Is Insider Betting on Politics a Crime?

Various figures connected to the Prime Minister, Rishi Sunak, have been accused of criminal activity for betting on the date of the election, which, unexpectedly for most of us, is to be held on July 4 2024.

Context of the Gambling Act

The Gambling Act 2005 was passed by the Blair government to completely regulate gambling in the UK. The Act consolidated existing gambling/betting-related legislation, established the Gambling Commission, and made gambling contracts enforceable where previously they were not.

Prior to the GA 2005, there was piecemeal legislation covering different elements of gambling — for example, the Gaming Act 1845, s 17 provided that winning at gambling by “fraud, unlawful device or ill practice” constituted the crime of “obtaining money by false pretences”.

Gambling Act s 335 & s 336

S 335 of the Gambling Act makes gambling contracts enforceable, except where they are unlawful. S 336, meanwhile allows the Gambling Commission to void bets within six months of their outcome, where they are satisfied the bet is “substantially unfair”, particularly when (ss 4):

• an offence of cheating is suspected/proven under s 42
• the underlying event contravened industry rules, or
• “either party to the bet supplied insufficient, false or misleading information in connection with it”.

An s 336 order will mean that winnings already paid out to a gambler must be returned to the bookmaker/other party.

Gambling Act 2005 s 42

Section 42(1) of the Gambling Act 2005, makes it a crime to “cheat at gambling”, or to “enable or assist” another person to “cheat at gambling”, replacing the GA 1845 s 17 offence. A sentence of up to two years in prison can be imposed for cheating.

S 42(3) provides:

“cheating at gambling may, in particular, consist of actual or attempted deception or interference in connection with —

(a) the process by which gambling is conducted, or

(b) a real or virtual game, race or other event or process to which gambling relates.”

This suggests that:

1) Deception … in connection with the way that gambling is conducted, or the event being bet on, and/or

2) Interference … in connection with the way that gambling is conducted, or the event being bet on

is likely to constitute cheating, but cheating is not limited to deception or interference (see the words ‘in particular’).

In interpreting s 42 the courts and prosecutors may try to determine the intent of Parliament. Since 1999 Acts have had explanatory notes, which may be used in interpreting the law (see for example Westminster City Council v National Asylum Support Service [2002] UKHL 38).

The Gambling Act’s notes state that “cheating” is not defined in the law, but has its normal, everyday meaning, and that s 42(3)’s description of “deception” and “interference” does not prejudice the “general meaning of cheating” established in 42(1).

A number of clarifying amendments were proposed in Parliament prior to the Bill becoming law. The government rejected them, saying that it is better to have an open-ended definition, rather than a highly specific one, which could be more easily avoided by people with dishonest intent. They wrote:

• “Amendment №90 … involves undesirable consequences.

First, and most importantly, it narrows the scope of the offence, by excluding forms of cheating which do not alter the element of chance in a game of chance or its outcome. Second, by tying the definition of cheating specifically to games of chance it raises a question mark about cheating in the context of other forms of gambling than gaming, such as betting and lotteries.
The Government believe that it is an important strength of clause 41 that the expression “cheating” is not defined. This will enable the commission and the courts, in prosecuting and punishing cheats, to deal with the full range of culpable conduct. The Government believe that the practical effect of a specific definition (however desirable from a drafting perspective) will make things easier, not harder, for cheats.

· Amendment №91 … would bring within the definition of the offence any act which allows an advantage not intended by the manufacturer or operator of a game … the effect of the amendment will be uncertain, because the operator’s intention can only be a wholly subjective concept.

· Amendment №92 … would make the possession of any electronic equipment capable of recording games in a casino an offence. The Government are unclear about whether such activity will always constitute cheating, and accordingly think it unsafe to accept the amendment.

… A person who does anything unfairly to increase the chance of winning is cheating at gambling, and already falls within the offence. We are afraid that being more specific than this would risk making the clause too complicated, and vulnerable to evasion.”

Spot fixing case law

Mervyn Westfield was convicted (in February 2011) of accepting corrupt payments for ‘spot fixing’. Spot fixing occurs where a micro-event within the game is fixed, without intending to affect the overall outcome. Such a bet might include the timing of the first throw-in, the outcome of an individual point in a game of tennis, or, as in Westfield’s case, the number of runs scored off an over of his bowling for Essex.

