Everything You Need To Know About Fixed Odds Betting Terminals (FOBTs)
Bookmakers have been on our streets since the 1960s. Before that they were a staple of racecourses throughout the country, offering odds on every race taking place and attracting punters week after week. Their constant evolution has seen them go from ‘undesirable’ locations on the backstreets of a town or city to being found in every single main shopping area around the country. They shrugged off their image as a seedy place that was the dominion of men and gradually became a shop that any adult could visit without feeling out of place.
When the internet exploded bookies were amongst the first companies to realise its potential. No longer did they need to spend time and money making their stores seem like any other high street shop, instead seeing customers flock to them from the comfort of their own homes. They also used the development of the technology that came up with odds and reacted to fluctuating markets to invent entirely new ways of betting, such in In-Play markets and Exchange betting platforms. Still, more than a few punters continued to turn up at high street stores and wanted to be entertained, so a machine was invented to satiate their desires. The problem is, not everyone thinks they’re a good idea.
UPDATE - FOBT Stake Limits Reduced To £2
Following a long consultation by the UK government it was finally announced on 17th May 2018 that the new stake limit for category B2 Fixed Odds Betting Terminals is to be reduced from £100 to £2 per spin/hand. This will come into force in 2019. This also comes with a remit to evaluate the lower limit B1 and B3 gaming machines (see later for details) looking into spending and time limits.
The date of implementation was pushed back from April 2019 to October 2019, this was decided in the 2018 budget to allow the stake limit to come in at the same time as a new 21% point of consumption tax on online gambling. However, the following month following a backlash from the public and from ministers the government were forced into an embarrassing budget reversal meaning the FOBT tax will be brought in April 2019 yet again.
While this decision is not popular with bookmakers and is the lowest limit the government was considering it is no surprise it has been brought in. The fact of the matter is bets taken over the counter in shops has been declining for many years with more and more people moving online and has been covered up by the increased revenue generated from FOBTs.
Therefore it is now certain that betting shops will close and jobs will be lost, with most bigger high street operators estimating to lose £100-200 million each year alone. At the same time however you cannot keep a failing industry going if it at the expense of some peoples addictions and the closure of high street shops is something punters, the treasury and the industry will have to deal with.
Online betting is booming and you can still play all the high stakes games that were available on FOBTs online. People can also visit real world casinos where higher stake limit real and virtual games will still be available to play. And despite lower tax revenues for the government following the stake reduction at the same time this also removed a massive avenue for money laundering by criminal gangs (see later).
In the short term this will be seen as a negative for the gambling industry and possibly another example of the government controlling peoples freedoms. In the longer terms however the move will certainly improve the image of the betting industry and based on their history they will surely find new innovative ways to replace the revenue.
For more information abut FOBT's, how they evolved to this point and why such a hard campaign was fought to limit them read on.
What Are Fixed Odds Betting Terminals?
Fixed Odds Betting Terminals tell you everything you need to know about them in their name. They are, in essence, computer terminals that allow customers to place bets on events that have fixed odds. Normally shortened to FOBTs, these machines are perhaps best thought of as being like electronic slot machines, offering players the chance to play quick games like roulette. They tend not to be limited in what they offer, either, with the likes of simulated horse racing and bingo also available for those that choose to play them.
If you were to enter a bookmakers and have a look at a Fixed Odds Betting Terminal then you’d see a percentage figure available for your consideration, referred to as the RTP. That stands for ‘Return To Player’ and, as you might imagine, indicates how much money (on average) will be given back to players. Let’s say that the RTP of a specific machine is 94%, the idea there is that for every pound you’ll spend you’ll get back ninety-four pence over the course of time. The problem is that there isn’t a limit to how much time it takes for that 94% to be returned to the player, meaning you could play for years at a loss, or you could win instantly, it is all down to probability.
We’ll come back to the controversy surrounding the machines later, concentrating on how they work for now. RTPs average at around 90-94% across the board, with some games like roulette tending to creep up closer to 97%. The machines usually have a minimum stake of £1 per spin and a maximum payout of £500, although that differs in certain circumstances. The games that you’ll be able to play will change from bookie to bookie, though it’s essentially irrelevant - the RTP is the same no matter what graphic you’re interfacing with. They appeal to punters because they are quick, bettors know the odds that they’re going to be getting and they could get an immediate payout. If you were to place a bet on a greyhound race instead, for example, then you might end up having to wait an hour until the race actually begins.
Are All Fixed Odds Betting Terminals The Same?
