The government's review of UK gambling laws could cause betting firms serious problems, but also risks worsening market failures already in existence.
If you have ever watched a Premier League football game, you will know that UK betting companies are heavily embedded in the world of sport. Whether it be the Betway logo on West Ham's kit or the vast array of betting adverts at half time, UK gambling's high profile has increased appetite for tougher legislation in the industry to protect vulnerable consumers and young people from falling into a spiral of debt and addiction.
Regulators are said to be pondering the introduction of registration requirements, such as making individuals show proof of their earnings, to increase effort and deter people from signing up to betting companies - the consumer equivalent of higher barriers to entry.
The introduction of limits that may be too harsh, however, such as a £2 cap on bets in games such as roulette, could have unintended consequences by fueling a rise in black market gambling - where there is no regulatory oversight. If new regulation is not thought out properly, this could be a classic case of government failure in which intervention only proves to exacerbate existing market failures - as consumers turn to black markets that are far worse than current UK betting firms.
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