What Is The Deposit Protection Scheme and What Does It Mean For Player Funds If A Gambling Company Goes Bust?

There is an old saying in the world of betting that you never see a poor bookmaker. It’s not true, of course, but the idea behind it is that bookies are like casinos and in the end the house always wins. It’s why not many people think about what would happen to their funds if a bookie went bust, but it does happen from time to time so it’s important to know the answer.

The Deposit Protection Scheme is a level of protection offered by certain bookmakers that guarantees that your money is ring-fenced from their business and therefore can’t be touched if they go bust. Not all bookies sign up to this, however, so there’s a chance that you could lose all of your money if you bet with the wrong companies.

What The UKGC Says

UKGCThe first port of call when trying to establish how safe your money is is with the United Kingdom Gambling Commission. The governing body of the betting industry is responsible for licensing companies that wish to offer their services to customers in the UK, so what they say goes and companies know this when signing up to their rules.

The first thing to note is that funds deposited into a gambling business are not protected in the same way that those deposited into a bank are, for example. Instead, bookmakers are simply required to provide information that lets customers know what will happen if they go out of business. It’s therefore important to look at each bookie’s plans on this front.

There are three different levels of protection outlined by the UKGC and companies that will take funds from customers based in the United Kingdom have to choose which one of them they’ll opt for. The good thing is that they have to choose one, but the less inspiring news is that the one that they go for might not actually have any protection.

Three Levels Of Protection

high medium and low riskThe most important thing that you’ll want to do when you’re thinking about which bookmakers to sign up with is to find out which level of protection they offer. There are some specific things that must be done in order for the protection level to be reached, but the UKGC doesn’t actually arrive the assessment that the betting company claims that it offers.

Instead, they do random checks to decide if the level of protection claimed by a company is accurate. Regardless of the level opted for, the money of customers has to be kept in separate accounts from the business one. The protection that that money is then given will help to decide the level of protection according to the Gambling Commission’s ratings.

  • No Protection – Money will be kept in a separate account but if a company goes bust then the cash will be seen as part of the business and can be claimed by creditors
  • Medium Protection – The money is kept in a separate account but it is protected by insurance. This means that customers may have to claim their money back from a third-party rather than simply be paid it directly
  • High Protection – The money that is held in a separate account is ring-fenced and is legally separate from the rest of the business. In the event that the company goes bust, the money will be paid back to customers directly as it is controlled by an independent auditor or person

Deposit protection levels are always detailed in betting site terms, here is an example from BetVictor who have high level protection:

We are required by our license to inform our Customers about what happens to funds which we hold on account for you, and the extent to which funds are protected in the event of insolvency, further details of which can be found at: www.gamblingcommission.gov.uk/for-the-public/Your-rights/Protection-of-customer-funds.aspx . We hold customer funds separate from company funds in the Independent Trust Account to ensure that there are always sufficient funds available for Customers to withdraw their balances, even in the highly unlikely event of the insolvency of BetVictor. The account is subject to oversight from either an independent trustee or external auditor. This means that steps have been taken to ensure that Customer funds are repaid to Customers in the event of insolvency. This meets the Gambling Commission’s requirements for the segregation of customer funds at the level: high protection.

Why You Need Protection

protect fundsThe reason it matters which level of protection the company you use has is all about the decisions that you make. That is to say, if you’re the sort of person that likes to have a large sum of money in your betting account ready for use whenever you need it, you’ll be best off going for a business that offers the highest possible level of protection.

If, on the other hand, you tend to simply deposit money into your account prior to placing a bet and withdraw any winnings as soon as you’ve been paid them, it won’t really matter which level of protection the betting site you use offers. The type of bettor you are will dictate which level of protection you need, so have a think about that and sign up accordingly.

What Happens To Your Funds

Credit Card PaymentsWhat happens to the money that you’ve got in your account will depend entirely on both which level of protection the company offers and what has actually happened. If a rival business decides to come in and buy the failing business out, for example, then there’s a strong likelihood that they’ll also have to agree to take on their customers and the associated debt.

In this instance, you’ll usually find that your money simply shifts to the new company and you can carry on betting with them. If you’ve already got an account with them then the funds will most likely be added to that account, though not always. Some companies will also take on your outstanding bets and pay them according to how they’re settled.

If you bet with a company that offers the lowest form of protection then the likelihood is that your money will be used to pay creditors, unless you can withdraw it before the business’ accounts are all frozen. There will normally be some form of warning before a company goes bust and reaches the stage when accounts are frozen, so make sure that you keep a look out.

Arguably the most surprising thing about the level of protection is just how many companies offer the lowest one possible. It might seem strange, but the majority of the big firms whose names you will recognise opt for the No Protection option. Obviously they hope that their position in the market means it will never be a problem, but it is something that you’d do well to bear in mind.

What Can You Do To Protect Yourself?

WithdrawObviously choosing a site with medium or high protection is the first thing to do but if you already have an account with no protection that you want to continue using there are some things you can do to mitigate risks:

  1. Never leave excess money in your account wallet, withdraw money and re-deposit when needed, this way if a site goes bust you should have a minimal amount of money in your wallet.  If you are concerned about the time it takes to deposit or withdraw use an eWallet as an intermediary (e.g. PayPal), this way you can upload and withdraw funds in less than one day usually.
  2. Be careful placing ante-post bets, especially long in the future.  If a company goes bust with no protection you could not only lose any winnings but the stake itself.  Consider always placing ante-post bets with operators that have protection of funds.
  3. Avoid white labels, these are sites that are owned by one company but operated by another, you can tell this if you look at the UKGC license for a site and see the domain name in question listed under ‘white label’.  White labels are often poorly funded and can have a high closure rate.