British Horse Racing: The Gaming Machine (Miscellaneous Amendments and Revocation) Regulations 2018 and how will they affect the Jockey Club?

By Laura Donnellan, School of Law, University of Limerick, Ireland

The Jockey Club’s annual accounts for the year 2018 show a tenth consecutive year of profits with a turnover of £214.6 million (Press Release, ‘10 years of commercial growth leads to record prize money contributions’, 25 April 2019, https://www.thejockeyclub.co.uk/about-us/media-centre/press-releases/2019/04/10-years-of-commercial-growth-and-record-prize-money/). The operating profit of the Jockey Club (before prize money) was £48.1 million.

The increase in profits is all the more significant given that the prize money contribution of the Jockey Club has risen over the years. In 2015, the prize money contribution was £19.9 million, £20.8 million in 2016 and £22.9 million in 2017. In 2018, the Jockey Club contributed £27.1 million in prize money. In 2009, the prize money amounted to £12.5 million; the 2018 figures represent a 116.8% increase in prize money in a ten-year period.

The increase in operating profits are also noteworthy as the role of the Jockey Club is to invest in British horseracing by ‘generating returns from its commercial interests, to plough back into the sport’ (Jockey Club, ‘Our Heritage’, http://www.thejockeyclub.co.uk/about/our-heritage).

The Jockey Club, a company incorporated by Royal Charter, has a portfolio of 15 racecourses in Britain, including Aintree, Epsom Downs and Newmarket. It operates as a commercial entity and thus is not involved in the regulation or governance of horse racing in Britain. It shares its headquarters in London with the British Horseracing Authority (BHA), the regulator of flat and jump racing in Britain.

The operating profits of the Jockey Club come from a number of streams including:

  • general admissions;
  • media;
  • hospitality;
  • commercial partnerships;
  • events;
  • training facilities; and
  • breeding services (Press Release ibid).

In 2018, there were 339 race days wherein a total prize money of £53.2 million was distributed (Press Release, ‘10 years of commercial growth leads to record prize money contributions’). The average prize money per fixture was £157,000 in 2018 (Press Release ibid). This represents an 18% increase from 2017, where the average prize money per fixture was £133,000 (a 35.3% increase on 2009 where the prize money was on average £116, 000 per race).

Simon Bazalgette, the Chief Executive of the Jockey Club Group, attributed the 2018 turnover to a number of factors, including agreements with ‘fantastic partners such as ITV and the brands we’ve been able to welcome into the sport’ (Press Release ibid).

While highlighting the positive progress the Jockey Club had experienced in the last year, including improving facilities for racegoers and doubling its contribution of prize money,  Bazalgette noted the changes in gambling laws that may impact on the end of year financial accounts from this year onwards (Press Release ibid).

The Gaming Machine (Miscellaneous Amendments and Revocation) Regulations 2018 came into force on 1 April 2019 (http://www.legislation.gov.uk/uksi/2018/1402/pdfs/uksi_20181402_en.pdf).

The new Regulations have reduced the maximum charge for a single bet on Fixed Odds Betting Terminals (FOBT) from £100 to £2.

FOBTs are electronic gaming machines that betting shops, casinos and racetracks with betting pools are permitted to have on site. For betting shops and tracks with pool betting, there is a limit of four machines per premises, according to section 172 (1) (a) of the Gambling Act 2005 (https://www.legislation.gov.uk/ukpga/2005/19/pdfs/ukpga_20050019_en.pdf).

Under section 172 (5) (b) (ii), small casinos are permitted to have 80 machines, while large casinos may have up to 150 machines, section 172 (4) (b) (ii).

Under section 235 (1) of the 2005 Act, a gaming machine is a machine that ‘is designed or adapted for use by individuals to gamble (whether or not it can also be used for other purposes)’. The machines contain a number of games including roulette and simulated horseracing.

The premises must have an operating licence, which is granted by the Gambling Commission, and a betting premises licence that is obtained from the licencing authority (Gambling Commission, ‘B2 gaming machines, also known as fixed odds betting terminals–FOBT’,  http://www.gamblingcommission.gov.uk/for-gambling-businesses/Compliance/Sector-specific-compliance/Arcades-and-machines/Gaming-machine-categories/B2-gaming-machines.aspx).

