As the rumours continue to swirl about the Government potentially introducing new taxation measures upon gambling companies, it is important to understand unintended consequences. Whilst on the face of it taxing the betting companies more, may seem an easy win, there are so many unintended consequences to this. I have so little faith in those making these decisions to truly understand what those unintended consequences will be.
Let’s give a recent example of unintended consequences and how poorly those making these decisions, actually understood what was happening. Affordability checks. The basic concept had merit and was something that felt inevitable given the way the bookmakers had behaved in recent years. However, the way it has been applied has been nothing short of pathetic.
First, we had all the ambiguity as to whether it was even happening or not. The ambiguity as to what the levels would be set at. The ambiguity was both from bookmaker and punter. No one had any clue what was going on and even now it still remains a mystery. Let’s put that aside and get to the bigger issue. The unintended consequences of it.
We now have this absolutely crazy situation where people are effectively penalised for withdrawing money from their account. For behaving in a rational, sensible manner they are penalised by then facing deposit restrictions in the future. Variance is a very real problem within sports betting and the lack of acknowledgement of it, says everything about those making these decisions and their understanding of the subject manner. The only way many people feel they can counter variance and the potential deposit issues is by either leaving more money in their betting account or having to change how they are betting. Neither is an optimal solution.
Encouraging people to keep more money than necessary in an account is just increasing the chances of reckless behaviour on that account. Which goes against the whole point of affordability checks in the first place. Not only that but in an era of higher interest rates the bookmaker benefits from customers keeping additional money in their betting accounts rather than bank accounts. Why penalise the punter who you were meant to be trying to help?
You are also exposing customers to much greater risks than they may want, that an operator may cease to exist. Increasingly important when the Gambling Commission doesn’t insist on all companies segregating/ring fencing customers money.
Let me give a real life example of how ridiculous the situation has become. A friend used to use Draftkings a lot. The swings and variance on the account were pretty wild but all within expected levels. He had made large sums of money in recent years but went on a bad downswing (expected) and was in a situation where he needed to top up the account to continue playing in the manner he was before and wanted to going forward.
He had to jump through all sorts of ridiculous hoops to then be told he was limited as to what he could deposit into the account. Despite being a significant recent winner and having the funds ready to go. One of the ironies was that Draftkings weren’t allowed to tell him exactly what he could deposit. It would either be approved or not. The whole situation was a farce from start to finish. He had to reduce stakes whilst the restrictions were in place until he could get his balance back up to a reasonable amount for the stakes he wanted to play at.
He then went on a nice winning run. He had to leave the balance in the account (significant sum) because he was scared to face the same issues encountered before. There is the real cost of leaving literally tens of thousands of pounds on the table in terms of interest had the capital been employed elsewhere (more sensibly). You also had huge currency exchange risks as the funds had to be converted into US dollars. All the time whilst risking that something untoward doesn’t happen to Draftkings. Whilst that chance wasn’t high it also wasn’t zero.
As you can imagine he was delighted when Draftkings then pulled out of the UK market. Having to pay foreign exchange costs on a large sum for a second time. All the time and effort trying to get money into the account. All this nonsense because the Gambling Commission didn’t and don’t truly understand unintended consequences. As is always the case when the bookmakers aren’t squealing, maybe that in itself is a sign that they aren’t too fussed by what is happening. They love customers having to keep bigger balances with them.
I know so many people who are in a similar situation with betting exchanges. It makes a complete mockery of the original intentions.
As for what will happen with an increase in tax it would be incredibly naive to think that there won’t be so many other unintended consequences. The customer will suffer as a consequence. The bookmaker will undoubtedly look to increase the margins on the products it offers. It is safe to assume that the bookmaker will further restrict those using certain products. It will inevitably lead to customers being driven to the more competitive Black Market and the perils that brings. The smaller bookmaker will suffer. Sports such as Horse Racing will suffer. Why would a bookmaker want to stay in the UK and pay taxes here? The list is endless.
There are so many other knock on consequences to a decision like this and quite frankly I would have absolutely zero confidence that those making these decisions actually understand what they are doing. That’s not to say that taxes around a product such as slots shouldn’t be looked at. It just needs to be done with much greater care and understanding.
ProPunting 