Investigation into Fixed Odds Betting Terminals ('FOBTs')

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Fixed Odds Betting Terminals are highly profitable gaming machines that are located in most betting shops, meaning that any threat to their continued operation is a matter of serious concern for the bookmaking industry. In this piece we look at the current position in relation to the numbers of FOBTs in betting shops and restrictions on their manner of play and also at the investigation currently being conducted by the Gambling Commission into such machines.

At present, the following principal standards apply to FOBTs:

• The maximum number of machines in a betting shop is currently four;
• Frequency of play is 20 seconds, (e.g. each game cycle must last at least 20 seconds to complete);
• The maximum stake is £100 (in multiples of £10); and
• The maximum prize is £500.

It is worth noting that the actual number of machines may be amended by the Secretary of State (currently Andy Burnham) under secondary legislation, so it would be relatively straightforward for the number of permitted FOBTs per shop to be altered if that was the outcome of the investigation. Also, new regulations could be put in place by the Secretary of State re-categorising the machines and placing new restrictions on their use. Finally, it is a condition of gaming machine technical operating licences that they comply with the Gambling Commission’s technical standards, which contain specific requirements for hardware, software and games in relation to frequency of use for example. The current Technical Standards were drafted after extensive consultation; it is unclear but likely that a further period of consultation would be required in order to amend these Standards in the future.

On 20 February 2008 (at the same time as announcing its determination of the 47th Levy Scheme) the Government also announced an investigation by the Gambling Commission into the risks associated with high-stakes gambling machines. Concerns were expressed that the Government had instigated the enquiry into FOBTs as a stick with which to encourage the bookmakers to play ball in the review and modernisation of the horserace betting levy. However, if the Government were to reduce the permitted number of FOBTs or otherwise limit their attractiveness to punters in a way not supported by the evidence of the Commission's latest investigation, a judicial review would be likely to be brought by the bookmaking industry.

On 14 March the Minister for Sport, Gerry Sutcliffe, asked the Commission to give priority to the research on FOBTs and further to this the Commission published its research proposals on 31 July in a letter to the Minister for Sport click here. The proposals suggested:

• Immediate qualitative work be undertaken using the at-risk and problem gambling contacts made in the British Gambling Prevalence Survey 2007, looking at specific gaming machine features;
• Re-analysis of data from the Prevalence Survey and other studies in light of recent research;
• The establishment of an international panel to help the Commission develop a research programme focused on gaming machine regulation and minimising harm in the Great Britain context; and
• Subject to the advice of such panel and the necessary funding, the extension of this work to study a larger panel or regular gamblers.

The Commission devised these proposals following a review of existing research and consultation with experts to determine the usefulness and relevance of the available research to machines in Great Britain. After conducting this review, the Commission stated that there was a broad consensus that high-stake, high-prize machines are particularly attractive to those at risk of problem gambling and to those with a gambling problem. Mr Sutcliffe specifically picked up on this point in his response to the Gambling Commission dated 6 August click here. Highlighting the finding as a "key conclusion of the review" he stated "I welcome the Commission's commitment to explore this association in greater detail in the UK context through a programme of further research…" However, the Commission had actually qualified this conclusion by emphasising that this does not mean, however, that there is a consensus about the extent to which such machines cause gamblers to become problem gamblers, how such machines should be compared with other forms of gambling, or the extent to which regulatory action focused on high-stake, high-prize machines would actually reduce the development of problem-gambling. A summary of the results of the review or 'desk exercise' is to be made available imminently.

In its letter to the Minister, the Commission set out a number of short-term initiatives along with longer-term proposals. In the short term, the Commission aims to obtain the views of panel experts and stakeholders to discuss harm minimisation, methods of behavioural study and the making available of industry data to aid with research efforts. Longer term, the Commission will look at the possibility of commissioning a "British longitudinal study", involving repeated observations of the same group of people over different points in time, to look at the risk factors for problem gambling.

The Commission is scheduled to report in June 2009 on the proposed short term initiatives, and provide an update as to its progress in relation to the longer term proposals.

In the meantime, certain organisations remain opposed to FOBTs and how they are currently regulated and continue to make their feelings on the subject known. As part of its response to the Gambling Commission Second Consultation on the Review of Gambling Research, Education and Treatment (responses and final report and recommendations document published on 21 October 2008), when referring to a formula for calculating voluntary contributions to RIGT, the Casino Operators Association stated that "an industry formula rather than a sector formula is disproportionate", based in large part on evidence of increasing income generated for the bookmakers from FOBTs. The COA also stated its view that, further to references in the Prevalence Survey to the contribution of FOBTs to problem gambling, ""the polluter should pay" and betting shops should contribute in relation to the problems caused by their B2 machines".

In addition, a few months ago a lobby organisation fairandopengambling.net launched with the aim of letting "everyone in the gambling industry, the industry regulators and the government know that there is a groundswell of people who believe that these Terminals are unfair, exploitative and unethical." Fairandopengambling.net placed an advertisement in the Financial Times regarding FOBTs with a list of reasons that they believe FOBTs are unfair, and exploitative. It has also started an online petition to the Government to 'Terminate the Terminals'.