Sports Betting Industry in the United Kingdom: Current Issues - Report Example

?Investigation and Report about the Sports Betting Industry Related To Key Issues Table of Contents Introduction 3 2. Research Methodology 4 3. The Expansion and Growth of the UK Betting Industry 5 3.1. Current Structure of the Industry 5 3.2. Factors Influencing the UK Sports Betting Industry 9 4. Factors That Contribute To Fraud and Money Laundering within the Betting Industry and Remedies to Make It Safer 11 4.1. Factors Influencing Fraud and Money Laundering in the Industry 12 4.2. Remedies to Make the Industry Safer 15 5. Future Opportunities for the Industry 16 6. Moving Overseas 19 7. Conclusion 20 References 21 1. Introduction Sports betting industry in the United Kingdom has gained considerable significance in the economic structure of the country for the past few decades. It is due to the growing participation of the industry in the total earnings of the economy, that the industry is being termed as one of the potential industries of the current and future era. For instance, the total revenue earned from sports betting industry in the year 2007 was valued at ?2.5 billion with more than 10% of the total UK adults participating in the bets regularly (William Hill, 2011). However, the sports betting industry in the UK is currently witnessing a fall in the total revenue earned due to which many betting organisations, such as William Hill, are tending to expand their business in the US and other countries (Davidson, 2011). The discussion of the report will be based on the trends of the UK sports betting industry for the past few years. In this regard the report will focus on describing the expansion and growth trends of the industry considering its performances for the past four years, i.e. 2007 to 2011. The report will further attempt to identify the various factors to influence the potential customers in participating in sports betting. Analysis of these issues is likely to assist in identifying the future prospects of the industry. Furthermore, the report shall intend to analyse the advantages of moving overseas in terms of tax incentives and lower costs. 2. Research Methodology The research method implemented in this paper is based on the qualitative research method. The reason to select qualitative research approach is due to the time consuming and complex nature of quantitative researches. The data in this paper has been gathered from the secondary sources available online. Due consideration has been provided to the aspect of reliability of the data obtained. In this regard, only news, organisational and governmental websites have been considered. Although, the findings of the research focuses on the statistical data to reveal facts regarding the Sports Betting Industry of the UK, the discussion of the paper has been based on the descriptive analysis of the findings adhering to the characteristics of qualitative research. 3. The Expansion and Growth of the UK Betting Industry 3.1. Current Structure of the Industry The market value of sports betting industry in the UK is recorded to be almost ?400 million in the financial year of 2010-2011 (UK National Statistics, 2011). It is worth mentioning that the sports betting industry in UK includes itself as a major facet of the gambling industry. It can be well-recognised from the graphical representation of the current data below. [GGY is the abbreviation of Gross Gambling Yield] Source: (Gambling Commission, 2010). Two types of betting operators can be identified in the industry, namely the on-course betting operators and the off-course betting operators. The betting industry is regulated by the Gambling Act 2005 (William Hill, 2011). Currently, there are 590 individuals who are provided with the license of on-course betting operators and 681 individuals as off-course betting operators. The industry is subjugated by five top operators, i.e. Ladbrokes, William Hill, Gala Coral Group, Betfred and Tote that contribute over 80% of the total betting shops (Gambling Commission, 2010). The statistical data represented below shall be quite effective in revealing the market share captured by the top operators in terms of betting shops and the change in percentage. Source: (Gambling Commission, 2010). Furthermore, the industry is observed to be a good source of employment with its total employees figuring to 55,775 in the financial year 2009-2010. It can be evidently witnessed from the table represented below. Source: (Gambling Commission, 2010). In the UK sports betting industry, off-course and on-course betting includes dogs, football, horses, and others. Despite a well-organised structure the revenue earned by the industry as a whole has been recorded to decline for the past few years. This can be apparently witnessed from the tables represented below: Receipt from Betting Industry Source: (UK National Statistics, 2011). Source: (Gambling Commission, 2010). It is worth mentioning that increase or decline in revenues earned by any industry depends on its structure including macro and micro economic factors (Tremblay & Tremblay, 2007). Considering this fact, the factors influencing the performance of sports betting industry will be studied in the further discussion of the report. 3.2. Factors Influencing the UK Sports Betting Industry Gambling has a historic role in the European culture and thus it is inherently related to the social factors of the continent. This can be identified among the most significant factors influencing the performance of the industry. However, in the modern day context there are various consequences raised by the industry with the potential to harm the socio-economic culture of the region. In this regard, the industry is strictly regulated by the Gambling Commission under the Gambling Act 2005 from the year 2007. The Gambling Commission operates as a Non-Departmental Public Body with the sponsorship rewarded by Department for Culture, Media and Sport. The commission is not only responsible to provide licenses to the betting operators, but is also liable to regulate the transactions in order to ensure fair betting policies (Gambling Commission, 2011). Therefore, apart from the social factors, the regulatory factors also influence the overall performance and structure of the industry. The economic factors, such as GDP earning of the country, annual contribution from the Department for Culture, Media and Sport, per capita income and other similar issues also have major role to play. For instance, a timeline performance of the industry reveals that in the pre-recessionary era the revenue earning of the industry was increasing at a significant percentage on an annual basis. Subsequently, in