In the Court of Appeal ([2012] EWCA Crim 1186) it was stated that Westfield would have been guilty of statutory conspiracy (CJA 1977, s 1) to commit the offence of cheating (GA 2005, s 42). In late 2011, the Pakistan players Mohammad Amir, Salman Butt, and Mohammad Asif were all convicted of conspiracy to cheat for spot fixing during a test match, in similar circumstances to Westfield — a Pakistani middleman liaised between the gamblers in Pakistan and the players in England. Asif’s conviction was affirmed by the Court of Appeal ([2013] EWCA Crim 1153).

Gambling Commission v Mosdall (2015)

The Mosdall case is a fairly straightforward case of cheating. Mosdall drugged dogs in order to profit at gambling, and was given a short prison sentence following a private prosecution.

Ivey v Genting Casinos

Facts

The case of Ivey v Genting Casinos was not a criminal case, but a civil one. Phil Ivey and his associates had devised a scheme to win at punto banco, a version of baccarat.

The game of punto banco

Punto banco is a game without skill: two cards are alternately dealt to a player (‘punto’) and banker (‘banco’) hand. Each hand is summed (where A-9 = 1–9, JQK = 0), any tens digit discarded, and then:

• If either player or banker has 8 or 9, the game is over
• If player has 0–5, one more card is dealt to his hand, whereas if he has 6–7, he stands.
• The dealer draws on 0–2, stands on 7 and:
  Draws with 3, unless the player has 8, in which case he stands
  Draws with 4 vs 2–7, otherwise stands
  Draws with 5 vs 4–7, otherwise stands
  Draws with 6 vs 6–7, otherwise stands
• The outcome of the game is then either: banker and player have same total (between 0-9): the tie bet wins, dealer/player bet pushes (bets returned); banker total higher than player: banker wins, other bets lose; player total higher than banker: player wins, others bets lose.

Before the deal players can bet on ‘dealer’, ‘player’ or ‘tie’, though tie is a poor bet and is irrelevant here.

The rules reflect the carefully balanced design of a game with a small edge in the casino’s favour: dealer bets (more likely to win) pay 19:20 (i.e. a bet of £100 will return the £100 stake plus £95 winnings), whereas the player bet pays 1:1 (£100 winnings on a £100 stake). In the long run the casino should win 1.06% of aggregate sums placed on the banker, and 1.23% of sums placed on the player.

Since, unlike blackjack, the player has no control over how the game is played, it follows that the only way to win is if the player can predict the cards that are coming up next and bet on the more likely winner (the player or the banker). Unfortunately for the would-be advantage gambler, the use of 8 decks shuffled together, which are cut, and not dealt to completion, makes it impossible to beat (i.e. obtain a mathematical advantage over the casino) by keeping track (counting) of the cards which have being dealt.

This differs from blackjack (‘21’), which in some casinos is played with just a single deck. When a deck for blackjack contains more high cards, the player is more likely to win. When it contains more low cards, he is more likely to lose. A player can choose to place higher bets at blackjack when the count (i.e. the balance of high and low cards remaining) is in his favour, and smaller bets (or no bet), when the count is poor. Doing so would not be a cheating offence of itself. To avoid being banned from play, the players may resort to physical disguises, or playing in teams, in order to deceive the casino about what they are doing. (In the Ontario case of R v Zalis [1995] OJ №20 a team employing such disguises was held not to be cheating, on the basis that blackjack counting is ‘merely observing’ and the deceptions did not change the fundamentally legal nature of watching the deck.)

The Ivey/Sun scheme

Ivey worked together with Cheung Yin ‘Kelly’ Sun. Sun, a Chinese national, enjoyed a reputation as a degenerate gambler, having previously lost millions of dollars of her father’s money to casinos in Las Vegas. She employed sex-based and racial stereotypes to pull off the heist. Baccarat is the most popular casino game in China, and casinos are happy to indulge superstitious gamblers, because they know that superstitions do not affect the outcome of games and can encourage players to bet and lose more money.

Sun spoke in Cantonese to the croupier at Crockfords (“Genting”), deceiving her that she was a superstitious Chinese gambler, saying that she wanted to “change the luck” by rotating cards (see [2014] EWHC 3394 (QB)). In reality, this aimed to exploit the fact that the cards were not cut perfectly symmetrically, so by rotating high cards in a certain direction (with the thicker white edge on a particular side), the gamblers would know whether the first card out of the deck, to be dealt to the player, would be 7–9, favouring the player bet, or a lower card, favouring the banker bet, and bet accordingly, giving a large player edge. The croupier dutifully arranged each card accordingly over dozens of successive games, at Sun/Ivey’s instructions, going deeper into the shoe than would be normal, at Sun/Ivey’s insistence (ostensibly because they were superstitious: in reality because they wanted to arrange as many of the cards as possible).