The 2005 Act is supplemented by the Categories of Gaming Machine Regulations 2007. FOBTs are categorised as B2 machines under section 5 of the 2007 Regulations.   Prior to the 2018 Regulations, regulation 5 defined machines as a sub-category B2 machine if—

– the maximum charge for use is no more than £100;

– the maximum prize value is no more than £500; and

– it is not a sub-category B3, B3A or B4 machine or a Category C or D machine.

B2 machines must display the ‘theoretical target percentage return to player’; a minimum return to the player must be shown on the machine (Gambling Commission ‘B2 gaming machines, also known as fixed odds betting terminals–FOBT’). There are just under 33,000 of these machines in Britain according to Industry Statistics from December 2018; the gross gambling yield (GGY) from the B2 machines was £1.7 billion (Gambling Commission, Industry Statistics, 19 December 2018, https://www.gamblingcommission.gov.uk/news-action-and-statistics/Statistics-and-research/Statistics/Industry-statistics.aspx). GGY is the income that is generated by the machines minus the prize money paid out but before the operating costs are deducted (John Woodhouse, ‘Fixed Odds Betting Terminals’, Briefing Paper, Number  06946, 6 February 2019, p.4, https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06946).

The FOBTs have long been a source of controversy, with gambling charities, politicians and journalists calling for limits to be placed on the amount a person can bet. Greg Wood refers to FOBTs as ‘poisoned betting’ and one of the most ‘catastrophic blunders ever committed in the name of deregulation’ (‘Racing backed a loser on poisonous FOBTs and recovery will be painful’, The Guardian, 18 May 2018, https://www.theguardian.com/sport/blog/2018/may/17/horse-racing-backed-a-loser-on-poisonous-fixed-odds-betting-terminals).  Wood states that £25 billion has been ‘sucked from the poorest communities in the country’ since 2005.

The UK Department for Digital, Culture, Media and Sport (DCMS) conducted a number of consultations and put forward a number of proposals in October 2017, which included the recommendation that the maximum stake on FOBTs to be reduced to between £50 and £2 (John Woodhouse, ‘Fixed Odds Betting Terminals’, p.3). The consultations ended on 23 January 2018 and, on 18 May 2018, it was announced that the maximum stake would be lowered to £2.

The Gaming Machine (Miscellaneous Amendments and Revocation) Regulations 2018 came into force on 1 April 2019. Regulation 2 (3) of the 2018 Regulations amends Regulation 5 of  the  Categories  of  Gaming  Machine  Regulations  2007 and provides that £2 is substituted for £100.

According to early reports, there has been a 40% reduction in profits of independent bookmakers due to the restrictions placed on FOBTs by the new regulations (Bill Barker, ‘Independent bookmakers hit hard as FOBT revenues plummet 40 per cent’, Racingpost.com, 3 May 2018, https://www.racingpost.com/news/independent-bookmakers-hit-hard-as-fobt-revenues-plummet-40-per-cent/378830).

Bookmakers have reported a 10% increase in over the counter betting and this year’s Grand National had an increase in turnover from 2018 (Bill Barker, ‘Independent bookmakers hit hard as FOBT revenues plummet 40 per cent’).

It is not yet known what effect the new Regulations will have on the annual turnover of the Jockey Club. As the law came into force on 1 April, the annual turnover for 2019 will include the first three months of the financial year when the maximum stake per bet was £100.

The financial records of 2020 will be the first full year and thus will provide a more accurate account of the fiscal implications of the new Regulations.

Given that the Jockey Club derives its profits from a number of revenue streams as noted above, the impact of the Regulations will arguably be insignificant in comparison to the effect that they will have on the bookmakers.

It is mere conjecture at this point; the announcement of its annual accounts in April 2020 will make for interesting reading.

However, it will take a number of years for the implications of the Regulations to manifest themselves; however, the Jockey Club has shown itself adaptable in its diversification into activities outside horseracing!

Laura Donnellan may be contacted by e-mail at ‘Laura.Donnellan@ul.ie’