Written evidence submitted by the British Horseracing Authority

Gambling Regulation Inquiry

Executive Summary

• British racing is a world-leading industry, generating significant economic activity and bringing enjoyment to millions of people who attend and bet on our races annually
• Over £13 billion is bet on horseracing annually in the UK, with racing associated with low levels of problem gambling
• Racing and betting share a unique interdependency, already recognised through legislation, which must be reflected in the future regulatory environment for gambling
• British racing is facing increasing challenges in maintaining its international leadership position globally, from better funded competitor jurisdictions
• It is critical – through a reformed Horserace Betting Levy and a proportionate wider regulatory environment from the Gambling Act Review – that the Government gets the balance correct in its approach to Gambling regulation, allowing British racing to thrive
• Gambling regulation must also keep pace with the growth of digital technology and increasing threats to sports integrity, including from the Black Market

Introduction

British racing welcomes the opportunity to respond to the Commons Digital, Culture, Media and Sport (DCMS) Select Committee’s inquiry into gambling regulation in the United Kingdom.

British racing is the UK’s second largest sport, in respect of attendances, employment and revenues generated annually. This translates into a significant economic benefit for the UK, with our industry generating £4.1 billion in direct, indirect and associated expenditure annually for the British economy. Much of this is focused in rural areas with over 20,000 people directly employed across our 59 licensed racecourses, over 500 training yards and 660 breeding operations – all of which play a key role in the lives of the many hundreds of rural communities they operate in.

Tens of thousands more jobs are supported in the rural economy supply chain including in the farriery and veterinary sectors, as well as many jobs in the betting sector. Moreover, British thoroughbred racing and breeding sits at the pinnacle of the highly competitive international industry, as home to many of the world’s top races, stallions and training yards, as well as acting as a unique diplomatic and trading asset for the UK globally.[1]

A unique relationship with betting

The origins of British racing are however, intrinsically linked with betting in a way unique to any other sport. It was in 1750 that the Jockey Club was founded by a group of people with a shared passion for horseracing, to establish an agreed set of Rules for ‘match races’ around Newmarket – still an international centre for horseracing today. These common Rules were first written down for, amongst other purposes, the ability for wagers (or bets) between members to be settled – and have formed the basis for the regulation of horseracing worldwide. No other sport can trace its origins so uniquely back to a link with betting.

British racing has remained heavily interlinked with the UK betting sector with our fixture list and racing calendar designed to provide a safe, responsible betting product throughout the year. Betting on racing is a leisure activity responsibly (with low levels of problem gambling) enjoyed by millions of people in the UK, and a wide variety of customers including those who would have one bet a year on the Grand National to extremely regular, skilled bettors who are betting daily on British racing.

This was recognised by Lord Grade of Yarmouth, Chair of the House of Lords Gambling Industry Committee, who commented to the Racing Post in 2020 that “Horseracing is interlinked with the gambling sector, as one of the most recognisable and popular products on which people gamble. Moreover, the way in which the fixture lists and race programmes are developed is directly affected by the need to provide a consistent betting product.”[2]

Health Surveys reveal that horserace bettors have consistently been associated with low levels of ‘problem gambling’ – a rate of 2.8% (PGSI and/or DSM-IV) in the 2018 Health Survey for England.[3] One of the appeals of horseracing is that betting on the sport can almost be considered as a skill and is enjoyed by many as an intellectual challenge, as well as a leisure activity.

Figure 1 below outlines how the unique interdependencies between racing and betting are reflected across many connections throughout the industries. Some of these relationships are underpinned by statutory legislation – for example, the Horserace Betting Levy – while others reflect important commercial relationships, including increasingly on digital betting activity on horseracing, between the two industries.

Figure 1 – Link between racing and betting industry by racing industry sector

Many of our major revenue streams, including the Horserace Betting Levy, sponsorship and media rights income from race streaming (worth £350+ million annually) are derived from racing’s relationship with betting.

