Britain Opened the Door to Online Gambling.
Now It’s Living With the Consequences

On an August morning in 2016, Stewart Kenny, the co-founder of Paddy Power, was struggling to keep his emotions in check as he took his seat around the firm’s board table at its Dublin headquarters. The company he helped set up 28 years earlier had recently finalized a £7 billion ($8.4 billion) merger, making it one of the world’s biggest gambling companies.

Paddy Power had led the transformation of the betting industry from one of drab shops that smelled of stale cigarette smoke into a digital wonderland where anyone with a smartphone could access a maze of blackjack tables, flashing slot machines, and virtual horse races. All the would-be bettors, or punters, across Britain now had a casino in their pocket, and with a flick of the finger they could win — or, more likely, lose — thousands of pounds on a single spin of a virtual roulette wheel. That year, the total amount lost in the UK online casino market was £2.66 billion.

But Kenny wasn’t celebrating, he was having sleepless nights. At 64, he was ashamed of his complicity in popularizing online games, which he believed were responsible for a surge in gambling addiction and hundreds of suicides. After the usual business of the board was done, Kenny cleared his throat and, fighting back tears, said he was quitting in disgust from the firm because of its collective failure to curb an epidemic of gambling addiction.

“It is the biggest issue facing us and we seem to be like the frog in the boiling water,” Kenny said. As he read from a statement he’d spent weeks preparing, some of his fellow directors looked increasingly uncomfortable. Kenny said his position on the board had become untenable when, earlier that summer, senior managers shelved a safer gambling campaign it was running in Australia because it had proved too effective and was costing them money. He finished his speech, and later that afternoon he walked out of the building for the last time, never to work in the industry again.

Six years later, online casino gambling has cemented its dominance — especially in one of Paddy Power’s core markets, the United Kingdom, where it has mushroomed by 47% since his resignation and where gambling addiction clinics are reporting a surge in people seeking treatment.

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Britain is the world’s biggest regulated online gambling market, and one of the most liberalized. UK authorities largely outsource consumer protection to the addicts, who are expected to self-exclude from gambling websites if they develop a problem. They do that via a platform called Gamstop, set up and funded by the gambling industry in 2018. Leaving aside that addicts rarely make the best decisions, Gamstop is flawed. While in theory, anyone who self excludes from one site is barred from all UK online gambling businesses, it’s relatively easy to get around. Hundreds of websites offer tips on how to do it, which include changing minor personal details or registering to bet under someone else’s name. Yet when the UK’s regulator looked into how the system could be improved, it delegated the process to industry lobbyists, who went with Gamstop. A spokesperson for Gamstop said it has always acknowledged that “no system can ever be 100% infallible.”

Successive UK governments have done little to tighten the rules in the last decade, as an ever-increasing number of politicians have developed closer ties to the industry. Many lawmakers who have spoken out against increased regulation have also accepted thousands of pounds in hospitality from gambling companies, and regularly receive free tickets to top-flight sporting events, as well as lucrative speaking gigs and even second jobs, according to a Bloomberg News analysis of lawmakers’ financial disclosures. The government announced a review of gambling legislation in 2019, but has delayed publishing its findings at least four times. This summer, after intensive lobbying, officials in Boris Johnson’s administration watered down or removed several measures originally contained in the review, according to people familiar with the situation.

For four of the past five years, British punters have lost more than £14 billion on online casino games, sports betting and other forms of gambling. Fully 60% of the industry’s profits come from only 5% of its customers, according to a House of Lords’ report. As many as 138,000 people in England are classified by British regulators as problem gamblers, as well as 36,000 children aged 11-16, UK government statistics show. About 400 suicides — or around 8% of all suicides — in England are estimated to be linked to gambling each year, while it disrupts the lives of many more through broken marriages, bankruptcy, homelessness, and crime. During Covid, about 20% of higher-risk gamblers increased the time they spent gaming.

