Making the case for fully protecting player funds

We’ve all become more savvy consumers when it comes to hunting down the best offers, be it scouring comparison sites for deals on utility bills, insurance and holidays or, as in the case of betting, pinpointing the best odds, bonuses and concessions. For most gamblers, this process is part and parcel of selecting an online bookmaker or casino. Yet, a third consideration should probably be added to the list of criteria: how safe are my funds if the company runs into financial difficulties?

This issue was once again brought to the fore recently with Gibraltar-headquartered Addison Global, the company behind the MoPlay brand, collapsing and going into liquidation. As a result, players’ funds, which were not properly ringfenced and protected, disappeared in a puff of smoke. Prior to MoPlay’s licence suspension and its subsequent demise, its T&Cs stated: “If there was ever a situation where we became insolvent, your funds would not be considered separate to the other company assets and you may not receive all your funds back.”

Rules and regulations

Fortunately for those customers, Betfred has stepped in and bought the MoPlay customer database and has promised to honour cash balances, although outstanding bets will be voided. As per UK Gambling Commission (UKGC) regulations, any UK-licensed business holding customer funds must set out in their T&Cs how this money is protected in the event the business becomes insolvent. The funds have to be held in a separate bank account, though this doesn’t guarantee players will get their cash back if the company goes belly up.

They also have to lay out whether funds are either not protected, have medium protection or high protection. This information has to be presented to players at the time they make a deposit and any subsequent deposit where there has been a change to the terms regarding protection of funds. In addition, operators must not allow customers to place bets until they have provided confirmation and the UKGC says it takes action against firms flouting these rules. On its website, the regulator even suggests consumers may wish to consider spreading their money across more than one company and highlights how gambling isn’t like the banking sector (personal accounts are protected by the government up to £85,000 per person if a bank goes bust).

But are these rules really enough? The Horseracing Bettors Forum (HBF) – a body set up in 2015 to represent racing gamblers – recently updated and added to its list of UK-licensed operators offering horseracing markets whose T&Cs stipulate whether they offer the highest level of protection. The HBF also named and shamed those offering no protection. Of the 64 brands singled out, the HBF found that just seven had the highest level of protection: Betfair (both its exchange and sportsbook), BetStars, BetVictor, Coral, Paddy Power, Smarkets and Betway.

A total of 33, including bet365, Unibet, Sky Bet and William Hill, had medium protection, while the remaining 23 fell into the no protection category. Some of the bigger and well-established names in this section include the likes of MansionBet, Bethard and Marathonbet, as well as publicly listed operators Betsson and LeoVegas. Ironically, Betfred was also included.

We have now updated the Register of Protection of Funds to incorporate 64 bookmakers who offer horse racing markets in the UK. They are now sorted in order of protection. 1/2 pic.twitter.com/yDGWZsKiWb

— H'racingBettorsForum (@HbfBritain) March 19, 2020

“There are some fair-sized bookmakers as well [with no protection on the list],” says HBF member and professional horseracing punter Paul Johnson. “If they go bust, you’re not getting a penny back and that isn’t right. It’s our job to inform punters and that’s why we’re there to help.” So was Johnson, who previously spent 30 years employed at William Hill, surprised at how many operators offered no protection? “I don’t think it matters what I think but, when we raised these things on Twitter, punters were alarmed, obviously. All we can do is alert punters and if they decide the funds aren’t protected and they won’t bet there, then good – we’ve done a good job.”

Who to trust with funds?

The MoPlay debacle underlined the increased risks that sometimes come with depositing money with newer and smaller operators. In fact, anecdotal evidence on social media would seem to indicate some customers have been withdrawing funds from gambling accounts, which seems to be as much to do with the lack of betting opportunities right now as out of fear businesses could collapse due to the effects of the coronavirus pandemic. MoPlay wasn’t the first online operator to go to the wall and likely won’t be the last as the coronavirus poses a possible existential threat for some brands.

Richard Smith, an online gaming strategy consultant who has worked for major operators in senior roles during a 16-year career, suggests the regulator should be held more accountable for failures, in the same way they hold operators accountable when there are inadequate checks on player finances. He adds: “We really need to see a full review from the UKGC into the learnings of this [MoPlay] case and for them to self-reflect so they can take forward learnings to protect customers better in future.”

In fact, he questions whether operators should be subject to similar financial scrutiny applied to the banking industry. “If an unusual event happens, such as all the favourites win at Cheltenham or in the Premier League for three weeks in a row and a company goes under, then this is the risk that each party – customer and company – are taking in betting and transacting together. However, perhaps UK-regulated firms need stress tests like the banking sector brought in for the more day-to-day financial health of the business. For me, this is a fundamental point to get right and should be prioritised over many other initiatives that the UKGC works on.”

A costly exercise 

Certain operators would probably argue that it’s an expensive task to fully protect customer funds. In fact, the UKGC consulted with operators back in 2013 on what, if any, requirements should be placed on companies to ringfence deposits in the event of insolvency or fraud. Cost, as it unsurprisingly transpired, was the main objection. A UKGC spokesman tells EGR Compliance: “Following that consultation, we decided not to require operators to guarantee customer funds – by insurance or bonds or setting up trust funds – because of the potentially high costs involved in doing so, which may be passed on to the consumer.

“Instead, we ensure customers can decide for themselves whether to risk their money with an operator that offers low or no protection, or whether they wish to incur the potentially higher costs of gambling with an operator that offers higher levels of protection.” That said, those operators that do offer the highest level could promote this fact as part of their marketing instead of players having to go through the small print to find this information before choosing a brand. And who actually goes to that effort when some T&Cs are thousands, sometimes tens of thousands, of words long.

“I have a bit of sympathy [for operators] because T&Cs have to be very long,” Johnson says. “I worked at William Hill and I understand these things, so they are not buried away deliberately but, yes, they are hard to find.” Going forward, Smith urges the regulator to remove the option to offer lowest level of protection. “I found the whole situation [MoPlay] highlighted a really bad practice. It seems it’s on customers to trawl through T&Cs to find this info out themselves so, in my opinion, it should be the regulator who needs to not allow ‘not protected’ in the first place,” he states.

As things stand, the UKGC doesn’t seem in any rush to implement this recommendation, with the spokesman reiterating operators must state on their sites and within apps the level of protection on offer. Yet, if the angry responses on Twitter to the HBF highlighting those brands offering no extra protection in the case of insolvency is anything to go by, some would appear to be inflicting a certain degree of damage to their brands by not properly ringfencing funds. In this period of uncertainty due to the coronavirus, leading to the value of public gambling companies falling off a cliff this past couple of weeks, brand trust and reputation has perhaps never been more vital.