According to Gambling Commission statistics, betting operators generated turnover of £13.2 billion and a pre-tax profit (GGY) on racing of £1.18 billion in 2021/22, an increase of 10% from the £1.072 billion GGY figure generated in 2019/20.[4] Whilst GGY can fluctuate depending on results, this demonstrates that betting activity on horseracing is continuing to generate significant revenues for betting operators.

However, British racing is facing continued challenges in maintaining its position at the pinnacle of international racing and breeding, against jurisdictions with higher prize money and legislative mechanisms delivering a greater return for the sport from betting. Our analysis has found that British racing receives a lower rate of return from betting turnover, through statutory and commercial income streams, than the most comparable markets in Australia and Ireland. Such financial pressures are starting to have an active impact on decisions to invest in British racing, damaging the rural economy and our significant economic impact.

It is, therefore, in British racing’s view, critical – through a reformed Horserace Betting Levy and a proportionate wider regulatory environment from the Gambling Act Review – that the Government gets the balance correct in its approach to Gambling regulation in the coming months, reflecting the interdependency of racing and betting while avoiding unintended consequences.

The Horserace Betting Levy

The Horserace Betting Levy has been in place since the 1960’s and recognises the “mutual interest racing and betting share in a thriving racing industry.”[5] Receipts from the Levy are then distributed in line with three statutory purposes:

• the improvement of breeds of horses;
• the advancement or encouragement of veterinary science or veterinary education;
• the improvement of horseracing.

The Levy is currently delivering between £80-100 million per annum for British racing. This is invested into areas including prize money, veterinary science, animal welfare, the sport’s promotion and industry training, recruitment and education. It was last reformed by Government, with cross party support, in April 2017 to ensure that offshore based, online betting operators were required to pay Levy on a statutory basis, which has generated an estimated additional £45 million annually.

However, as outlined above, British racing and breeding faces significant challenges from international competitors while the cost base for sustainably running the sport, in the common interest of racing and betting, has been subject to increasing inflationary pressures during the Cost-of-Living crisis.

Following the previous legislative changes to the Levy in 2017, the Government is required to conduct a review of the Levy rate by April 2024. We believe that this process should be expedited to ensure the racing industry is placed on a surer and more-sustainable footing, benefitting the racing and betting and industries, and growing British racing’s international leadership position in the industry. As part of this Review, we believe that Government should consider:

1. Extending the Levy to apply to all horseracing globally which is bet on by British customers. This is based on both historic, and international, precedent, including close competitor jurisdictions such as Ireland.
2. Adjusting the Levy rate so it is based on a percentage of turnover, rather than a percentage of profit. This would result in less volatile yields and reflect overall activity levels on the sport. Figure 2 below demonstrates some international comparisons from 2019 of a statutory return from racing, all of which (except Great Britain) use a turnover based model.[6] Commercial income streams are not included.

Figure 2 – British Racing’s statutory return when compared to other racing jurisdictions, 2019

We believe that development of the Horserace Betting Levy will bring clear benefits to the industry. Areas earmarked for expenditure under a developed Horserace Betting Levy will include:

• Enhanced prize money returns to participants and breeding operations, supporting rural businesses and levelling up across hundreds of communities, while drawing significant international investment to Global Britain
• Developing a world-leading racing product, working with the betting industry and broadcasters to engage our racegoers, punters and viewers
• Underpinning the sport’s comprehensive equine welfare strategy – A Life Well Lived – with significant financial investment, alongside critical horse sector-wider funding to support animal health, biosecurity, veterinary education and research. This is in line with the Government’s ambition for the UK to be a world leader on animal welfare
• Supporting our participants’ physical and mental wellbeing, improving facilities, while bringing the future of the industry through with investment in training and education opportunities for people from all backgrounds
• World class regulation and integrity standards, underpinned by investment in digital platforms and technologies

Therefore, instead of a story of decline and contraction, the Government will instead benefit from a great British success story, as British racing and breeding invests in our future sustainability, expands our impact supporting economies and communities across the country, while growing our industry’s international leadership position. We hope that the Committee will support our call for an expedited review.

Nonetheless, the wider regulatory environment for gambling must be stable and proportionate, avoid unintended consequences, while also supporting those who are experiencing gambling related harm.

