Betting should be made a public utility
Once a pioneer in gambling policy, Britain is now being surpassed by Uganda. Transforming betting from an industry of exploiting addiction to a public utility would be an incredible policy tool (and make money).
Image from Unsplash.
Gambling can be traced back to the Neolithic age at the latest, with excavations uncovering stone dice and backgammon in the Burnt City and Mohenjo-daro. Similarly, the culture of sports-betting (often on animal and human fights) in Ancient China, Greece and Rome is well documented. Britain was once at the forefront of betting policy when, in 1928, Winston Churchill advanced the initiative to create a government-appointed board charged with providing an alternative to illegal bookmakers and ensuring the reinvestment of profits into horse-racing, the most popular sport among gamblers at the time. This organisation came to later be known in the UK as the Tote.
The Tote was enjoying success until its luck turned at the dusk of the century when the new Labour government championed a privatisation initiative, led by Home Secretary Jack Straw, which was later made part of their 2001 manifesto. Despite the process eventually taking over 10 years, the sale of the Tote to Betfred was finally completed in 2011; it was seen that a sell-off could raise immediately available cash for the government and the losses of the racing sport could be reimbursed from the betting levy profits.
Since then, the government’s relationship with the betting industry has been largely regulatory in nature. The Gambling Act of 2005 (and its later amendments) is mostly concerned with preventing criminal activity within the industry and protecting the “vulnerable” consumers from exploitation, as well as regulating licensing and advertising. In fact, in December of last year the UK government launched a review into the country’s gambling laws to ensure they are “fit for the digital age”, yet the outlined aims leave a lot to be desired. The changes under consideration include stake restrictions, affordability checks and measures to help wronged punters and addicts. These fail to go above the existing punitive and regulatory approach to betting policy and remain blind to attractive alternatives. To explore those, let us briefly consider Uganda.
In Uganda, betting is deeply woven into the fabric of the economy and entertainment industry. Exaggerated by the volatile conditions many destructive effects of gambling are brought to the forefront in the BBC Africa Eye documentary “Gamblers Like Me”, which not only depicts the capacity of gambling to crush lives, but also presents a dramatic story of the narrator, Collins Muhinda, who having been employed by the betting industry discovers in the process of filming both its darker side and his own addiction.
Across the world, regardless of income level or legislation, gambling thrives. In Japan, where most forms of gambling are a criminal offence, the seemingly absurd industry of pachinko machines has taken off. The game involves continuously chucking 11 mm balls into a pinball-like apparatus in hope of winning many more of those metal projectiles. Gambling for cash is illegal in Japan, but it is reported that prizes given in exchange for the heaps of pachinko balls can be converted into a sum of yen in the alleyways surrounding the 10,000+ pachinko parlours in the country. By the way, the industry makes 10 times the money Las Vegas does every year.
A study of the Ugandan city of Kampala revealed that 45.6 per cent of male youths and around one in four adults gamble. This is significantly lower than in the United Kingdom where about 49 per cent of the entire population above the age of 16 engages in gambling regularly. Capital flight is a major concern of the Ugandan policy-makers regarding the betting industry, as profits get shipped away in the form of dividend payments to shareholders abroad. In this light, the government decided in 2019 to move forward and stop the renewal and issuance of any betting licences with the intent to monopolise the activity countrywide. In effect, Matia Kasaja, the Minister of Finance, is hoping to both regulate gambling more directly and keep the profits in the country.
A similar idea has been swung about in Sam Wolfson’s opinion piece for the Guardian in 2018, where he suggests that slot machines and betting terminals in the UK can be operated in a similar fashion to the National Lottery, however the idea fails to move beyond a call for “nationalisation”. Regardless, Sam Wolfson and Collins Muhinda very clearly present opposing views on the problem, with the latter suggesting that state-run betting is akin to government “opening a liquor shop” to fight alcoholism, while Mr Wolfson claims that regulating betting terminals is “as futile as banning lard to fight obesity”. Indeed, measures like the Alcohol Prohibition of 1920-33 in the U.S. were a failure, and many nationalised industries worldwide have declined under poor management. However, betting has great potential.
To begin with, nationalised betting can be both a useful gambling policy tool and a source of revenue. First, instead of erecting restrictions and closing down loopholes, which the betting companies are both capable and incentivised to overcome, the governing body would be able to control directly the safety of advertisements, the background checks and generally the mechanisms by which customers are encouraged to spend. A private betting company is maximising profits given the imposed legal restrictions, a public betting organisation could operate on a double or triple bottom line, only concerned with a certain level of profit and only when certain conditions are met.
Second, the possibilities for extra stately revenue are golden. Instead of about £586m in betting duty revenue and additional £285m from remote (online) betting, we could set our eyes on the £4.7bn total betting GGY (Gross Gambling Yield, constituting all the money players have staked after the total winnings have been paid out by the bookmaker). Subtracting the set-up and running costs (which are incredibly low online), and accounting for a much less exploitative business model, we are still looking at billions of pounds in potential annual profit without including potential gains in stakes given higher public trust and value. Additionally, capital flight would be prevented and the employment opportunities remain entirely within the country too.
I wish to move this idea forward. Betting is a commonplace, naturally-occurring phenomenon serving a public entertainment need and, in this regard, deserves to be treated as a public utility no less than railroads or postal service. We know that the next Christmas a lot of people would want to send a postcard and so we set up the mail service to furnish a basic necessity. Similarly, we know that the next weekend a lot of people would want to wager on a game of football no matter what and so we should provide an opportunity for them to do so in a transparent manner and without paying extraordinary premiums.
A state bookmaker was more than feasible in 1928, now the market is accessible with just a smartphone app. Gross Gambling Yield of non-remote betting dropped by 26.4 per cent in the year preceding March 2019 and the pandemic is more than likely to reduce offline betting to cinders. There is now no need to set up a chain of betting shops with interior design, staff and expensive machines, which substantially reduces both set-up and running costs and more importantly greatly lowers the risk of the mismanagement that could be associated with state-controlled industries. In fact, the incredible works of Mariana Mazzucato, especially the “Entrepreneurial State” show how the state could be the innovator-in-chief and how many breakthroughs like the Internet or smartphones are associated with strong state support.
It is striking that the existence of multiple companies with billions of pounds in profits is allowed off a simple want of many people to wager on sport. Apart from receiving a “licence to print money”, these companies cannibalise an incredible share of the advertisement market. Recently Google promised that YouTube users would be able to block gambling and alcohol ads on their devices from next year. Among the platform’s users a feeling of unease with the betting-related ads and sponsorships is common, and the recent government review aims to “consider gambling advertisement limits”, yet it is the colossal profit of the gambling industry that allow betting ads to be seen on prime-time TV, social network feeds and public transport. This industry innovates towards better methods of playing with the human dopamine system or the excitement of risk, if you wish, and trains its prowess in squeezing past regulatory gates that would only change once every couple of years.
Setting up a national betting company, akin to the Lottery, is very cheap and must not require monopolising the market or making it state-franchised, as the competition is winnable by running lower profit margins on betting odds, although restricting foreign operators would still be reasonable. Having close access to the very infrastructure of betting (i.e. the app’s user interface) opens possibilities for better regulation of problem gambling or unauthorised use by children, as well as promoting charitable causes. During a pandemic we could have seen promotions raising funds for the NHS on the common betting app, or perhaps gamblers would have been able to choose which social causes the profits off their bets would go to.
The race to regulate the gambling industry of the digital age has begun. Taking adequate risk while falling back on a strong legal system and favourable circumstances could make a lot of money for the British state and bring a lot of joy to the British nation, but would change prove too frightening?
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