Self-regulated gambling. Is it possible?

About the expert: He is a partner at the 4H Agency. As an employee of international law firms, he dealt with gambling issues in Eastern Europe. Now he is focused on a wider range of international tasks. At 4H, Ivan advises clients on various aspects of the business, with a particular focus on licensing compliance, AML and gambling advertising.

A response to the Head of the Dutch regulator.

The head of our favourite KSA René Jansen has recently questioned the possibility of gambling industry self-regulation. Can the industry really do that? We have the regulator’s opinion, and now I’m going to try to reveal the inner details of this issue.

But brace yourself! You need to listen to a small legal lecture first 🙂

How does the regulation work in general?

The regulation of any sphere of social relations, including gambling, is always built on legal norms (a universally binding, formally defined rule of conduct guaranteed by the state) For example, the provisions of laws and court decisions. Everything depends on a certain area (jurisdiction) that the laws apply to.

In turn, the legal norm should always consist of the following elements: hypotheses, dispositions, and sanctions. Without all these three elements, the rule of law does not work. Thus, at least in terms of sanctions, the regulation of both gambling and any other industry cannot be done without the participation of the state. Only the state has the right to impose sanctions for non-compliance with established norms.

As for the general structure of social relations regulation, there are several levels of legal force.

  1. The key regulatory legal act regulating gambling, as a rule, is the relevant law. For example, the Gambling Law in the UK, the Gambling Law in Georgia, the Gambling Business Law in Kazakhstan, the Special Government Order On The Organization And Conduct Of Gambling in Romania.

  2. The provisions of non-core laws, which, among other things, cover the regulation of the gambling business. For example, the law on advertising, the criminal code, the code of administrative offense.

  3. Sub-legislative regulations. It can be regulatory legal acts of the regulator in different formats, regulatory legal acts of non-core public authorities, for example, the state body responsible for supervision in the field of advertising.

It is also possible to separate judicial decisions as a certain source of law, but the imputed legal force of such a source is more typical for countries with a common system of law (for example, Great Britain, and the USA). On the contrary, in countries with a Romano-Germanic legal system ( in almost all countries of Europe), court decisions certainly play their role, but are not as critical as in countries with a common system of law.

Thus the regulation of the gambling industry (as well as any other sphere of public life) takes place at several levels at once by different state authorities (or judicial institutions). And it is easy to guess that such a level as self-regulation is lower than all the above levels, as it is the initiative of the market participants themselves, which does not always coincide with the state's vision regarding the regulation of gambling.

In what areas of the industry is self-regulation common and implemented?

It seems that self-regulation in the field of gambling comes to those parts of the industry where the participation of the state can be considered not so fundamental, and accordingly, state intervention is not required to achieve the development of the industry and the correct effect of regulation.

Unfortunately, there’s quite a few examples of such a thing. The clearest example of how self-regulation works is responsible gambling. Operators often take the initiative and independently implement certain tools in their products, despite the absence of any legal requirements (for example, some Russian and Georgian operators).

Another example is the regulation of gambling advertising. An interesting example is Ukraine, where, despite the presence of fairly understandable advertising restrictions, market participants signed a memorandum on advertising, in which they once again set out and concretized the provisions of the legislation on advertising - and it worked! I don’t know what exactly catalysed the fact that illegal advertising has become significantly less, but I want to believe that it was self-regulation that worked.

It is noteworthy that in 2019, some of the world's largest gambling brands (Flutter, Entain, William Hill, and Bet365) issued a joint statement concerning advertising and responsible gambling and joint efforts that are needed to carefully reduce the potential harm that gambling can bring.

How can self-regulation be useful?

Self-regulation is not a magic pill that will immediately solve all problems. However, if market participants can agree on some problematic aspects of regulation and subsequently fulfill this agreement, then such agreements will reflect the current development of the industry, and, probably this will give a huge incentive for business development. I think it is difficult to argue with the fact that the state does not always keep up with the real state of affairs and/or is aware of how business works. It is the lack of professionals that often prevents two things from being made correctly:

  • As minimum. To regulate correctly all market actors (not only operators which are not alone on the market)

  • As maximum. To build a correct interaction of all the market participants.

A certain attempt to develop self-regulation on a global scale can be called the activities of at least such organizations as the Betting and Gaming Council (BGC) and the European Gaming and Betting Association (EGBA), which unite an extremely extensive pool of global gambling brands that occupy significant market volumes in different countries

These organizations combine world experience operating standards in different countries and are extremely open to sharing this experience with markets that are either just starting to regulate the gambling industry, or only with markets, the state, which has decided to embark on the path of reforming the industry.

The role of the state in regulating the gambling industry

The role of the state in regulating the gambling industry has always been and remains key due to the mandatory presence of those areas of public life in which the citizens can be harmed. This is the key goal for the state in all industries, including the gambling industry.

Among these areas, one can at least name control over the implementation of AML legislation, preventing the possibility of operating without a license, and, of course, taxes. It seems that in these areas it is impossible to ensure the proper level of protection of the interests of citizens without the involvement of the state.

At the same time, despite the mandatory presence of the state in these areas, no one forbids, but rather welcomes the involvement of international experience in the regulation of such areas (and partly this can be covered by self-regulation). However, as always, without a request from the state, any attempts to improve some areas through self-regulation will not change the industry.

Summarizing the above, I would like to say that it is impossible to do without state participation in the regulation of the industry, and elements of self-regulation. In this regard, it seems to be the symbiosis that potentially can give positive results in the formation of industry regulation architecture.

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