When the time came to change the shoe, Sun & Ivey pleaded that they should keep the same ‘lucky cards’. Where players have touched the cards, this would not be allowed, because of the risk of the players having marked/bent the cards in some way. Sun/Ivey stressed that they had not touched the cards, and so this was allowed by the casino, under the mistaken belief that no harm could be done.

Shuffling machines do not affect the rotation of cards, so on subsequent deals they were able to place large bets on the more likely winner (player or banker), eventually winning £7.7 million. Ivey had joined in the deception, claiming he was ‘lucky’ when he played with Asian female dealers, and also wore a ‘lucky’ hat, in order to help distract from the fact that Ivey/Sun were now playing a game in which they enjoyed around a 6% advantage over the house. In the last shoe, when it was made clear they would not be allowed to play again with the same cards, they sought to cover their tracks by randomly rotating the cards so it would no longer be evident that the high cards were rotated in a particular direction, before attempting to cash in their chips (they were promised that the money would be wired to them).

The court decisions

At the time of Ivey v Genting, the test for dishonesty required in many criminal offences such as theft was from R v Ghosh ([1982] EWCA Crim 2). In Ghosh, it was held that ‘dishonesty’ requires that the defendant must himself have realised that what he was doing was dishonest. The courts, however, found that Mr. Ivey was a reliable witness, and said that he believed that what he was doing was legitimate “cat and mouse” tactics between casino and advantage gambler. As such, he was subjectively honest, even if not objectively so.

In the High Court, Mitting J avoided Ivey’s lack of subjective dishonesty by finding he had objectively cheated “at civil law”, by tricking the croupier into rotating the cards, changing the game “into a game in which his knowledge is greater than that of the croupier and greater than that which she would reasonably have expected it to be” (¶50–51)

In the Court of Appeal ([2016] EWCA Civ 1093), Richard Spearman QC, for Ivey, argued that:

1. There is no ‘civil law concept of cheating’, it is identical to the criminal concept. (¶25)
2. Cheating requires dishonesty. (¶16)
3. This dishonesty must be subjective, by reason of Ghosh, whereas Ivey was not subjectively dishonest.
4. Therefore, Ivey had not cheated, and Genting should pay his winnings.

These arguments were dispensed with as follows:

• Sharp LJ held that dishonesty is a necessary element of cheating, and this necessarily followed the Ghosh test, and hence Ivey’s appeal should succeed. (¶138)
• Tomlinson LJ affirmed Mitting J in choosing to follow a civil rather than criminal approach, and dismissed the appeal. (¶104)
• Arden LJ held that the correct test was the criminal one under section 42, but that there was no need to imply dishonesty, or the Ghosh test into it, as Parliament had not done so. (¶97) Thus, she likewise dismissed the appeal.

In the Supreme Court ([2017] UKSC 67), Lord Hughes resolved these differences of opinion, making a number of important findings:

• Cheating at civil and criminal law are the same thing — the section 42 offence
• The question of what is cheating is an objective standard of fact, to be determined by a jury in a criminal case. (¶48)
• S 42 does not require dishonesty. (¶49–51)
• Ivey’s actions met the objective standard of cheating. (¶48,75)
• The Ghosh test was wrong. It would never be used again. The correct standard of dishonesty in law is the “objective standards of ordinary decent people”, with “no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest”. (¶50–74)
• Ivey’s actions were also objectively dishonest, although this was not required in order to hold that he had cheated. (¶74–75)

He stated that some cheating (such as tripping someone up in a race (¶45)) involves no deception, but it is still clearly cheating. By having the croupier rotate cards so that Ivey knew with certainty whether the first card of the next deal would be high or low, he had interfered with the “random and unknowable” nature of the game, and by taking “positive steps to fix the deck” he was cheating. This was distinguished from (non-cheating) passive observation as of “spotting that some cards had a detectably different back from others”. (¶50)

Arden LJ’s judgment in the Court of Appeal stated that section 42 “contemplates that a person may be guilty of cheating (on the ordinary meaning of that word) even if there is no interference with the process of the game and no deception”, and that cheating is not “restricted to dishonest cheating” as per the Concise Oxford English Dictionary’s definition of “act dishonestly or unfairly in order to gain an advantage.” (¶43,36)