The explosion in online gaming in the UK can be traced to the Gambling Act of 2005. Gambling firms were allowed to advertise sports betting, online casinos and poker on TV and radio for the first time, and until 2014 remote operators selling to British customers weren’t even required to hold a UK license. The law predated the technological revolution that was the smartphone. Betting firms have been exploiting that blind spot ever since, developing aggressive habit-forming games tailor-made for obsessive gambling, and cashing in while a significant subsection of their customers racked up huge losses, according to interviews with dozens of current and former employees, reformed addicts, lawmakers, consumer advocates, and academics. Firms including Bet365 Group Ltd., Ladbrokes and Paddy Power then enrolled their biggest losers into so-called VIP schemes and showered them with gifts that typically included free bets, cash deposits, tickets to sports games, flights to Las Vegas, and other inducements to keep them hooked, the reformed addicts and current and former employees said.

A spokesperson for Entain Plc, the owner of Ladbrokes, said the company shut its VIP scheme in August 2020, though it still provided account managers to a small number of higher spending customers. A spokesperson for Bet365 declined to comment on their VIP scheme. A spokesperson for Flutter Entertainment Plc, the parent company of Paddy Power, said the firm had also closed its VIP scheme, and reduced the revenue coming from its highest spending customers by 55%.

The Flutter spokesperson said the firm had “invested significantly” in its safer gambling capabilities in recent years, which had cost it about £150 million in lost yearly revenue. “We recognize that the sector has not always got it right in the past, but we are proud of the role we are taking to lead the industry around safer gambling,” she added.

Sitting at a bar in an upscale Dublin neighborhood this fall, Kenny, a soft-spoken Irishman with a shiny bald pate and mischievous smile, says the industry is still in denial. He likens UK gambling operators to the US pharmaceutical companies that continued pushing synthetic opioids long after the devastating public health consequences had become obvious.

As the majority of US states liberalize their gambling laws, Kenny says he “is certain America is heading down the same path.” Flutter now makes more money from the US than it does from any other market, racking up a 114% year-on-year growth, according to its latest financial results. Smartphone betting apps such as DraftKings and FanDuel have rapidly grown into companies with more than $1 billion in revenue. In states where it’s legal, they pitch online casino games to sports bettors by offering them free spins. Kenny believes this is particularly dangerous. “It’s like a young kid going into a pub for a shandy for their first drink and the barman gives them a free triple brandy,” he says.

The UK’s relaxed approach to the dangers of gambling helped transform it into one of the world’s biggest regulated betting markets — and an object lesson in the dangers confronting the US as it emerges as the industry’s new frontier.

It took recovering gambling addict George Cooper fewer than five minutes to set up an online betting account with Grand Ivy Casino during the first Covid 19 national lockdown, despite being registered with Gamstop since early 2019. Sitting in front of his computer in his parents’ house in Ireland, Cooper used his middle name, a different phone number and email address, and one of his other bank cards to open the account.

The 38-year-old freelance journalist had opened his first online casino account in October 2016. He’d recently had a messy break up with his partner of seven years and felt isolated and alone. Gambling was a way of escaping the stress and avoiding difficult emotions, he says. Within days of playing that first slots game, Cooper was hooked and soon was losing hundreds of pounds a night. Over the next two and a half years he racked up losses of as much as £100,000, mostly playing online slot machines on more than 50 different casino sites including William Hill and Ladbrokes.

Back at home on his own in the leafy west London suburb of Ealing, Cooper would log in to games with names like Starburst, Gonzo’s Quest and Book of the Dead. Totally absorbed, he would lose track of time as he pressed the spin button, and the multiple reels covered in brightly colored symbols began to spin wildly. Cooper would gamble feverishly for hours without moving from his couch, sometimes wagering £100 per spin and only stopping once he’d burned through nearly all his money. He once gambled, and lost, a month’s wages in 20 seconds. If he hit a winning streak, he would gamble through the night, until his casino balance hit zero again and he stumbled to bed. Some days he would gamble for 12 hours straight, stopping only to go to the toilet or to eat.

Gambling companies have a duty of care toward their customers. But despite losing on average around £3,000 a month, Cooper says he only received one phone call from a gambling company checking that he was alright. None of the operators asked him if he could afford to lose that much, or checked the source of his wealth or income. But if he stopped gambling for longer than a couple of days — usually because he had lost nearly all his money and could barely scrape enough together to eat — then he would be bombarded with emails, text messages and phone calls offering him free bets, bonuses, and cash to return to their site.