If you go to a Ladbrokes in Liverpool and then another branch in Hounslow then the design and general styling of the Fixed Odds Betting Terminal you’ll find in each will be pretty much the same. The veneer might differ between a Ladbrokes and a Coral shop, just as the games that you’ll be able to play might not be the same from one betting chain to another. What you’ll find remains the same from place to place is the level of game available depending on the category that the machine fits into. These are as follows:
- Category B2 - Available at racing tracks with pool betting, casinos and betting shops. Have a maximum stake of £100 (reducing to £2 in 2019) and a maximum payout of £500
- Category B3 - These also have a maximum payout of £500 but a maximum stake of just £2. You’ll find them in bingo halls, adult game centres, casinos, bookmakers and racing tracks that offer pool betting
- Category C - Allowed in betting shops but not as popular or common as their maximum stake is £1. More usually found in adult game centres, commercial cubs, pubs, members clubs and so on
The Origin Of FOBTs
Knowing what these machines are about is useful, but knowing their history perhaps helps to explain why they grew in popularity and why they’re now such a cause of controversy. The FOBTs in their current form began to arrive in the United Kingdom in 1999, though the types of games that you could play were much more limited and the margins were much higher. That meant that they weren’t all that popular, with punters turning their nose up at the cut the bookies were getting as well as the less interesting games.
What turned the tide for bookmakers was a change to the way that gambling was taxed back in 2001. It meant that bookies didn’t need to have such high margins to ensure profits, allowing them to install more enjoyable games such as roulette for customers to play.
These changes meant that Fixed Odds Betting Terminals began to grow in popularity from 2001 onwards, with punters pleased with the variety of games that they could play and bookmaking companies delighted with the regular margin they were benefiting from. As a result, FOBTs began to spring up all over the place, with around 20,000 terminals installed around the United Kingdom by April of 2005.
Another big event happened in the world of gambling in 2005, which was the introduction of the Gambling Act. That was designed to offer some limitations on things like the installation of FOBTs, but it didn’t actually come into effect for another two years. During that time bookmakers continued to introduce the machines at an impressive pace, with about 10,000 more installed before the Act became law. With approximately 30,000 terminals in place around the country, the games being played were part of the new betting shop experience for players and part of the profit making machine for the companies that owned them.
How FOBTs Changed The British High Street
There have been studies conducted around the activities of betting shop customers on the high street in the past. Research suggests someone who is visiting a bookmakers is also likely to spend around £20 in the shops in the same area as it. There’s not as much data to suggest whether or not this amount decreases if they have lost their bets rather than won them, but on average bettors add to the local economy. Even so, critics of bookmakers and betting in general believe that both the shops themselves and the people that use them bring down a neighbourhood.
Whether there is any truth in that is a tricky question to answer. After all, betting shops employ about 52,000 people throughout the UK and every individual shop pays an average of £120,000 in taxes and business rates, which adds to the local economy. That amount will go down the more that people turn to online gambling rather than visiting physical shops. The closing of a bookmakers might seem an area ‘seem’ nicer, therefore, but in reality it would remove money from the local area and is also unlikely to stop people from betting. If someone who has been going to the bookies for five years turned up one day and discovered that it was now a butchers, he’s not going to decide to buy a steak with his fiver. He will either spend it in another bookmaker’s shop or else go online and spend it there instead.
The problem for those that oppose betting shops is that the introduction of Fixed Odds Betting Terminals gave the bookmakers a reason to open more of them. Companies were limited to having just four terminals in each shop that they owned, so the best way around that was to open more shops. It made financial sense for the bookies, given the amount of money that each individual terminal made them in profit. Between 2004 and 2012 the amount of betting shops on British high streets went up by 50%. FOBTs won’t have been solely responsible for that, with the financial crash also playing a big part. That’s because few shops turn enough of a profit to expand in the same way that bookies can, meaning that betting companies with high street stores bought up the shops that were failing.
Again, FOBTs are only a small part of why bookmakers could afford the expansion into new shops. Yet there’s no question that their profitability made life an awful lot easier for bookies than it would have been for a newsagent or baker, for example. Each terminal brings in around £50,000 in profit, giving a betting shop opening its doors for the first time a yearly profit in the region of £200,000 before a single other type of bet has been placed. You don’t get that sort of guaranteed income from magazine sales or people buying loaves of bread. That’s why the number of bookmaking shops on UK high streets has stayed level at about 9,000 for the past decade or so.
Bookies certainly enjoyed their heyday during the 1970s and 1980s, with around 16,000 shops open throughout the UK. There are nowhere near that amount around any more, even though for some it feels like there’s more. That’s likely to be due to the commercialisation of betting shops in the modern day, with the clean cut image and the change in law allowing them to be located smack bang in the middle of a popular shopping area. In the past they were required to be hidden away down side streets instead of on the main road, say. Still, bookmakers account for about four percent of retail outlets today, taking up more prime locations than they’ve ever done before.</p>
Why Are FOBTs Controversial?
