UK Fixed-Odds Betting Terminals Stakes Get Slashed, Bookies Bear the Brunt in 2018
Storm clouds were gathering on the UK betting industry’s horizon as the New Year broke. A 2017 government regulatory review into fixed-odds betting terminals (FOBTs) had threatened to cut the maximum £100 ($130) stakes on the machines, but to what?
The industry warned that any drastic reduction would lead to hundreds of betting shop closures and potentially thousands in job losses across the country. Retail bookmakers had come to rely on the machines for more than 50 percent of their profits, but public sentiment — supported by media rhetoric — had turned against them, denouncing the machines as a pernicious blight on society.
The decision was in the hands of newly appointed Minister for Culture, Media and Sport (DCMS) Nick Hancock, a man bookies originally believed was on their side. Hancock was a big supporter of the horseracing industry whose funding would be hit by a regulatory crackdown on the bookies.
But on January 20, an anonymous Hancock ally confided to The Times that the minister was, in fact, no fan of the gambling industry and wanted the new maximum stakes to be “at the bottom of the range.”
With Friends Like These
Rumors immediately began to swirl that the government was planning to take its nuclear option — a feared cut to just £2 ($2.60) — rather than the £30 to £40 ($39 to $52) the industry believed was the most likely option, and for which it had prepared.
Shares in the UK’s biggest betting companies, like Ladbrokes and William Hill, tumbled on the rumors.
At least the betting industry could rely on Chancellor Philip Hammond, who is head of the Treasury. Hammond had long been rumored to have clashed behind the scenes with the DCMS, fighting against the proposed reduction in a bid to protect the £450 million ($587 million) the machines generated each year.
Except it turned out he wasn’t really the bookies’ bff either.
On April 24, another anonymous Times source told the news site that Hammond had never opposed slashing the stakes at all and was on board with the most drastic reduction possible, provided the hundreds of millions generated each year could be found elsewhere. And that meant higher taxes on other forms of gambling to plug the shortfall.
It was a double blow for British bookmakers. By the end of trading that April day, around £1.2 billion ($1.56 billion) had been wiped off the share prices of the three market leaders: William Hill, GVC (Ladbrokes Coral), and Paddy Power Betfair.
Day of Reckoning
To add insult to injury, on May 17 the government unleashed a regulatory wrecking ball on one of the biggest and most liberal regulated betting markets in the world. FOBTs would be £2 a spin, Hancock announced.
The industry was united in its condemnation, almost. Paddy Power Betfair (PPB) described it as “positive development for the long-term sustainability of the industry.” With fewer betting shops than William Hill and Ladbrokes Coral, and a stronger digital arm, PPB had less to lose and was content to take a revenue hit, as long as its major competitors took an even bigger one.
The media was delighted by the move, until it learned that the reforms would not be implemented until October 2019. It then returned to its default position of outrage.
Minister for Sport Tracey Crouch — who led a regulatory review into the machines in 2017 — branded the delay “unjustifiable” and resigned. Within weeks, the government was facing a full-scale party revolt on the issue. Rebel MPs threatened to trash Hammond's budget unless the reforms were expedited to April 2019. It would have been the first time a UK government had been defeated on a budget plan since 1978, and Hammond relented.
The decision to slash FOBT stakes came just three days after the US Supreme Court’s rejection of the federal prohibition against sports betting in the US that had existed for all but four states since 1992, paving the way for the American market to open up, and open it did.
Fully operational and ready to move in for the kill, several major UK operators like William Hill quickly put up stakes in the states that were swiftly legalizing sports betting. In every cloud, there's always that silver lining, and one thing these companies can count on is that no one across the pond will cap out bets at $3.
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