“All it would take would be one email, offering you 50 free spins or something like that and you’ve fallen off the wagon in an instant,” he says.

By January 2019, Cooper’s mental health had deteriorated, he was exhausted, and his gambling was out of control. “I just thought, ‘I can’t do this anymore.’ I was on the brink of it ruining my life. I knew the direction I was heading in, and it was a very, very dark place,” he says. Cooper signed up to Gamstop later that month, and didn’t visit another online casino for more than a year, until he opened the Grand Ivy Casino betting account.

Fortunately for Cooper, this time it didn’t mark a relapse. He just wanted to test how effective Gamstop was, and he hasn’t gambled since. But he says he found it deeply unnerving how easy it was to circumvent the system, because he knows how fragile his recovery is. “It was a real shock,” he says. “My heart just sank. When you have an addiction like that, you need help. It was a knot in the stomach moment. I was devastated.”

The Gamstop spokesperson said it had helped 330,000 people to self-exclude since 2018, and cited a survey showing that 82% of gamblers had reduced their betting since registering with it. Grand Ivy Casino did not respond to requests for comment sent via email and its website.

By 2021, the excesses of the gambling industry were front page news in the UK following a wave of suicides of young men with addiction issues. In parliament, former Conservative Party leader Iain Duncan Smith led a growing chorus of lawmakers calling for tighter restrictions. The Gambling Commission — considered by critics as more of an enabler than a regulator — responded to public and political pressure and started to crack down. That February, it clamped down on online slots by reducing spin speeds, having banned the use of credit cards to gamble a year earlier. From 2020 to 2021, it fined 15 firms a record £32.1 million for infractions that included poor to virtually non-existent “know-your-customer” procedures and a failure to identify problem gambling behavior. One case involved a customer who deposited more than £100,000 into his account and over seven days lost more than £65,000, despite the online casino knowing the client earned less than £20,000 a year.

That January, former JPMorgan Chase & Co. trader Simon Prest picked up a newspaper and read an article about the ravages of gambling addiction. He was shocked by the tales of suicide, financial ruin and family breakdown. He says he couldn’t understand how this could happen so often without someone spotting it. To Prest, the gambling industry looked a lot like the world of finance did before the banking crisis of 2008: a David and Goliath battle between an under-funded regulator and a deep-pocketed, tech-savvy, and politically connected industry selling increasingly risky products at the expense of their customers. He messaged some former colleagues that this was a market ripe for an overhaul.

The idea that he and three fellow bankers hit upon was to build a system providing operators with a birds-eye view of their customers’ betting across the entire market, alerting them to potentially problematic behavior. In subsequent meetings with officials from the Gambling Commission and its overseers in government at the Department for Digital, Culture, Media & Sport, Prest and his colleagues discovered that the regulator was looking for something similar: It had told operators that it wanted an industry-wide tool to track their customers’ activity, known as a “single customer view.” It seemed a perfect fit. But the regulator, on a shoe-string annual budget of about £20 million, handed the job of selecting the most effective solution to the industry lobby group, the Betting & Gaming Council. The BGC told Prest and his partners at the firm they set up, called BetterRisk, that it was running the tender process and would invite them to submit their proposal. Prest says it struck him as odd that he kept being referred to the lobbyists, but he didn’t think much more of it at the time.

Over the next few months, they spent tens of thousands of pounds developing their platform, which would establish a digital ID for each gambler, making it easier to spot if an individual set up multiple accounts with different identities. After a customer’s losses hit a certain level, it would trigger an affordability assessment that would give a red, amber, or green flag. There would also be a digital audit trail that the Gambling Commission could check. To a regulator reliant on a quarterly telephone survey to assess the state of the market, it would bring a real-time and detailed overview of what was going on in any ZIP code.

As they were applying the finishing touches earlier this year, though, the bankers received an email from the BGC: They would not even get to submit their proposal because the lobby group had picked Gamstop to help develop the new system. Ten months on, Prest is still extremely frustrated. He says it’s wrong “the industry gets to be the gatekeeper controlling the scope, design, functionality and delivery timeline of a harm-prevention system which is to stop harm that they themselves are causing by their commercial activities.”

