What does the deposit protection scheme do?
Like most everyday activities, punters will probably not have given any thought to the risks, other than losing a bet, that betting might entail. If they have thought about it, it’s likely they have simply assumed that a regulated industry will have sufficient safeguards and measures in place to protect their money. They will be used to schemes in place to protect their money in a bank, holidays and housing deposits, so might be surprised to learn there isn’t any scheme in place to protect them in the event a bookie goes under.
Instead, the Gambling Commission approach is light touch. Bookmakers are required to decide what protection they will offer to gamblers’ money in one of three categories, basic, low or high protection. They have to publish which they offer, but only in their terms and conditions which are not frequently read. There is no mandatory external audit of this, although the accuracy might be checked by the Gambling Commission, so generally gamblers are likely to be entirely unaware of what might be in place and reliant on the good faith of their bookie.
How does it work?
The one safeguard that bookies are required to have is a separate account for customer funds. This account, which must be ring-fenced from their other business accounts, should hold, and only hold, all the stakes placed by customers on unsettled bets and the stakes and winnings from settled successful bets.
The protection level they publish indicates what, if any, further measures might be in place.
This is basically ring-fencing plus. Your money is not just held in a separate account, it’s actually legally separate from the bookmaker. While the bookie can use it for customer cash, it is controlled by a third party, who is totally independent of the main business. If the bookie collapses, the account would be unaffected and its manager would be able to use the cash to refund affected customers.
Medium protection means some steps have been taken to protect customer money. The customer account is operated by the bookie, and might be used to settle debts if the bookie goes under, but other safeguards are in place. This is often something like an insurance policy that covers customer money.
While offering some security, there is no guarantee that punters will get all their cash back. The insurance policy might, for example, only cover a fixed proportion of the balance, or might have an upper limit on payments. Bookies aren’t required to provide the cover detail in the terms and conditions, so it’s impossible to know exactly how much might be at risk.
Basic protection is just a nicer way of saying no protection. Although the account is ring-fenced the bookie, or their insolvency administrators, are free to use it to settle any debts. While punters might get lucky, they would be creditors and, under current rules, among the lowest priority for any payments. It is likely that any punter owed money by an insolvent bookie would have a long wait only to find they get a small fraction, or none, of their money back.
What does this mean for punters?
In practice, there might not be any point in reading the lengthy terms and conditions. Bookmaking is a profitable business and failures are rare. Even in those unfortunate situations where a bookie goes under the amounts most punters have on account are small; their losses may be unpleasant, but not large enough to cause them any problems.
However, if you are holding significant balances it might be worth checking the bookmakers’ level of protection for your peace of mind. You might be surprised but many bookies, including some big names in the gambling world, opt for the lower protection options: there are plenty of very reputable bookmakers with basic or medium levels of protection, like Betfred and William Hill.
If your bookmaker went bust and had either medium or high protection then what is protected will depend on the status of the bet. The key thing to bear in mind is that the protection applies to your cash, not your bet. Therefore, if you won you bet your stake and winnings should be safe. If the bet is still in progress, however, then only your stake is covered. You might only need one more result on that big accumulator, you’ll still only get your stake back.
How can you make your money safer?
The first thing to do is to check the protection offered by your bookmaker. The terms and conditions are usually long and impenetrable documents, but searching for the words ‘protection’ or ‘protected’ will usually find the relevant clause.
You should bear in mind that it isn’t necessarily a bad sign that your bookie only offers basic protection: this is a business decision and not a measure of quality in the gambling industry. If you are with a reputable, established, bookie it is likely your money is safe but you might want to reconsider using a brand-new company with no protection.
It’s also important to actively manage your account. This also helps protect you against fraud. Avoid keeping big balances in your account, instead keeping a balance that matches your gambling. And consider how you withdraw your money. With most bookies eWallets are the fastest way to get your cash, and this minimises the time they have — and can lose — your money.
Finally, think about the type of betting you do and with whom. Having a small flutter just before kick-off is likely to be safe, but putting down a big stake on the winner of next season’s title might be riskier; bookies are usually profitable but there’s a lot that can go wrong over a year, so it’s sensible to make sure your stake is safe for this type of bet.
What’s right for you?
Bookie failures are rare, but they happen. It’s sensible to think about your attitude to risk and knowing what would happen if your bookie went under will help you decide. Most punters will not need to worry about it, but if you have large balances on account or put big bets on future events you might want to think if your bookmaker’s protection is right for you.
Carl Hughes - Editor
Carl Hughes is a leading expert on sports and casino betting. Carl began his career with a BSc in Sport, Exercise and Health Sciences from the University of Birmingham before working within the industry for some of the bigger names (GVC and Bet365) and has been praised as being "a leading sports betting commentator".