Bingo in pubs and clubs
At the start of this year, the Gambling Commission’s e-bulletin issued a reminder on ‘Bingo in pubs and clubs’. The short statement explained that the Commission has seen an increase in queries on this topic recently and advised ‘lawyers and other industry advisors’ that there are several factors to consider when running bingo events in unlicensed venues.
The first thing to note, and most fundamental, is that the law has not changed. There has been no change to the regulation of bingo in pubs or clubs. ‘Bingo’ is defined under the Gambling Act 2005 (‘the Act’) and is classed as equal chance gaming. Part 12 of the Act provides allowances for exempt gaming in alcohol-licensed venues. The controls and mechanics of exactly how venues can operate bingo without an operating licence are laid out in statutory instruments.
In brief, the law permits bingo to be provided in alcohol licensed venues as exempt gaming. The game must be played whilst the bar is open and alcohol is for sale, is adult only and a participation fee cannot be charged*. The maximum stake for any game of bingo is £5 per person per game. In practice, this means £5 maximum per bingo card and per game, not per bingo session. If three games are played throughout a session, each with an independent card and different set of numbers, each card can be charged at £5. All stakes must go towards the prizes with no deductions. There is no limit on the value of the prize, however the total weekly value of the stakes or prize cannot be greater than £2,000, unless the operator also holds an Operating Licence.
It is clear from the Gambling Commission’s e-bulletin that they see considerable risks in the use of exempt bingo. The risk is that the exempt bingo is exactly that – exempt. A pub operator does not require an operating licence or approval from the Gambling Commission akin to bingo licensed venues, or a bingo premise licence. They only need an alcohol premises licence. With that, comes no customer protection from the Licence Conditions and Codes of Practice (LCCP) attached to non-remote bingo Operating Licences, or the protection of conditions attached to bingo premises licences. There is no obligation for operators to adhere to the gambling objectives under the Gambling Act, the fundamental tenet to safe gambling. The LCCP are specifically designed to signpost operators to ensure the gambling objectives are always adhered to, such as requiring measures to prevent money laundering, ensuring specific safer gambling information is provided to customers and requiring customer interaction. This is why limits exist. Pubs can offer bingo, they do not have to adhere to the LCCP but as a result, stakes and prizes are limited. The game can only be offered for entertainment and not provided for any gaming revenue.
The Gambling Commission has issued a Code of Practice for equal chance gaming in licensed premises which must be adhered to at all times when operating exempt gaming, however this is considerably more light touch than the requirements placed on licensed operators found in the LCCP.
Why are we seeing more queries on holding bingo in venues without an operating licence? Well, it is not a secret in the industry that the number of bingo clubs across the country has fallen. Bingo clubs suffered with the indoor smoking ban in 2007, and more recently the covid pandemic and cost of living crisis.
However, out of adversity has come diversity. With people going out less often, the need for premises to provide an ‘experience’ – and entertainment – has increased. With this, we have seen pubs and clubs turning to exempt bingo to entice punters in on the traditionally quieter nights of the week. This diversification should ultimately have a positive direct impact on the industry, with more people playing bingo across the country and hopefully creating a new generation of ‘dabbers’!
*this relates specifically to pubs. The law is slightly different for clubs dependent on the type of club in question.
** HiJingo and Bongo’s Bingo hold an operating licence with the Gambling Commission so different rules apply, but the point regarding the diversification of bingo remains.
Change of Corporate Control for operating licences
Changes in corporate structures occur daily at many different companies across the UK. The majority of companies, however, are not stringently regulated, so will be able to make these changes as they see fit and without providing in-depth information to any external regulatory body. Our industry is slightly different.
The Gambling world is heavily regulated, and as we all know there are considerable legal reporting duties placed upon operators by the Gambling Commission, such as when a change of corporate control takes place.
In March this year, the Gambling Commission published updated guidance on changes of corporate control for both public and privately traded companies. The primary reason the Commission has these checks in place is to monitor all sources of new funding a company has generated. The parameters of the conditions will be similar to the conditions of obtaining an operating licence approval. Our industry is highly regulated, and all stakeholders are subject to scrutiny, with the ultimate aim of protecting the industry and ultimately our customers.
Under the terms of Section 102 of the Gambling Act 2005, a company must notify the GC when a person or entity becomes a new controller of the company.