Prest and his colleagues have repeatedly complained to the BGC, Gambling Commission, Department for Digital, Culture, Media & Sport, and industry executives that they hadn’t had a chance to pitch their proposal, to no avail. Prest says he knew he would never get the industry onside after he met recently with the CEO of one of the world’s biggest and most progressive gambling companies. He says the executive told him bluntly that his team’s proposal was far too radical, and that there was zero appetite for it unless the regulator forced operators to adopt it, which wasn’t going to happen.

A Gambling Commission spokesperson said that it would “assess whether the industry’s response to the challenge has delivered the right outcomes.” The spokesperson said the regulator was “not resourced to be able to commission and develop such technological systems ourselves.” A Department for Digital, Culture, Media & Sport spokesperson said it was “not directly involved” in the decision. A BGC spokesperson said it would be “unusual” for the government not to engage with the industry. He added that BetterRisk was one of 12 suppliers considered but “after a rigorous and fair selection process” the lobby group selected Gamstop because it has “a proven track record.”

The gambling and horseracing industry has spent hundreds of thousands of pounds cultivating lawmakers of nearly every British political party, no matter who is in power. That lobbying has intensified since the end of 2019, when the ruling Conservative Party promised in its election manifesto a review of the 2005 Gambling Act.

Since then, the sector has spent more than £300,000 on wages and entertainment for at least 37 UK lawmakers. On numerous occasions, they spoke in favor of the industry in parliamentary debates within weeks of being schmoozed in hospitality suites at sporting and social events, according to a Bloomberg News analysis.

“They always happen to be the best tickets for the best sporting events. It’s easy to fall into the trap of assuming that there is no payback for these things, but they want you to be their voice in parliament,” said Carolyn Harris, a UK lawmaker who is leading the campaign for tighter regulation of the industry. “Just because you have a racecourse in your constituency there is no need to defend the whole gambling world.”

At a Westminster debate on gambling-related harm in March, pro-industry lawmakers took turns to warn the government that too much state intervention risked pushing ordinary citizens into the hands of black-market operators. One after another the parliamentarians — some representing districts around Stoke-on-Trent, where gambling giant Bet365 is located — stood up and lauded that firm’s record on consumer protection, touting its role as a major employer in the region, and its financial contribution to the local community. One even described the multi-billionaire owner of Bet365, Denise Coates, as “admirable” for paying her “fair share of income tax.” As lawmakers around the room sniggered at the spectacle, the Scottish National Party’s Ronnie Cowan stood and offered a rare rebuke of his colleagues, mocking them for reading their “Bet365 briefing so beautifully.”

The spokesperson for Bet365 declined to comment on the debate. In a statement, the company said the gambling review presented “an important opportunity to bring forward proportionate changes to the regulatory framework to drive down problem gambling while ensuring those customers that are able to enjoy a bet without harm can continue to do so.”

The Conservatives’ Laurence Robertson also attended the debate that day. He called on the government to adopt a “balanced approach” to regulation, repeating a phrase often used by the industry. The 64-year-old is one of the sector’s most outspoken supporters in Parliament. In an October article for The House, parliament’s official magazine, he downplayed the need for tighter regulation and labelled those pushing for tighter regulation “anti-gambling prohibitionists” who wanted to “spoil the fun for millions of people.” In February, The Times newspaper reported that after the Gambling Act review was announced, Robertson wrote emails to then-gambling minister Nigel Huddleston urging him to ensure that “millions of people who enjoy harmless gambling can continue to do so.”

All but one of the pro-industry speakers at the March debate had accepted hospitality from various gambling companies, including tickets to England international football matches, and concerts by Ed Sheeran and Adele. Robertson has received more than £100,000 from 11 different industry donors in the past 12 years, more than any other lawmaker, according to a Bloomberg News analysis of financial interest disclosures. His ties run even deeper than that: He is on the payroll of the Betting & Gaming Council. Since October 2020, he has been paid £2,000 a month by the industry lobbying firm for 10 hours work, or £200 an hour, to advise on “sport and safer gambling.”

