KBS academic Dr Des Laffey provides expert comment on the decision by Ladbrokes and William Hill to end the practice of “trapping” promotional winnings and be much clearer in their use of “free” promotions after regulator pressure.
There’s no such thing as a free bet
‘The news that leading gambling firms such as Ladbrokes and William Hill are going to end the practice of “trapping” promotional winnings and be much clearer in their use of “free” promotions is to be welcomed. This was prompted by an investigation by the Competition and Markets Authority (CMA) into these practices.’
The trap
‘“Free” bets or stakes have been a major promotional tool for gambling firms. Examples would be a new customer being given a £20 bet on the outcome of a football match for free or being allowed £20 of free roulette spins. However, as with the old adage, there’s no such thing as a free lunch, these promotions came with a catch.
‘It was usually very difficult for customers to withdraw any winnings with extensive further gambling often required. This then raised issues such around transparency and also the dangers of customers becoming problem gamblers.’
Information is power
‘Gambling has increasingly targeted a broader range of people. What is often not realised is that the industry is based on an information gap between customers and firms which have many highly skilled statisticians working for them. How many customers know what the implied probability is for their football team to win when the odds are 2-1? How many casino players know the probability of winning at roulette?
‘Whilst gambling firms may lose heavily in the short-term, for example Leicester City winning the Premier League, the information gap builds in healthy profit margins. The danger of “free bets” is the lure of what seems to be easy money for customers who do not understand they are playing against a far more skilled opponent, the gambling operator. This shows the importance of consumer education: the most basic lesson is only gamble what you can afford to lose.‘
The race to the bottom and mis-selling
‘Whilst gambling firms have clear policies on social responsibility the “free” bets scandal shows how a competitive market can lead to a race to the bottom and worsen problem gambling. Gambling creates employment and generates large taxes for the UK government but it needs to be properly regulated.
‘The “free bets” scandal may run on as gambling may well see legal claims from customers similar to the PPI scandal in financial services.
‘The end of free bets should actually help the more responsible firms in the sector as it will create a level playing field. This does not solve the problem of offshore firms beyond the reach of UK law and regulation. Hopefully, it will also help to avoid the lure of easy money attracting people to gambling.‘
Dr Laffey has published a number of papers on the gambling industry including his 2016 paper in the Journal of European Public Policy on the regulation of online gambling within the European Union.