Is the Gambling Commission heading for its FCA moment?

It’s been interesting to read the story of the FCA over the last few days, after they briefed the Daily Telegraph about a review they want to do of old life insurance policies. The story wiped £5bn from share prices, and they have been trying to scramble back desperately ever since. This morning, John Griffith-Jones, the FCA Chairman, has written to the Chancellor assuring him that the Board of the FCA “shared similar concerns to your own about the events themselves as well as the potential impact on the FCA’s and UK’s reputation in financial services” and has set up an independent enquiry.

I found it interesting in light of a stance currently being taken by the Gambling Commission which, it seems to me, has the potential to have a similar impact on the share prices of businesses currently under their licence.

The point relates to the issuance of new licences under the updated legislation that requires offshore companies to bring themselves under the jurisdiction of the UK if they want to do any business here – a change which, on the face of it, makes a lot of sense. It’s not meant to be an enabler for collection of the forthcoming Place of Consumption Tax, but it has that effect; and in some respects, there are therefore good reasons to welcome it.

What is strange, though, is the stance that the Gambling Commission is taking in issuing those licences: it is insisting that a prospective licensee provides details of all the markets that it takes any business from, as well as details of the licences that it holds to allow it to do so. It also wants to know what percentage of a company’s overall business comes from those markets in question, wants an explanation as to why the applicant thinks it is lawful to provide gambling facilities and “some evidence of due diligence” in coming to that conclusion, and then, in the event that the operator generates 3% of revenues from a country where it does not explicitly hold a licence, the Commission won’t issue a licence to operate here.

You may feel – many will – that it is the Gambling Commission’s role to be the world’s policeman in this manner. You may also feel that the principle that ‘if something is not explicitly illegal, that means by implication it can be done’ is not, in fact, a sound one, and it is a better adage to say that ‘all is banned unless explicitly regulated’. But what is interesting about this stance is neither of those two points, but that it is quite clear that it does not apply to existing licensees. Notwithstanding the answer given by the Gambling Minister Helen Grant recently to a Parliamentary Question from Philip Davies MP, where she claimed first that ‘The new licensing regime will bring consistency of standards to the entire British-facing remote gambling market, and is expected to apply to both existing and new licensed remote operator’ and then that, ‘We do not expect the new licensing regime to have a detrimental effect on the business operations of prospective licensees based overseas’, it looks abundantly clear that it is threatening to deny licences to operators conducting substantially the same business as those already licensed by it. It would seem that a double standard is being applied.

No? Well, a quick look which companies are licensed already by the Gambling Commission suggests so.  The private players’ numbers are hard to know, but one analyst suggested to me yesterday of one obvious example that gets plenty of positive coverage, “25% UK, I think, plus Italy [illegal under a dot.com], Spain, and a bit of Germany… and the rest from the [unregulated, and in some instances not grey but black] Far East.”

Rumour has it that the Gambling Commission is not actually interested in the black market in Asia but instead is worried about Europe, which suggests that the GC’s position is all about cosying up to its fellow operators on the Continent – again, an admirable stance to take, in many respects. But it seems abundantly clear that either it has to apply its new principles across the board, or it cannot apply them at all. If the former, the impact on share prices, and jobs, would be interesting to behold.

Perhaps some bright analyst out there would like to model it up?