the post-recessionary era, with the decline in the per-capita income in the UK, the revenue earned by the industry has also declined. It can be well-observed from the chart represented below which depicts the fall in betting duty for the past ten years. Change in Revenue Earned From Betting Industry Source: (UK National Statistics, 2011). Therefore, the decline in the revenue structure of the industry can be identified as the influence of these factors, i.e. social, regulatory and economic issues. According to the experts, the sports betting industry in the UK and in various other economies of the European continent are currently facing various challenges due to the impact of socio-economic factors, e.g. fraud as well as money laundering (Remote Gambling Association, 2009). Based on this thought, the further discussion of the report will intend to identify the various factors influencing the occurrences of unethical issues, such as fraud, money laundering and also aim at suggesting few measures to eradicate or minimise the risk. 4. Factors That Contribute To Fraud and Money Laundering within the Betting Industry and Remedies to Make It Safer Sports betting industry in the UK and in the global platform as well is structured with the assistance of strict legal frameworks. These frameworks are perpetually aimed at prohibiting unfair or unethical gambling practices in order to secure the interests of customers and the sustainability of the industry at large. However, with the growing significance of betting industry, the occurrences of unethical incidents, such as frauds and money launderings have also increased. Since few years, a few of the major participants of the industry including the players and the betting operators have been indicating to such unethical practices. For instance, the allegations were raised against the Pakistani cricket players regarding the infringement of rules related to match fixing in the year 2010. In the same year, Croydon Athletic, a well-known English football club was alleged to participate in money laundering which evidently raised questions on the effectivity of the regulatory system (Slater, 2010). In the recent instances, three major online betting sites for poker in the UK were accused of participating in money laundering by the US authorities. According to the report, Pokerstars, Full Tilt Poker and Absolute Poker were alleged to trick the US banks and were being engaged in a money laundering worth of billion Dollars. Although the money laundering in this case was controlled by the involvement of FBI, a question still exists on how to stop these occurrences and make the industry safer for its customers (Morningstar, 2011). The highest rate of fraud, money laundering and other unethical issues is observed to occur in the case of online gambling. As stated by the experts, it is quite difficult to abolish the consequences of these risks as it tends to be strongly addictive and protects the violators through many terms, such as providing privacy, greater options and others (Axelrad, 2011). 4.1. Factors Influencing Fraud and Money Laundering in the Industry Considering the fact that most of the instances of fraud and money laundering have been observed involving the online betting operators, technology can be identified as one of the influencing factors in this context. Technologies provide various opportunities to the customers as well as to the operators. For instance, online betting through internet secures the private information about the customers and the operators as well which in turn makes it difficult to identify them. Moreover, the huge number of customers involved in online betting as an addiction also makes it challenging to control these unethical practices effectively (Axelrad, 2011). The table represented below depicts the percentage of doubtful betting activities for the last few years. Source: (Gambling Commission, 2010). Another factor which influences the instances of fraud and money laundering in the sports betting industry can be identified as the lack of knowledge or accountability possessed by the operators and their employees as well as the customers. The fact can be illustrated with the assistance of a recent example in which a 29 year old customer was identified selling gaming chips of Zynga games at a lower rate to satisfy his addiction for gambling. The money laundering was accounted to cause a total loss of ?7 million (Morris, 2011). Evidences also reveal that smuggling, illegal selling of arms, drug trafficking, bribery and other organised crimes also influence the unethical practices in the industry. The profits generated from these illegal sources are often used in gambling through money launderings with an intention to provide a legal explanation to their earnings (MHA Report, 2009). Therefore, the chief factors that influence fraud and money laundering in the UK sports betting industry are, Technological support, Addiction to games, Lack of responsibility and awareness regarding the gambling rules, The obtainment of huge profits from illegal activities As has been prescribed by the Gambling Act 2005, there are several measures which can be considered to minimise the risks of such unethical issues. However, with the increased instances of fraud as well as money laundering, it is quite crucial for the industry to consider other measures for controlling the activities which will be mentioned in the following discussion. 4.2. Remedies to Make the Industry Safer With reference to the above discussion it is quite apparent that lack of responsiveness and accountability is a major influencing factor of fraud and money laundering in the UK sports betting industry. In this regard, experts have stated that educating the online operators, the customers, the players and other participants of the industry shall prove to be highly beneficial. Simultaneously, the rules and regulations enforced to prohibit these activities shall also be exercised with strictness (Wilson, 2010). Experts have also stated that the rules and regulations to control the operations of the sports betting industry should be directly monitored by the government to reduce such occurrences in future (Sports City, 2011). However, it is likely to give rise to the limitations of complexity and cost which is most likely to influence the industry’s expansion and growth negatively. Technological aspects also play a major role in influencing the unethical practices in the industry. It is due to this reason that the participants of the industry should focus on developing secured technologies to monitor the online betting transactions. Stating precisely, the following measures should be adopted by the regulatory