A change to the regulation of gaming machines will occur on 1st April 2019 when the maximum stake on category B2 games will reduce from £100 to £2. In this article we explore the implications of this change.
The Gambling Act 2005 sets out a number of categories of gaming machine and which premises are allowed each particular category. Betting shops are allowed up to four gaming machines which can operate any category other than A, B1 and B3A. Generally betting shops have operated B2, B3 and C categories of machine. The categories define the type of game allowed and one machine can offer a number of different categories of games.
The UK Gambling Commission have an information page about different types of gaming machine categories at Gaming Machine Categories
Independent betting shop owners must now decide if it is viable to continue to offer cat B2 games on the machines in their shops.
Taxation
Machines Games Duty (MGD) is charged on the Gross Gambling Yield (GGY) generated by gaming machines. MGD is charged at 25% on cat B2 games and at 20% on cat B3 games. However, the kicker is that if a machine makes a combination of categories of games available then the highest rate of MGD applies to all GGY generated by that machine. Thus if only one cat B2 game is available on a machine and all other games are B3 the GGY generated by the cat B3 games would be taxed at 25% (the B2 rate).
Thus, unless the B2 content is particularly valuable it does not make commercial sense to offer cat B2 on the same machine as cat B3.
What’s the difference between B2 and B3?
Categories of games are regulated by maximum stake per game, maximum win per game and the rate at which games can be played. The return to player (RTP), that is the average percentage of stakes that are returned to the player in winnings, is chosen by the operator or a function of the choice of game. Together the maximum stake, RTP and rate of play combine to give an average rate of loss by the player. This can be expressed as an amount per minute.
A B3 game can be played every 2.5 seconds which is 24 games per minute and is subject to a maximum stake of £2 per game. A typical RTP for a B3 game would be 90%. Hence the maximum loss per minute for a typical B3 game would be 24 x £2 = £48 less 90% RTP = £4.80
Under current regulations their are two maximum stakes applicable to B2 games. For walk up play the maximum stake is £50 per game. If a customer wishes to play above this level then they can either insert a loyalty card which tracks their play and allows them access to data regarding their history or approach the counter and request that staff allow play up to £100 per game.
The most popular B2 game is roulette, this is because the RTP for roulette is 97.3% which provides the player the best value for money of any game on betting shop gaming machines.
Under present regulations a B2 game has a maximum stake per game of £100 and can be played every 20 seconds, which is 3 games per minute. The RTP for roulette is 97.3%. Hence the maximum loss per minute for a game of B2 roulette would be 3 x £100 = £300 less 97.3% RTP = £8.10, at the walk up stake of £50 per game the loss per minute reduces to £4.05
After the change in regulations on 1st April the maximum stake on B2 games reduces to £2. Thus the loss per minute for B2 games will reduce to 16p. Calculated as 3 x £2 = £6 less 97.3% RTP = 16p.
Conclusion
Under the new regulations the loss per minute for roulette in cat B2 will drop to 16p per minute compared to £4.80 for a typical B3 game. Cat B2 will continue to have a higher MGD rate applied to GGY generated. These two commercial factors combined with the loss of playability and enjoyment suffered by roulette players restricted to a £2 stake every 20 seconds will result is the B2 category of games disappearing from gaming machines.