Are new UK iGaming regulations threatening small businesses?

Slot machines are one of the most played games in the gambling industry. This is largely due to the fact they’re easy to play, are hugely entertaining, and can result in a massive jackpot if you’re lucky.

Calls for a stake limit for online slot games led to shares in iGaming businesses to plummet, with fears of the effects this change, and increasingly stringent regulations across the board, could have on the industry.

This has especially caused concern amongst small businesses. Those who can, are looking further afield, to the US and beyond, but what of the small businesses that are likely to stay based in the UK?

A Call for Change

In early November 2019, an all-party parliamentary group, focused on gambling related harm, called for the government to reduce the maximum stake for online slot games to £2.

This comes not long after a similar rule was requested, and enacted, for fixed-odds betting terminals (FOBTs) which caused widespread panic across the land-based betting industry.

The logic of the call for change is simple, as Labour MP Carolyn Harris explained:

“If they are not acceptable in land-based venues they should not be allowed online.”

It seems like the change could make more of an impact if it was put in place for online slot games. This was made clear by a drop in value of nearly £1.2bn for UK gambling firms on the stock market in the wake of the news.

The Impact

The repercussions of this bill, should it be passed, would be felt across the industry. Slot games make up a third of all income for gambling companies in the UK, and are estimated to be worth more than £2 billion a year.

The largest drops in share prices hit the bigger companies, with 888 losing 14% of its value, and GVC, which owns Ladbrokes, losing over half a billion in value overnight.

However, the most concern is being felt by smaller businesses such as the many new casino comparison websites and startup slots companies looking to make an impact in a highly competitive industry. It goes further than just the UK too, as many foreign operators may have to start blocking UK traffic if regulations in the UK see the limits dropped to £2 per spin.

The Troubles for UK Small Businesses

Small businesses in the UK iGaming industry have been feeling the strain of regulations for some time now. Forced to pay UK tax, POC tax, and make withdrawals easier for players who are used to swift and affordable options. This change could be the final nail in the coffin for many small companies.

While the iGaming industry sees a huge amount of money pass through it every year, this has led to a hefty increase when it comes to taxes and regulation. The UK Gambling Commission (UKGC) has made it very clear they are not scared to hand out hefty fines for those seen to be failing to comply with regulations, with individual fines reaching into the millions on several occasions.

For a long time, the UK had an approach that appeared fairly laid back when it came to regulation of the iGaming industry, leading to a fertile marketplace, but those times are in the rear view mirror now. With the tax rises, the risk of fines, and looming changes on the horizon, it’s a scary time for UK based iGaming businesses, and scarier still for small businesses.

But is there a way out?

Crossing the Atlantic

On the other side of the coin, as regulations tighten in the UK, they are loosening in the US, and many small businesses are already looking at focusing on this new market, especially after a US Supreme Court ruling that could lead to the legalisation of sports betting across the US.

It isn’t only the US market, Asian markets including India have seen a great deal of attention turn their way recently, but it appears that the first stop on most company’s global plan is the United States, and there is certainly potential in that market.

Whether this is enough remains to be seen, but with the chance of a No Deal Brexit still in the air, which could change the way personal data is accessed between the EU and the UK, it seems like there is rarely good news for small iGaming companies working in the UK.

The UKGC and the UK Government have made it clear that further regulation and law changes could be on the horizon, meaning that operating in the UK looks set to only become more expensive. For the giants of the industry, this is a big blow, for the smaller businesses, it could be far more extreme.

The change in FOBT limits made a huge dent in the profits of UK based gambling businesses, and when one considers the higher percentage of income that comes from online slots for most companies, a similar change for this game type could have catastrophic effects.

It is important to note that just because the limit reduction for online slots has been suggested, doesn’t mean it will happen. However, if it does, it could change the face of the gambling industry forever, and may leave numerous small businesses closing in its wake.

But for the meantime, with further changes expected in the near future, don’t be surprised if an increasing number of UK gambling businesses start turning their attention towards other countries in the near future.

For the major companies, this should prove to be a decision that doesn’t have too much of a drastic impact on income, for the smaller companies, with considerably more at stake, it’s a gamble, but one that may well pay off.