domestic law.  This is likely to result in further money laundering regulations being published in the autumn of 2016, with the aim of coming into force in the summer of 2017.

  The fourth Directive will have a significant impact on businesses within the sectors to which it is applied by HM Treasury.  Much gambling is based upon anonymous cash-based play and for those sectors affected by the fourth Directive, the anonymity, to an extent, is likely to end.  Although we wait to see which sectors are exempt, and the detail of the regulations, for those sectors affected we are likely to see approaches to anti-money laundering similar to those which you would currently only expect within casinos.

Guidance to licensing authorities fifth edition.
  The final published version of the fifth edition Guidance is not significantly changed from the document put out to consultation by the Gambling Commission. One immediately obvious change from the proposed version is the absence of the appendix of sample conditions from the final published version; instead the Gambling Commission will publish sample conditions on their website, a move which will be generally welcomed by the industry.

  The significant changes, for instance the guidance on local area profiles, local risk assessments and on understanding local risk were necessary and followed the requirement for local risk assessments in the Licence Conditions and Codes of Practice. There have been some changes to the language used by the Gambling Commission, with references to ‘concerns’ and ‘perceived risks’ changed to refer to local risks to the licensing objectives. Further analysis will follow in the next Journal.