bodies in order to lessen the risk of fraud as well as money laundering: Generate responsiveness through education Strengthen the regulations Gather sufficient information regarding the money used in betting and the customers Focus on continuous monitoring of online betting transaction Obtain adequate information regarding the operators and the employees Ensure ethical behaviour by the employees in prohibiting these activities 5. Future Opportunities for the Industry Sports betting industry in the UK has gained a substantial position in the modern era. It is stated to be one of the chief promising industries of the economy to support it in its recovery stage, i.e. the post-recessionary era. It is also significant due to the fact that sport gambling has been an inseparable aspect from the ancient history of European culture as well as society. Based on this concern, the forecasted result reveals that expenditure on the industry is likely to increase over the next few years (Pratten & Walton, 2009). Source: (Keynote, 2010). It is in this context that the industry enjoys significant opportunities to boost its future performances. For instance, the structure of the industry can be witnessed to relate with the living standard in the modern era in terms of technology, social involvement and others. It can be identified as a fact that it is quite likely that the demand for the industry services is likely to sustain for a long-term period. Moreover, it is also recognised to be one of the major employment generating industries in the UK which can also be identified as a significant opportunity for the industry. From a general point of view, people with minimum education and experience can be eligible for employment in the industry which in turn has the potential to create significant job opportunities in the economy and thus shall benefit the industry growth as well. Significant governmental interventions and well-structured regulatory frameworks also play a vital role in supporting the performances of the industry (Gambling Commission, 2011). Therefore, the opportunities identified in this context which can influence the future prospects of the industry are, Employment opportunities Technological support Well-structured legal framework Governmental support Along with the opportunities there are also few threats which can affect the future prospect of the industry to a large extent. For instance, the sustainability issues currently faced by the industry can be identified as significant threat which can hamper its sustainable growth to a large extent. Therefore, the industry players should provide due consideration to the aspect of unethical practices in order to gain enhanced sustainable growth in the future (Pratten & Walton, 2009). It is worth mentioning that betting operators have undertaken various measures to enhance their future prospects, such as overseas expansion. The further study of the report will be based on the advantages that the industry players are likely to gain by moving overseas to the US. 6. Moving Overseas Various betting operators including William Hill, a major player in the UK sports betting industry have been recorded to expand its operations overseas with an aim to enhance its growth (Johan, 2011). The betting operators of the UK have been witnessed to expand overseas for the past few years, but experts stated that due to the strictness in the regulations and overhaul in tax rates in the current fiscal year, the operators are likely to be inclined towards overseas for better opportunities (Bowers, 2010). However, moving overseas for the tax and cost benefits which are likely to get increased in the UK due to tightened regulations are being criticised by various analysts. It is due to this reason that the US sports betting industry is also observed to be affected by the occurrences of fraud as well as money laundering in the UK context. Moreover, the online betting, which is stated to be one of the prime sectors to cause these issues in the UK is termed as illegal and thus is prohibited in the US (Jackson, 2011). Therefore, it can be stated that moving overseas to the US in order to gain tax and cost benefits shall not prove to be beneficial for the betting operators of the UK. 7. Conclusion The sports betting industry can be witnessed as a significant facet of the UK economy. It is considered to be one of the inseparable bits of the European culture due to which it has gained considerable opportunities in the UK market. It is regulated with strict and well-structured legal framework in order to direct the industry’s performance in a sustainable manner, securing the interests of both the industry customers and the operators. It is fundamentally influenced by the social, legal and economical factors. Technology also plays an imperative role in determining the overall structure of the industry. Notably, the inclusions of online gamblers and online betting operators have simultaneously increased to a significant level that has raised various issues, such as fraud as well as money laundering. The opportunities provided by the modern internet technologies have been evidently used in an unsustainable manner influencing the industry’s future prospect to a considerable level. Subsequently, the regulations are likely to be tightened providing limited opportunity to the betting operators and thus create a constraint for the growth of the industry at large. It is in this regard, that the government and the major industry players should take initiatives with an aim to reduce the unethical practices, such as educating the industry participants, forcing strict punishable measures for the occurrences and others. It is worth mentioning that the rapidly increasing occurrences of fraud along with money laundering through online banking has not only influenced the industry in the national context, but has also created an impact internationally which can again obstruct its growth and expansion. References Axelrad, J., (2011). Online Gambling May Be Too Powerful For Regulation. Guardian News and Media Limited. [Online] Available at: http://www.guardian.co.uk/commentisfree/2011/apr/21/online-gambling-regulations [Accessed May 21, 2011]. Bowers, S., (2010). Online Betting Faces Regulation Overhaul. Guardian News and Media Limited. [Online] Available at: http://www.guardian.co.uk/uk/2010/jan/07/online-betting-regulation-overhaul [Accessed May 21, 2011]. Davidson, J., (2011). William Hill Expanding Into U.S. Sports Betting. Casino News. [Online] Available at: http://www.5casinos.co.uk/news/william-hill-expanding-us-sports-betting [Accessed May 20, 2011]. Gambling Commission, (2010). 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