She added in obiter “It is possible to think of actions which are neither deception nor interference with the process of the game, which may in some circumstances constitute cheating. For example, someone who has material information (for example, as to whether a star player will play in a particular game) which is not in the public domain may place a bet on the result of the game on the basis of that information. That person may be guilty of cheating because he has used his unequal access to confidential information to make a profit. In this type of situation, Parliament may well have taken the view that it was enough that covert use of confidential information was intrinsically wrong and that it could amount to cheating” (¶42)

She continued by saying that “dishonesty is not necessarily the right ingredient of [the criminal offence of insider dealing], where other participants in the same activity are deprived of material information. So too in gaming, Parliament may have taken the view that the courts should be free to conclude, if they thought it fit so to do in the circumstances of any particular case, that cheating might occur where one player knowingly uses confidential information which is not disclosed to the other player or players.” (¶45)

Use of inside information as s 42 cheating

Arden LJ’s question over the use/misuse of inside information, has been discussed since before the Gambling Act became law.

Discussions prior to enactment

In evidence to the Joint Committee on the Bill the minister Lord McIntosh stated in the context of “voiding of bets” that if “somebody gets information at a cocktail party on a Sunday that a horse is sick for a Monday and he lays against that horse, as it were, on the betting exchange”, that is cheating. The Committee’s report suggested that in fact “betting on horses is very much tied up inextricably with inside information”. They called for the improper misuse of information to be distinguished from the normal sharing of inside information.

The All-Party Parliamentary Betting & Gaming Group published its “Report of Inquiry Into the Effects of Betting on Sport” in February 2005. It noted that the definition of cheating in the Gambling Bill was too vague and called for the Gambling Commission to be given a duty to provide a full definition of cheating. They noted that the strict ban on the use of “inside information” as applicable in security trading (including spread betting) would be harmful to the horseracing industry. (Note that spread betting is excluded from the Gambling Act and instead regulated by the FCA. Insider dealing provisions apply to spread betting.)

It seems relevant that horseracing essentially exists only so people can bet on it, and caveat emptor applies in that people choose to bet where they know others (trainers, owners, stable boys, etc.) have more information. The financial markets, which exist primarily to provide financing for businesses, and income and growth for investors, are rightly heavily regulated, and the same concerns do not necessarily apply to betting.

Christopher Foster, director of the Jockey Club suggested to the APBGG: “If you do use inside information, it means that you are defrauding the other punters. I think you could build a case on misuse of information which is nothing to do with the race being fixed. That will be for the Gambling Commission to think through ….. I think it falls within the definition in the Bill.”

Developments since 2005

In 2010 the Parry Review into the integrity of sports betting recommended that the definition of cheating in the Gambling Act be reviewed and if necessary given greater clarity, in particular with respect to inside information. The government in 2012 responded that there were insufficient cases of alleged cheating to assess the effectiveness of s 42.

The New South Wales legislature passed the Crimes Amendment (Cheating at Gambling) Act 2012, which followed their Law Commission’s report, to replace their existing offence of cheating (which consisted of a “fraudulent scheme or practice”), with a series of separate offences, including one of “betting with the benefit of inside information” (information which is not generally available to, or deducible by the public), as well as a more serious offence of using “corrupt conduct information” (where the bettor has inside information about corrupt activity such as match fixing or spot fixing).

In 2016, the UK Gambling Commission stated that “courtsiding” is not cheating. Courtsiding is the practice of placing bets directly from a sporting event, relying on the delay between the event happening in real time and odds being updated, which is often exacerbated by broadcasting delays. By betting in the second or two between the information becoming known to the bettor and the betting odds being updated, the courtsider should enjoy an advantage over other gamblers.

UKGC’s Misuse of Inside Information Report

The UK Gambling Commission in 2018 published its report on the Misuse of Inside Information.

It listed six types of ‘inside information’:

