Betting Firms Take Hit To Shares Over £2 Online Minimum Stake Proposal

The world of betting has been dealt another blow, with shares of some of the biggest firms taking a hit in the wake of confirmation from the United Kingdom Gambling Commission’s confirmation that it could impose a cap to stakes in online casinos. Betting companies are still reeling from the decision to reduce the maximum stake on Fixed Odds Betting Machines to £2.

That came into effect last year, with bookmakers having to shut stores up and down the country as a result. However, they were largely able to cope with the stake cut thanks to the growth of the online market, so there are major fears that companies could go bust if the same maximum stake was applied online casinos games.

Betting Companies Share Prices Plunge

The share prices of some of the world’s biggest betting companies have tumbled, losing millions in value. William Hill, as an example, saw its share price fall by 8% whilst the owner of Ladbrokes and Coral, two names that are big on the high street, dropped by 7%. The same figure affected Playtech, which is a firm that creates gambling software.

Not all companies were hit in the same manner, though. Both Flutter Entertainment, which is the newly rebranded name of Paddy Power-Betfair, and 888 both fell my smaller amounts. Even so, the total amount that UK gambling firms have been hit by is £500 million at the time of writing. That’s entirely due to the change in their stock market value.

UKGC Considering Stake Limit

The reason for the fall in share prices is simple: the Chief Executive of the Gambling Commission, Neil McArthur, spoke to a group of MPs running the All Party Parliamentary Group that is looking into gambling related harm that it would consider cutting the maximum stake playable in online casinos to £2, which would bring it in line with the FOBT maximum stake.

As soon as the stock market heard news of his comments, investors began to sell off their stakes in online casinos and bookmakers. It is the second time that the APPG has resulted in value falling off online gambling firms, with the revelation in November of 2019 that more stringent curbs to rules could be recommended by the panel resulting in a loss of around £1.2 billion.

Gambling Act Review Likely

Another thing that might concern investors is the fact that the government is likely to review the Gambling Act that was introduced by Tony Blair’s Labour government in 2005. The original act was designed to liberalise an industry that hadn’t had a proper review applied to it since the 1960s, but the unintended consequences of that were that it became a very free market.

The 2005 Act was introduced just before the exposition of the internet, meaning that it wasn’t really equipped to deal with the emerging market. The rules were seen as ‘inconsistent‘ once the development of online gambling became a real proposition, so taking a new look at the laws and changing them to bring the into the modern era is more than likely.

Many Problems Could Be Dealt With

There are many issues that the gambling industry has been faced with in recent times, with the effect of betting on vulnerable people and children high on the list. The advertising laws surrounding gambling have been looked at as a result, with the UKGC being far more stringent on companies that don’t obey them than they have been in the past.

Similarly the ties between gambling firms and the sport of football have been questioned, with many feeling that the two are far too closely intertwined. More recently, the use of VIP schemes by online bookmakers has come under intense scrutiny. These are all things that are likely to be targeted if the government decide to write a new Gambling Act.

What The UKGC Is Saying

There is a feeling from the United Kingdom Gambling Commission that the reaction from the market is somewhat surprising, given that the regulator has said since October that online stake limits would be considered as attempts to reduce gambling-related harm continue. A spokesperson even said as much, as well as mentioning other areas of possible improvement.

The spokesperson said:

“We said last October that we would be looking at online stake limits as part of our ongoing work to reduce the risks of gambling-related harm. This work is in addition to us focusing on VIP practices, advertising technology and game design. We will publish our assessment and next steps for online stakes and further protections later this year”.

APPG Becoming More Influential

As criticisms of the gambling industry increase in volume, the All-Party Parliamentary Group On Gambling Harm has found its influence growing. It was seen as being instrumental behind the government’s decision to cut the maximum stake playable on Fixed Odds Betting Machines from £100 to £2, also pressuring the government into backtracking on when that would happen.

It was originally suggested that the stake cut would be introduced in October of 2020 in order to give bookmakers time to adjust and for a new Point Of Consumption Tax to be introduced. In the end, however, pressure from ministers, which included the resignation of the then Sports Minister Tracey Crouch, forced the Chancellor Of The Exchequer to change his mind.

The decision to reduce the maximum stake on FOBTs was made because of the feeling that the machines, which had been branded as ‘the crack cocaine of gambling‘, were a major part of the increase in problem gambling in the UK. Now there is a fear that people have simply turned to the online equivalent, which is why the calls to cut the stakes on online casinos have come up.

Decision Will Come In Next Six Months

The Gambling Commission has confirmed that it will make a firm decision about whether to introduce a maximum stake cap within the next six months. It means that it is something of a sword of Damocles dangling over the industry until the choice is made, which will likely result in more market volatility over the coming weeks and months.

The Betting And Gaming Council, somewhat unsurprisingly, was wary about the news. In a statement they said, “We want to have a betting and gaming industry in this country which is not just the best in class, but which also ensures we don’t drive people towards betting on harmful unregulated black markets. We’re working hard with the Gambling Commission and with the government on their review to ensure effective regulation”.

Market analysts Goodbody feel that a reduction will be introduced, even if it’s not to a figure as low as £2. They did say, though, that ‘certain politicians may not rest until a significant stake reduction is introduced’. With those politicians coming from all sides of the political divide, a £2 stake limit is likely at some point in the future even if not in six months time.