The Gambling Act Review

British racing very much welcomes the Review and agrees with the Government’s ambition to make Gambling legislation in Britain fit for the digital age. It is critically important that gambling regulation keeps pace with the growth of digital technology, threats to sports integrity, and protects people from experiencing gambling related harm.

Betting on horseracing involves considerable skill and is overwhelmingly a product which people enjoy safely – with the Problem Gambling Severity Index Data pointing to low levels of bettors experiencing financial problems from their betting activity on the sport.[7] Nonetheless, we are actively assessing what further measures we can undertake in British racing to support safer gambling initiatives, including in relation to education, research and sponsorship. We provide further information on this in response to Question 1 below.

It is vitally important that any changes proposed within the Review strike the right balance between consumer protection and freedom, and reflect the level of risk involved. Given racing’s close links to betting, it is overwhelmingly the case that any changes to gambling legislation and regulation – even if not directly targeted at the specific relationship between racing and betting – can cause significant unintended consequences for the British racing industry and associated revenue streams.

Figure 3 below illustrates the key income streams into British racing and how these flow through the wider industry and sustain so many jobs, mostly in rural communities across Britain. It demonstrates how revenues from betting (top-right, worth an estimated £350 million+ annually) play a critical role, particularly given other revenue streams – i.e. Fans  and Sponsorship – are under significant pressure due to the current economic circumstances and cost of living crisis.

Figure 3 – Income streams into British racing and flow throughout the industry (Portas Consulting)

Ministers in the Department for Digital, Culture, Media and Sport have – on several occasions – acknowledged the interdependency of the racing and betting industries, and the potential implications from the review, which we strongly welcome. This includes former Minister, Chris Philp MP, in the House of Commons last February:

“We know that horseracing is a vital sport for the people who work in the industry. It supports many jobs, it provides leisure activities for many people, and it is a significant source of national pride and prestige. Nothing in the Gambling Act review, I hope, will do anything to undermine the financial condition of that great sport or its place at the heart of our national life.”[8]

Nonetheless, nearly two years have passed since the conclusion of the DCMS Call for Evidence as part of the Gambling Act Review. The recent re-organisation of the Machinery of Government may also lead to further delays. While British racing has been engaged in detailed discussions with DCMS officials over the last two years, including the practicality of applying certain proposals and their financial implications, the continued delay and uncertainty created is causing significant concern and damaging investor confidence in our industry.

For many reasons, including the uncertainty that the delays are causing for industries like ours, it is extremely important for the White Paper to be released at the earliest opportunity, and British racing is very much looking forward to engaging with the next steps of that process.  We note the Committee’s previous calls for the release of the White Paper and would welcome any further representations it can make to the Department on ensuring that it works at a pace on this important policy area to deliver much-needed clarity.

In March 2021, DCMS requested evidence from stakeholders on six areas, and we summarise our key points in relation to these below.

1. Online protections – Players and Products

British racing is supportive of action taken by operators to reduce gambling-related harm and notes that, through a combination of legislative, regulatory, operator and third-party actions, standards of protection for online horserace bettors have been raised significantly for horserace bettors in recent years.

It is vitally important that any measures within the Gambling Review regarding affordability do not impact the vast majority of customers who are betting safely on a wide variety of betting products, including horseracing.

We do not support blanket measures on affordability, and believe that if measures are to be introduced, they should be targeted at the individual and reflect their specific circumstances. We strongly believe that such blanket checks – floated as low as £100 per month in a Gambling Commission Call for Evidence in late 2020 – would be highly damaging.

Furthermore, such limits would not achieve the Government’s desired outcomes around customer protection (especially with the potential to push them into the Black Market), would represent disproportionate restrictions on customer freedom. The implications of this would be financially devastating to racing – with tens of millions of pounds in lost revenues – at a time when its finances have already taken a significant hit due to the Covid-19 pandemic.