A person or entity is considered a controller if they hold:
- 10 percent or more of the shares in a licensed operator or in a parent undertaking of a licensed operator
- 10 percent or more of the voting power in a licensed operator or a parent undertaking of a licensed operator
- shares or voting power in a licensed operator or a parent undertaking of a licensed operator, that, as a result of which, the person will be able to exercise significant influence over the management of a licensed operator
A reporting event to the Commission can be triggered by a transfer in share or voting power, or as a result of new investment. Evidence of the source of funding to acquire the controlling interest will also have to be provided.
It should also be noted that, when a person or entity purchases a 3% share in a company, this will trigger a key event notification. When this number is at 10% or above, the company must make a change of corporate control application. This application also comes with a fee and if any information is missing, this could delay the application. These regulations do not just cover new entities, as the form must also show all individuals and companies that already hold an interest of more than 3% in the licensee.
A key event must be reported to the Gambling Commission as soon as reasonably practicable, and in any event, within five working days of the licensee becoming aware of the event’s occurrence. They must either surrender the licence or apply for the licence to continue by way of a change of corporate control application to have an effect within five weeks of the change occurring.
On top of this, if an entity has provided £50,000 (or the equivalent in foreign currency) or more of the funding for the acquisition or ongoing investment, the Gambling Commission will require information on the source of funds. Entities using their own money to fund investment will need to provide information on when they were created or incorporated, and which jurisdiction they are registered in.
This is a particularly complex issue when it comes to investors such as trusts or investment vehicles, as they can be formed of more than one individual or entity and are formed of both general and limited partners. This can make the task more time-consuming, but the company in question must make itself aware of what is required.
This is an important issue which, in our experience, operators are often unaware of; we cannot stress enough that they must ensure they fully understand these regulations.
Without wishing to put too much fear into the reader, failure to adhere to these regulations could potentially lead to the revocation of the operating licence. That illustrates just how seriously the Gambling Commission takes these rules. It is very common for a company to fail to realise they have triggered a reporting event, and they would not need us to tell them how frustrating it would be to lose their licence over a piece of paperwork that simply slipped through the cracks.
Our advice to clients would be to get ahead of the game and ensure they are fully aware of what is required ahead of such a transaction completing. The obligation to comply with these regulations fall on the licensee, but they must also make sure the investor is aware of this requirement. An application can be made in respect of a person or entity who is expected to become a controller of a company in advance of such a transaction.
This may seem like a laborious task and will add to the various other duties that have to be carried out regarding an acquisition of shares, but in reality, it’s simply another compliance check.
When this task is completed ahead of time, the Gambling Commission can grant conditional approval and the entire process will run very smoothly. There is no reason for these measures to cause a headache, and so long as compliance teams are on top of them from an early stage, this will not be a problem. Being unaware of the rules will never be a legitimate defence for breaking them, so as a word of warning, do not miss this requirement!
DCMS – Machine Ratios
At the start of the year, the DCMS issued a supplementary consultation on machine ratios in bingo halls and AGCs. The deadline for the consultation has now passed and we await the results, however it is worth praising the DCMS for taking such a sensible view when looking at changes to machine ratios.
The consultation related specifically to B3 gaming machines – those with a maximum stake of £2, a maximum payout of £500, and a minimum game cycle of 2.5 seconds – and proposes a 3/1 ratio for B3 games in relation to every Category C/D game placed in a gaming venue.
It is certainly positive to see the DCMS supporting the retail sector, and the AGC and bingo sector in particular, with such a pragmatic, forward-thinking approach. The DCMS seems to be taking the issues the industry is facing seriously and is listening to operators. They are also trying to find a balance with the concerns of the Gambling Commission.
The proposed 3:1 or 2:1 ratio for B3 gaming machines will help provide the optimal mix of machines in an AGC, and will help with future-proofing and longevity, particularly as a lot of the older machines are more costly and onerous to run. The mix of machines will allow for greater variety, and will help offset losses from older machines. In addition, a wider array of options helps draw in varied consumers and to keep regular punters occupied.
The other benefit to having these newer models is the built-in safer gambling modes, such as time limits, consumer warnings and cooling off periods. The market can create a win-win for themselves and consumers by investing in the right mix of these machines.
Finally, in terms of the DCMS’s approach in guiding the sector, it seems intent on building a good framework, which is welcomed by many in the industry. Hopefully what is being proposed will build in future viability and help steady the industry in what has been a quite taxing past few years.
We await to see the result from the consultation.
