Gambling stocks lose out after MPs call for tighter curbs on online casinos

The Gambling Related Harm All-Party Parliamentary Group, chaired by Labour MP Carolyn Harris, published its interim report into the online gambling sector on Monday.

The report's main recommendation is for limits on stakes and prizes to be introduced, including imposing a £2.0 maximum bet on online slot machines. A £2.0 limit was introduced for fixed odds betting terminals (FOBT) in high street shops in April.

Other recommendations included banning the use of credit cards, improving affordability checks, and for legislation to be introduced that focuses on harm prevention.

The report also called on the regulator, the Gambling Commission, to “urgently improve its standards” regarding online gaming.

Vice-chair Iain Duncan Smith, the Conservative MP and former party leader, said: “Gambling addiction is becoming a public health crisis. It is clear from this inquiry that the powers of the Gambling Commission need to be significantly strengthened.

“For too long, online gambling operators have exploited vulnerable gambles to little or no retribution from the regulator.

“It is outrageous that there are not stake limits online, that gamblers are still able to gamble using credit cards online and that operators are able to continue to offer inducements to the vulnerable without proper sanction.”

The cross-party group can only make recommendations and has no power to force government to introduce legislation.

However, any perceived threat to the online activities of gambling companies will be taken extremely seriously. It is a massive growth area for operators, while growing pressure offline - such as the limit on FOBTs being slashed from £100 - has seen firms increasingly rely on online for sales and profits. In August, William Hill posted a £63.5m interim loss which it attributed in part to the impact of the new FOBT regulations.

Neil Wilson, chief market analyst at Markets.com, said: “It would be a big blow if any government were to go ahead with these recommendations, given the reliance on online revenues among the big gaming stocks.

“We should be clear that this is not a manifesto pledge, but simply calls by a cross-party group of MPs. But Labour would lap this kind of stuff up.”

In a note, RBC Capital Markets said: “Although we believe risk of a new online staking limit is low, the share price pressure today has confirmed just how nervous the market is about this.

“Taking the retail stake cut as precedent, we have simulated a 40% reduction in gross win for each of the operators, offsetting this with the associated costs.”

However, overall RBC remained upbeat about the sector's health. “Online gambling is a growth industry that has expanded at 10% per annum over the last few years, and we believe is set to grow at 6.5% per annum going forward,” it noted. “While we accept that the regulatory environment is unpredictable, we highlight that margins are high.”

As at 1300 GMT, Flutter Entertainment, GVC Holdings, William Hill, 888 Holdings and Rank Group, which owns the Mecca Bingo, were all under pressure. Flutter was down 4%, Foxy Bingo-owner GVC was 8% lower, at 822.80p, William Hill was also off 8%, at 186.15p, while 888 Holdings and Rank both lost 5%.