It is our strong view that checks can be achieved through non-intrusive checks by operators, based on individual customer circumstances and utilising the data which betting operators hold on their customers. Ultimately, the nature of, and level at which, affordability checks should be introduced must be subject to both:

• a full, evidence-based consultation process and economic impact assessment to account for the implications for industries including racing; and
• debate by Parliamentarians given the significant civil liberties implications for consumers, the vast majority of whom already bet safely on horseracing

We strongly welcome the recent comments by the former Minister for Tech and the Digital Economy, Paul Scully MP, that “it is not the role of government or the gambling commission to tell people how much of their salary they are “allowed to” spend on gambling.”[9] It is important that Government reflects this balance in its forthcoming White Paper.

Nonetheless, a clear regulatory environment must quickly be established. Delays to the publication of the White Paper are now having a significant, adverse, impact.

In the time since the 2021 Call for Evidence, there has been clear evidence of a material decline in customer activity levels on British racing, in part from measures being introduced by betting operators to anticipate or comply with regulatory requirements by the Gambling Commission.

Arena Racing Company, one of the two principal racecourse groups in British racing, has outlined a £280 million reduction in digital betting turnover on racing at their racecourses in 2022 against 2019.[10] This decline is far above the levels that would be attributed to solely restrictions targeting customers experiencing gambling-related harm, and scaled up across British racing means a decline of tens of millions of pounds in revenues generated for, and circulated throughout, the industry. We are engaging with the Gambling Commission and operators on this data, as we await publication of the White Paper.

Clarity is urgently required. The current environment is creating uncertainty for customers, operators, regulators and industries including horseracing, costing tens of millions of pounds in lost revenues in the racing industry and must be rectified by Government quickly through publication of the White Paper, and introduction of non-intrusive checks which reflect individual customer circumstances.

Lastly, it is important that any changes designed to deal with the perceived issues created by an online environment do not undermine the offline environment – i.e.. Betting in Licensed Betting Offices (LBO’s) or on-course - where face to face transactions with trained staff take place in order to place a bet.

2. Advertising, Sponsorship and Branding

Overall, we believe that the current regulatory regime is sufficiently robust and proportionate around gambling advertising and reflects appropriately the interdependencies between the racing and betting industries.

We firmly believe that it is wholly appropriate – provided that responsible gambling messaging is included and that the content and tone of the advert is suitable – for opportunities to bet responsibly on British racing to be advertised during broadcasts of the sport based on its intrinsic links with betting, and there are several benefits created by allowing licensed gambling operators to advertise.

The Gambling Industry Code for Socially Responsible Advertising recognises British racing’s ‘inherent links with the gambling industry, which is not the case with other sports’ which means that it is exempt from the new ‘whistle to whistle’ advertising regulations which ban gambling advertisements during sporting events before the watershed.[11]

It is also appropriate for businesses and events within British racing to be sponsored by gambling companies. This is based not only on the view that such sponsorships are managed responsibly, but is also cognisant of the intrinsic links between racing and betting which led to the Lords Gambling Committee’s recommendation in their 2020 report, Gambling Harm – Time for Action, that ‘any restrictions on sponsorship of kit and other advertising should not apply to horseracing’.[12]

3. Gambling Commission’s Power and Resources

British racing agrees that the Government’s priority in its Review should be that the 2005 Gambling Act remains effective in:

1. preventing gambling from being associated with, or supporting, crime or disorder
2. ensuring that gambling is conducted in a fair and open way
3. protecting children and other vulnerable persons from being harmed or exploited by gambling.

Meeting any of these objectives requires ensuring that the Gambling Commission, created by the 2005 Act, has sufficient resources and legislative enforcement options available to it as regulator to conduct its many important responsibilities in this area.

Betting corruption is an ever-present and growing threat to the integrity of sport, and attempts to corrupt the outcome of sporting events for financial gain strike at the very heart of sport, including racing. A core function of all sports governing bodies, including the BHA, is to maintain the integrity of their sport.

In cases of corruption where our licensed personnel are involved, we can take regulatory action in order to ensure that the individual(s) are suspended or disqualified from racing. However, when it comes to taking action against members of the public who are involved in the orchestration of the corruption, we require the Gambling Commission to use its powers to charge those involved.