As you’ll no doubt have picked up throughout the article so far, there is a controversial aspect to Fixed Odds Betting Terminals. They’re not universally accepted by everyone, with one critic referring to them as the ‘crack cocaine of the gambling industry’. The criticism got so bad that the government used 2017 to investigate whether they should introduce some new legislation specifically to deal with the problem. They’re not in a particularly easy situation, however, with FOBTs over-taking other types of bets placed in a betting shop in 2011-2012 and continuing in that manner since then. Though they’re only used by about 4% of the entire population, the profit that they give bookies makes them something that no one who benefits from them wants to limit - including a government that collects taxes.
What makes these machines so controversial is the speed with which bets can be placed. If you were to sit at one and load up a roulette game then you’d be able to place a new bet every twenty seconds. That may not seem too bad, but don’t forget that the maximum bet is £100 (at time of writing), meaning you could theoretically get through £300 every minute. Expand that over an hour and you’re looking at a possible investment of £18,000 during that time. Little wonder that the Gambling Commission believe that about a tenth of all money earned by the gambling industry in the UK - including other betting shop bets, lottery wagers and casinos - between April 2016 and March 2017 came from Category B2 machines. That’s around £1.8 billion of a £13.7 billion total.
It would be natural to hope that people would be more sensible than to stake £18,000 in an hour, but there’s a reason that the machines have been referred to as being like ‘crack cocaine’. There’s evidence to suggest that some punters have lost incredible amounts of money in a very short amount of time indeed. GambleAware highlighted the case of seven people who each lost over £10,000 in one day on Fixed Odds Betting Terminals, as well as one who lost more than £13,700 in just seven hours.
Campaign For Limits on Fixed Odds Betting Terminals
Stop The FOBTs is a campaign that has been running for a number of years now, with the specific aim of pressuring the government into stopping Fixed Odds Betting Terminals having so much influence over the industry. They are not asking for the abolishment of the machines in their entirety, but they are campaigning to get the maximum stake reduced from £100 to £2.
That campaign is linked to the Campaign For Fairer Gambling, which is concentrating not on the gambling industry but on the people who tend to place bets. They are hoping that regulation can be introduced to help protect bettors from themselves. On top of both of those campaigns there are also local ones that try to limit the influence of FOBTs in local communities, such is the extent to which there are a large amount of people that aren’t in favour of the machines.
This desire to lower the stake amount resulted in a government announcement in October 2017 that they would restrict the amount that punters could spend in one go on an FOBT. This involved a three month consultation, trying to decide the best manner in which to move forward. The options that they chose to consider involved lowering the stake amount from £100 to one of £50, £30, £20 or £2. This wasn’t enough for some, who immediately criticised the government for not being more firm in their conviction that £2 would be the right stake amount moving forward. That is best summed up by Sir Robin Wales, the Mayor of Newham, who said, “The government has bottled it, run away from the decision it should make. The fact they haven’t said their favoured option is £2 ... they should be ashamed of themselves”.
Part of the problem that the government has is that the gambling industry are thoroughly opposed to the idea of lowering the stake amount even slightly. They’re doing their best to appeal to the government’s sense of financial well-being, pointing out that Fixed Odds Betting Terminals on their own brought in around £400 million in tax in 2016. They also claim that a reduction in stake to £2 could result in betting shops needing to close, with companies unable to afford the overheads without that income stream. That in turn could lead to as many as 20,000 jobs being lost around the country.
The Future Of FOBTs
The government has now confirmed its decision regarding Fixed Odds Betting Terminals to reduce the limit to £2. Certainly the Association of British Bookmakers are not convinced that the critics of the machines are being entirely fair. A spokesperson for them said, “As with all forms of gambling there will be winners and losers and the research also shows a customer won over £13,000 in four hours on a gaming machine. In both cases there is no reason to believe that the individuals could not afford their stakes. Losses in other forms of gambling can be significantly higher than the exceptional loss cited here”. Admittedly, “other gamblers lose more money” isn’t the best argument that they could put forward.
The argument also fails to hold water when you consider some of the critics of FOBTs from within the gambling industry. Breon Corcoran, for example, was the outgoing Chief Executive of Paddy Power when he said, “We now believe that the issue has become so toxic that only a substantial reduction in FOBT stake limits to £10 or less will address societal concerns. I am confident we could operate our retail business successfully and profitably under such circumstances. Other well-run operators should be able to do the same”. That was in a letter to the minister at the Department of Culture, Media and Sport, Tracey Crouch, who is responsible for the government’s ongoing consultation.
Adrian Parkinson was partially responsible for introducing Fixed Odds Betting Terminals to the United Kingdom and he later joined the Campaign for Fairer Gambling in order to help them in their battle against the machines. He said, “These averages are in my view misleading and understate the scale of losses many FOBT players are actually suffering…During the 10 years I was responsible for FOBTs I saw…a former headmaster in Bradford who went through £8,000 in a single session”.
