Would welcome any thoughts on the threat of adverse regulatory changes to BOTB.
The risk is cited within BOTB’s annual report:
The Company and Group currently operate weekly skilled competitions, which are not regulated. This could be subject to change in the future and the Company and Group continue to seek appropriate legal advice to ensure they comply with all relevant legislation and licensing."
BOTB’s FAQs explain why the spot-the-ball competitions are not regulated.
What is Spot the Ball and why do you use it?
We are legally obliged to use a game of skill to determine the winner of our competitions – not simply a lottery or raffle. We use ‘Spot the Ball’ as it’s widely recognised, fun and an easy way to enter. You will be shown a photograph that does not contain a ball.
Why don’t you use the original ball position to decide the winner?
The basis of the game must categorically be the skill of an entrant versus the skill of professionals – not versus the chance that the original spot on the football picture is picked. It is a subtle but important legal definition by which we are bound to operate.
The Gambling Commission confirms spot-the-ball competitions can be exempt from the Gambling Act 2005 if they are “genuine prize competitions”:
Is your spot the ball scheme a prize competition?
Your spot the ball scheme could be a prize competition.
To be a prize competition, there must be an element of skill, knowledge or judgement that is likely to prevent a high proportion of people from taking part, or prevent a high proportion of people winning a prize.
If a panel of judges decide the position of the ball and players have to apply judgement, skill or knowledge to match their own decision of where the ball is with that of the panel, it is more likely to be a prize competition than a lottery.
Genuine prize competitions are free from statutory control under the Gambling Act 2005… and therefore do not require a licence."
The “element of skill, knowledge or judgement” definition within spot-the-ball competitions is critical for keeping BOTB’s games unregulated.
But questions could be asked:
Competition winners do not necessarily require any "skill, knowledge or judgement" to actually win. How many BOTB winners would genuinely say they won due to "skill, knowledge or judgement" rather than being plain lucky?
If BOTB’s games require an element of "skill, knowledge or judgement", then the more skilful players should have better records than less skilful players. Does BOTB have evidence to show that is actually the case? Has anyone won more than one BOTB competition?
Participants can buy up to 75 tickets per BOTB competition. Would anyone apply the same level of "skill, knowledge or judgement" on their first spot-the-ball attempt as they would on their 75th? Purchasers of multiple tickets could instead adopt a simple ‘scattergun’ approach, where the element of "skill, knowledge or judgement" involved would not be obvious.
Maybe those questions were asked in a court case involving Sportech and HMRC. This BOTB update during 2018 said:
“As a result of the outcome of the Sportech claim and the submission to HMRC, the Board also notifies shareholders that, under the guidance of its tax advisers and in order to adhere to the new tax rules governing “Spot the Ball” competitions, which are no longer subject to VAT, the Company has now registered for the payment of Remote Gaming Duty (“RGD”). The payment of RGD, as opposed to VAT will result in the payment of higher taxes and will negatively affect the Company’s operating margin.”
“The central thrust of [Sportech’s] claim was that it was incorrectly charged VAT on Spot the Ball as it is a game of chance and not a game of skill. Games of chance are free from VAT.”
It also held that STB was a game of chance since, however skilful a competitor might be and even therefore if he had superlative skill, the most that skill and judgment could do was to estimate the ball’s approximate position, so accordingly the game was one of chance.
The case went to appeal and the verdict overturned, but then went to another appeal and the initial verdict was reinstated.
“The First Tier Tribunal found that Spot The Ball was a game of chance and made no error of law in making that finding.’”
So according to the courts, spot-the-ball is a game of chance.
But according to the Gambling Act 2005, spot-the-ball is a game that requires an “element of skill, knowledge or judgement.”
BOTB currently pays Remote Gaming Duty to HMRC. Is such taxation commensurate with running genuine skill-based prize competitions?
“As with the rest of the economy, gambling has changed enormously in the last 15 years, with smartphones giving opportunities to gamble online almost anywhere and at any time, fast-paced innovation in product design and advertising, and new opportunities to harness technology for the protection of players. The Gambling Commission has broad powers to set and enforce licence conditions, but in recent years a number of high profile enforcement cases have raised concern that too many people are still experiencing significant harm. We want to look at whether our regulatory framework is effective and whether further protections are needed.”
While the consultation questions did not specifically mention spot-the-ball competitions, a review of the Act may well ask whether the associated "skill, knowledge or judgement" exemption still holds true.
Maybe the review will take the same ‘game of chance’ view as the courts (and now HMRC).
Arguably the present Gambling Act rules were drawn up with the old-style newspaper competitions in mind for a bit of reader fun…
…rather than for dedicated spot-the-ball businesses selling up to 75 tickets a pop online.
Regulatory changes to spot-the-ball competitions could mean greater marketing restrictions for BOTB, with a possible knock-on impact to growth rates and profits.
I note 17-year-olds will no longer be able to buy a £1 lottery ticket from October this year… but can continue to purchase up to 75 tickets at £5 a go to win a supercar at BOTB!
All views welcome.