The BHA and other Sports Governing Bodies provided a response to the Call for Evidence, calling for the Gambling Commission to:

1. have the appropriate investigative and prosecutorial powers available to it;
2. have the resources and expertise to utilise these powers effectively; and,
3. create an enhanced Sports Betting Integrity Unit with appropriately experienced leadership, dedicated resources and specialist expertise to fully investigate sports betting integrity issues in line with enhanced powers.

4. Consumer Redress

It is critically important that the regulatory environment around gambling provides appropriate consumer protections to the vast majority of customers who enjoy betting on horseracing safely, while giving consumers full transparency and confidence.

We are aware of representations from the Horserace Bettors Forum (HBF), who were founded to advocate the views of horserace bettors, that betting operators should enable greater transparency on their approach towards account closures and restrictions, which are undermining consumer confidence on betting on horseracing including on digital platforms and in some cases even forcing customers into the black market.

There are also statutory requirements in place in other jurisdictions, including Minimum Bet Liability in Australia, which we believe should be considered further. British racing is willing to play a role in these important discussions.

As mentioned above, we are hearing ever more anecdotal evidence of dissatisfaction from racing fans around affordability checks – a direct result of regulatory changes made by Gambling Commission - in lieu of any progress around the Gambling Act Review. This is a growing concern for customer engagement in our sport.

5. Age Limits and Verification

British racing is supportive of the current identification checks that already take place to ensure that prospective online betting customers are of the correct age to open a betting account with a licensed operator, and bet on products like horseracing.

In our land-based environments that we control (i.e., racecourses), there are strict policies in place at both pool betting outlets and in the betting ring where licensed on-course bookmakers operate, with training of staff to prevent underage gambling. This includes a ‘Think 25’ policy and an annual test purchasing programme for on-course betting staff to ensure that age challenges are taking place.

6. Land Based Gambling

One of the unique selling points of a day out at the races is the opportunity to place a bet on-course, and the buzz of a racecourse betting ring, especially on big festival days, is a real part of the racing experience. We believe the regulatory environment around on-course betting is sufficiently robust, and continue to work with our racecourses on ways to support and encourage safer gambling, while spotting markers of potential harm. It is important that any changes designed to deal with the perceived issues created by an online environment do not undermine the on-course environment.

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We now provide responses to the Committee’s specific questions as part of this Inquiry, below.

Committee Questions

1. What is the scale of gambling-related harm in the UK?

According to the latest Gambling Commission statistics, the UK’s problem gambling rate is described as “statistically stable” at 0.3% in September 2022 (having been at 0.2% in March 2022), demonstrating how the vast majority of those that are participating in betting in a safe and responsible way.[13]

However, there have clearly been some deeply concerning and well publicised incidents in recent years of bettors experiencing significant harm. British racing actively supports operators implementing processes to prevent this and we note that progress has been made in adding extra player protections such as ‘cooling off’ periods and deposit limits, as well as the promotion of responsible gambling through messaging in advertising (e.g., Take time to Think).

Health Surveys reveal that horserace bettors have consistently been associated with low levels of ‘problem gambling’ – a rate of 2.8% (PGSI and/or DSM-IV) in the 2018 Health Survey for England – a similar level of harm that is associated with National Lottery Products.[14] However, we are by no means complacent and are keen to understand as an industry what more we can do to prevent gambling related harm. 

This is why British racing is working on a socially responsible gambling policy. Current areas of work include:

• The prohibiting of cross-sell by bookmakers to online casino products in race titles
• Working with EPIC Risk Management and William Hill, the industry will be rolling out a series of Lived Experience Gambling workshops to industry employees over the next two years to highlight the risks of problem gambling
• The adoption of a ‘Think 25’ policy across all betting operators (pool betting and self-employed bookmakers) at British racecourses
• An audit of safer gambling initiatives across racecourses and sharing/promotion of best practice
• Evaluation of further research opportunities on betting activity on horseracing and its impact on customers, both positive and negative

2. What should the key priorities be in the gambling White Paper?

As mentioned within our introduction, we believe the key priority from the review should be striking the correct balance between preventing individuals experiencing gambling related harm whilst also not impacting the vast majority of customers that are enjoying betting in a responsible manner.

