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Consultation response

Changes to the licence conditions and codes of practice on High Value Customers

Response to consultation on strengthening controls on how licensees incentivise high spending customers.

  1. Contents
  2. 2 - Introduction

2 - Introduction

The Gambling Commission

We license and regulate commercial gambling within Great Britain, including the National Lottery, with the exception of spread betting which is regulated by the Financial Conduct Authority (FCA).

Our functions under the Act include:

  • licensing operators and individuals
  • monitoring compliance with licence conditions and the law
  • investigation and enforcement, both in relation to licensees and illegal (unlicensed) gambling
  • providing advice to central and local government on the incidence, manner, effectsand regulation of gambling.

We have a statutory duty to aim to permit gambling provided that it is reasonably consistent with the licensing objectives.

Consultation proposals and background

The management and incentivisation of HVCs poses two key regulatory challenges:

  1. HVCs are more heavily engaged gamblers in terms of their gambling spend, the frequency with which they gamble, or both. Heavily engaged gamblers are at greater risk of gambling-related harm.
  2. The disproportionate financial value of HVCs to licensees means regulatory compliance can conflict with short-term commercial objectives.

We are concerned that these regulatory challenges have not been consistently met by licensees. This has resulted in repeated instances of gambling-related harm and, in some cases, failure to prevent criminal proceeds being spent on gambling.

On 19 June 2020, we launched a consultation on proposals to amend social responsibility code provision 5.1.1 and introduce new guidance setting out the minimum standards we expected to be met to ensure HVC schemes are offered in a responsible manner. The consultation ran for 8 weeks and closed on 14 August 2020.

We received 81 written responses from the following categories of respondents:

Responses
Response group Responses
Licence holders 38
Trade associations 3
Professional bodies 8
Charitable organisations, non-profit or academic organisation 4
Members of the public 14
Others 14

There was a notable split between respondents who felt that the draft guidance was too restrictive, and those calling for a ban on HVC schemes.

Some respondents observed that rewards and heightened service levels are a normal part of market offering, and considered the guidance more restrictive than the industry’s voluntary code.

Others queried whether the commercial incentives underpinning HVC schemes could reasonably coexist with the licensing objective to protect vulnerable customers from gambling harm.

We identified several other key themes, notably:

  • Calls to draw a clearer distinction between HVC schemes and low value incentives offered to ‘regular’ staking customers, such as free bets or a higher value prize offered as part of a free customer prize draw.
  • Queries into the appropriateness of carrying out source of funds checks on HVCs, particularly where spend has fallen below the legal threshold for conducting AML checks.
  • Concern with proposal to ban individuals that had previously been a member of a multi-operator self-exclusion scheme, given the varied reasons consumers may have opted to register with such a scheme.

Our final position on each of these areas is provided in the boxes titled our position under the relevant section of this response.

Stakeholder engagement

The interim Experts by Experience group considered the risk of harm associated with HVC schemes too great and strongly favoured a blanket ban on HVC schemes to all GB consumers.

We understand the nature of the panel’s concerns, based in part on personal experiences. We agree that HVC schemes cannot continue to be offered without rigorous safeguards.

Where licensees are unable to apply our guidance, they should not offer HVC schemes to consumers. Should a business be found to have misapplied the guidance, or use HVC schemes to exploit vulnerable consumers, they will be subject to regulatory action.

This may include, but not be limited to, restrictions placed on individual licenses that will prohibit the offering of HVC schemes.

Other regulatory considerations, including fines or licence revocation (for example, PML holders or operating licences), will be applied on a case by case basis in accordance with our published enforcement processes.

Next steps

The changes to LCCP and new guidance will come into effect on 30 October 2020 and will apply to all licensees, except gaming machine technical and gambling software licences.

Previous section
HVC Response - 1 - Executive summary
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HVC Response - 3 - Changes to social responsibility code provision 5.1.1 – Rewards and bonuses