Robertson didn’t respond to email and phone requests for comment. A BGC spokesperson declined to comment on the specifics of Robertson’s work for the group.

Another one of those to receive tens of thousands of pounds in hospitality is Robertson’s fellow Conservative Party lawmaker Philip Davies. Davies said his views on gambling were rooted in his upbringing as the son of a bookmaker mother. He added that he was also one of the industry’s biggest critics and enjoyed a “robust exchange of views” with the companies when they hosted him at events.

“You won’t find anyone more critical of the gambling industry than me,” he said. “I think they are an absolute disgrace. They have the nerve to talk about the government putting restrictions on their business when they are happy to restrict peoples’ stakes when anyone shows signs of winning. The hypocrisy is mind numbing.”

Behind the scenes, gambling firms and their lobbyists meet with government officials on an almost weekly basis, according to documents obtained under Freedom of Information requests. In the 12 months to February, ministers and officials at the Department for Digital, Culture, Media & Sport met with representatives of the online gambling industry about 35 times, or around three times a month.

The lobbying paid off. In the last days of Johnson’s premiership, key proposals in the draft gambling white paper were either changed or dropped altogether, according to four people with direct knowledge of the matter. One casualty was a pledge to ban gambling sponsors from advertising on the front of Premier League clubs’ football shirts. Plans for a mandatory levy on betting firms to fund addiction research were also dropped. As the hours ticked down to Johnson’s departure, the white paper was ready to be published and even made it onto the “grid,” a spreadsheet used by Downing Street to schedule upcoming policy announcements, the people said. But at the last minute it was postponed for a fourth time, until Johnson’s replacement was chosen. It is still pending. A government spokesperson didn’t respond to a series of questions from Bloomberg News.

The Conservative’s 12-year grip on power is weakening, with the opposition Labour Party opening up a double-digit lead in successive opinion polls for the first time in more than a decade. So, when the Labour leadership gathered to party during their annual conference in Liverpool in September, it was only natural that the industry lobby group would pick up the tab.

As the drinks flowed, Labour’s shadow health secretary, Wes Streeting, took to a makeshift stage emblazoned with the BGC’s logo and belted out a pop ballad from the late 1990s — the last time the party looked like a government in waiting, under Tony Blair. Labour leader Keir Starmer and other members of his shadow cabinet mingled with guests including the BGC’s CEO, Michael Dugher, and other industry representatives. Dugher, a former Labour parliamentarian and party spokesperson when Gordon Brown was Prime Minister, was on first name terms with many of the revellers.

Labour’s embrace of the gambling industry goes beyond one drinks event. The party’s former deputy leader Tom Watson — once one of parliament’s most outspoken campaigners for overhauling regulation of the sector and a close friend of Dugher’s — took a job in 2020 as a paid adviser to Flutter. That same year, the co-founder of Bet365, Peter Coates, gave £25,000 to Starmer’s campaign to become Labour’s leader. Watson said he was working with Flutter on its safer gambling policies, and was proud of the firm’s progress. “I truly believe Flutter now sets a global standard in this area,” he added. The Labour Party didn’t respond to email and phone requests for comment.

Back in Dublin, Kenny says he’s not surprised at the way the industry has curried favor across the political spectrum. He spent years wining and dining government ministers.

These days he helps run a pressure group called Stop Gambling Harm, which campaigns for the reforms Kenny wished he’d done more to promote when he was still an insider. The group, set up with former Paddy Power chairman Fintan Drury and Ian Armitage, the firm’s first institutional investor, is targeting UK lawmakers, pushing them to strengthen industry regulations. Drury and Armitage are no longer involved with Paddy Power.

Kenny says gambling companies will never do enough on their own to protect customers. So his group also lobbies institutional investors who hold shares in the sector, pressuring them to insist that executives better balance profit alongside reducing “profound social harm.”

“Once upon a time it might have been a reasonable thing to say, ‘Look, we stay within the law, and it’s up to the government to regulate us,’” Kenny says. “But the world has moved on from that now. These companies have a social responsibility to their customers.”

Clarifies Gambling Commission data cited in second paragraph, removing three year comparison that didn’t include offshore betting firms