Paddy Power represents about 4% of the real estate owned by British bookmakers, meaning that others feel that the Irish bookie is better placed to cope with the losses than companies that depend more completely on Fixed Odds Betting Terminals for regular income. Given the loss in tax revenue that the government would suffer by reducing the maximum stake on FOBTs to as little as £2, that seemed the least likely outcome and many were surprised by the dept for Culture Media and Sport announcement in May 2018 that the limit would be reduced to £2.
One unforeseen aspect of the proliferation of the FOBTs on British high streets is the ability that they give criminals to successful launder otherwise dirty money. As the machines are able to take huge amounts of money, drug dealers and the like can pay a good chunk of cash into them and then cash out before they lose too much of it. It will involve taking a small hit on their profits from drug sales, but in return they’ll have ‘clean’ money and a printout saying that they’ve been gambling that day. That is enough to show any police offers that might stop them and ask why they’ve got such a large amount of cash on them.
In 2013 the bookmaker Coral was fined £90,000 by the Gambling Commission because they failed to do enough to stop a drug dealer from laundering close to £1 million in its shops. The commission said that ‘little or no challenge was made by the operator, although there were extensive and realistic opportunities to do so’. Instead of stopping the drug dealer from using its shops to launder their money, Coral actually gave him a day at the races in order to maintain his loyalty to their shops.
Although you can lose a lot playing FOBTs in reality they are fixed odds games with guaranteed payouts, on average over 90%. This means if you launder money regularly then the laws of probability say that for every £1000 you launder you will get over £900 back in clean cash. For criminals, drug dealers and gangs this is a price worth paying. They also don't do it themselves, instead getting a stream of vulnerable underlings to actually do the betting, dividing £10,000 into twenty £500 lots and giving this to 20 people to play on FOBTs.
Dealers know how betting shops work, including the fact that they will get alerts if people aren’t placing enough of their money on to bets, telling them that there’s suspicious activity on the machines. By placing £20 on red, £20 on black and £2 on zero, those that wish to launder money can go through huge swathes of their take whilst only losing £2 per spin. If zero does happen to come up then they’ll win £72, covering previous losses, up to a point. The lack of regulation around FOBTs from the moment they were introduced into the UK is why they have long been used by criminals to launder money.
The way that different bookmakers have introduced certain ways to use your winnings has also helped those nefarious characters who wish to ‘clean’ money via betting shops. Ladbrokes’s The Grid service means that winnings attained in a shop can be moved into an online account, for example. William Hill’s card means that you can put any winnings you’ve managed to rack up onto a debit card that you can then use to withdraw your money from a standard cash machine. It seems as though you’re a successful gambler when, in actual fact, all you’ve done is load up your account with money gained from illegal dealings.
Fixed Odds Betting Terminals v Online Slots
Those of you that regularly play online slots may well be wondering what the big differences are between them and the types of games you can play on FOBTs. After all, sitting at a terminal in a bookmaker’s shop, you’ll see the likes of roulette come up as an option, as well as countless slot-type games that look similar to their online casino counterparts. The answer to that particular question is that the major differences between the two types of game can be found ‘under the hood’.
One of the biggest differences is the Return To Player percentage, with decent online slots often returning somewhere between 96 and 98%. Compare that to the 90 to 94% RTP of Fixed Odds Betting Terminals and you’ll see the difference immediately. Even the 97% RTP of roulette isn’t as good as the best online slots you’ll be able to find if you look around.
Online slots also offer a lot more variety in terms of how much you’ll be able to bet. You can find games that offer stake lines of just 1p, or go as high as £250. Look around and you’ll be able to find a slot that fits exactly what you’re looking for. With FOBTs there’s nowhere near as much flexibility, given that the minimum stake is usually £1 and the maximum is £100. That’s also reflected in payouts, with Fixed Odds Betting Terminals being limited to a maximum of £500, whilst online slots can have progressive jackpots attached that can payout up to millions of pounds.
If you love you slots and have been considering whether or not to give FOBTs a try then you might want to think long and hard before you do. The sheer volume of choice alone should sway you towards online slots, with decent casinos offering thousands of game choices. Fixed Odds Betting Terminals, meanwhile, offer up to about fifty games for you to choose from. You’ll also find that, if things do become a bit too much for you and you’re playing with more money than you can afford, you’ll be able to exclude yourself from playing much more easily on online slots than with FOBTs. That’s not to say that you won’t be able to do it in a bookies, just that the system is set up to make it more simple online.
It is worth noting that the new higher tax for games online might reduce these payout rates in future, making them closer to 90-95%, atlhough still you have more options online.