The Government should ensure a clear legislative and regulatory environment around gambling which recognises the interdependent relationship between racing and betting and allows the sport to thrive and maintain fan engagement with it, whilst also providing racing with the sustainable funding to remain internationally competitive. It should also be platform appropriate, noting the different capabilities and risks of online and retail environments.

Finally, the Gambling Commission should be appropriately resourced and empowered to help sports counter integrity threats, and betting related corruption.

3. How broadly should the term, ‘gambling’, be drawn?

We do not hold a strong view here but opportunities to ‘gamble’ on British racing can be legally accessed by the public in these places:

• LBO’s
• Online Operators Betting Apps and Websites
• On-course, with either bookmakers or a pool betting operator

4. Is it possible for a regulator to stay abreast of innovation in the online sphere?

Through our own experience of being a sports regulator, we are clear that it has been extremely important to keep abreast of innovation in online betting markets since the liberalisation of betting in the United Kingdom in 2005. Over the past 18 years, betting on British racing has transformed from a predominantly retail based pursuit, to a market in which 76% of bets are now being placed online.[15] This has posed both challenges and opportunities for our industry; some of which have been tackled by Government to an extent (such as through the critical reform of the Horserace Betting Levy to secure a statutory return from online betting in 2017) and others which need further regulatory intervention.

The BHA works closely with the Gambling Commission and licensed operators in order to identify, prevent and disrupt any potential betting-related corruption in the sport, which could otherwise undermine people’s faith in British racing as a fair betting product. The growth of new technologies, including encrypted messaging services, pose increasing challenges to maintain integrity.

Another current challenge is the growth of black market betting both in the UK, and globally. The Asian Racing Federation’s State of Illegal Betting Report outlines some of the risks involved including lost revenues and decreased levels of consumer protection of Government’s allowing a Black Market to thrive without taking appropriate action.[16]

For every £10 million of British racing gross win moved to the black market, racing loses several million pounds in Levy receipts and media rights. Second order impacts – including losses to the exchequer of decreased betting duty if customers move to the black market - that are harder to determine, for example on sponsorship, advertising and hospitality from bookmakers will make this direct impact higher.

Racecourses are already experiencing a large number of drones, piloted from outside of their property used to broadcast live pictures exclusively for the use of in running betting, which has a number of extremely concerning potential outcomes.  Most immediately, there are significant safety concerns (both human and equine) for our participants but also, with the ongoing development of technology, the ability for such pictures to be shared widely and assist with the proliferation of black-market operators.

All of this is why it is extremely important for the UK Government to, where possible, future proof regulations around gambling legislation to allow it to keep up with technological advances in an ever-increasing digital age, and help tackle the risks of the Black Market.

It will also be important for the Gambling Review to enable the Gambling Commission to be appropriately equipped and resourced to deal with threats to sports integrity and to prevent further growth in the Black Market.

5. What additional problems arise when online gambling companies are based outside of UK jurisdiction?

A problem that has previously arisen from online gambling companies being based outside of the UK is that the legislative framework around the Horserace Betting Levy was not able to keep a pace with the significant growth in online betting that took place in the late 2000s and early 2010s. The by-product of this was a significant reduction in funding – which mostly came from voluntary contributions from operators - British racing received for the best part of a decade as operators exploited a loophole which allowed them to avoid paying Levy by being based abroad.

Whilst the 2017 reforms mentioned within the introduction closed the loophole and allowed revenues from the Levy to somewhat recover, the central funding received by the industry has not recovered to the £100m+ levels of the early 2000s which was being delivered before the channel shift from in-person to online betting took place.

Another concern we have around this involves protecting the integrity of British racing. The BHA has a world-leading integrity department, with information sharing agreements with prominent bookmakers in order to ensure that, if there are signs of suspicious betting patterns before a race, those bets can be fully tracked, and the individuals involved investigated.

If operators are not licensed with the UK Gambling Commission, this can pose significant challenges. While under the ‘Point of Consumption’ licensing regime for remote gambling introduced in the UK in 2014, the scope for this is limited, and there are increasing concerns about non-Gambling Commission licensed grey and black market operators.