1. ‘the art of betting’ — this includes watching public training sessions, studying form books, and so on. There is no inside information, and no misuse.
2. ‘chance information with no knowledge that the information is restricted’ — examples given include:
   a. Working in a hospital where a player is injured, but the injury is not yet public information
   b. Receiving a tip without knowledge that it is restricted information.
   c. “Being in the right place at the right time”
   d. “Overheard in the pub”
3. ‘Chance information where the individual should know the information is restricted’. This is deemed “inside information” but not “misuse of inside information” — the Gambling Commission states that this essentially an employment issue, and the clubs should act to minimize the impact of inside information by publishing it as soon as possible. Examples given:
   a. A club employee, on club premises, overhearing a conversation between senior staff, knowing the information is not in the public domain
   b. A stable lad noticing veterinary concern for a horse
4. ‘Restricted information’ is that which is gained by someone’s role in an event. The GC states that such bets should be refused, and that they may act to void them. Examples given:
   a. Club official has not-yet-public information about the team sheet.
   b. Club official knows manager is leaving, and passes this information to a third party to bet on it
   c. Employee of a TV reality show has advance knowledge of a participant’s participation, their health, or early phone voting results
   d. An employee of a bookmaker spots unusual betting patterns, and uses them to place a bet
5. ‘Potential aiding and abetting criminality’ occurs where an individual is aware of criminality and uses the information for their own ends, e.g., where bets are placed where:
   a. A bookmaker’s employee spots against-trend bets from the location of a primary participant
   b. A bookmaker’s employee spots bets being placed by team members to lose.
   c. “Becoming aware of a breach in sports rules which provides an advantage to those with advance knowledge, e.g., knowing that a participant intends to pull out of a tournament or event despite a public commitment to participate. “
6. ‘Manipulation of the event’ includes spot fixing and match fixing and they note as a potential cheating offence.

The Misuse report states that where “restricted information” is used, the bet may be voided (as “substantially unfair”, under s 336, above).

Under the Gambling Commission’s Licence Conditions & Code of Practice, operators should “keep in mind the scope of the offence of cheating” and notify them of any “suspected interference” with events being bet on.

This suggests that the Gambling Commission’s view of the scope of the offence of cheating is narrow and focused on match fixing, spot fixing, and other direct interference with the way that games/sports are played, and does not include the use of inside information.

Conclusion

The offence of cheating, following Ivey, consists of

1) Intentionally

2) Cheating

Unfortunately, no formal definition of cheating has been offered. The Supreme Court felt it “normally” involves a “deliberate act designed to gain an advantage in the play which is objectively improper”. (¶47) For example: (¶45–46)

• Having the croupier rotate beneficial cards is cheating
• Drugging greyhounds is cheating
• Tripping up an opponent in a race is cheating
• Hiding a card up one’s sleeve is cheating
• Hiding a camera to read one’s opponent’s cards would be cheating

The dictionary definition of cheating approved by the Court of Appeal was to “act dishonestly or unfairly in order to gain an advantage”.

On the other hand, the s 336 power to void “substantially unfair” bets shows that “unfair” bets are not always criminal cheating. The GC’s Misuse of Inside Information Report suggests they believe betting on inside information may be unfair, but it is not criminal.

The ‘Ivey test for dishonesty’ was not determinative of Ivey’s cheating. Ivey cheated because, by having the cards rotated in order to obtain a large edge at the game, he interfered with the game in a way held to be objectively cheating. The fact that his behaviour was also objectively dishonest in that he set out to deceive the croupier does not mean that dishonest behaviour is always cheating.

For example, level 2 in the GC’s MoIIR included “betting against a player you’ve just treated in hospital”. This seems objectively dishonest — doctors are expected not to use their positions to make a profit at the expense of others, but the GC deem it not to be a concern of any kind.

For Conservative MPs who had ‘heard’ that Rishi Sunak is calling the election for July, this seems to amount to a mere ‘tip’. We could reasonably deem them dishonest in betting on this, but their access to ‘better information’ does not seem to meet gambling industry understandings of cheating. Despite discussions in 2004–2005, insider information remains an accepted part of the industry, and arguments that mere ‘tips’ are criminal seem wholly misguided.

The 2005 government’s argument that a vague definition of ‘cheating’ is better than a clearer one has not been borne out. In cases such as con artists running three card trick scams on bridges, there is not even a need to prove cheating — the section 33 offence of providing unlicensed gambling is much easier to prove.

The New South Wales approach shows what could be done with a specific offence: Christopher Shannon is accused of using inside information to bet on several winners of the Australian of the Year award, and has been charged under the specific misuse of inside information offence.

A similar UK offence could cover the naughty Tories, but the present one, where it has been stated that cheating might include the misuse of inside information, doesn’t seem to fit the bill. Placing a bet in and of itself is unlikely to constitute cheating unless there is also an act of cheating, such as arranging cards, using hidden cameras, magnets, and so on.

Note: after writing this, it emerged that a Labour candidate had bet on his Conservative opponent, in a seat which was (at the time of the news, if not when the bet was placed) 50/50. This is much more likely to constitute cheating: if, hypothetically, you bet £50,000 on your opponent to win, and then did not do any campaigning in a winnable seat, then a jury would be likely to conclude that you chose not to campaign in order to win the bet. Not campaigning in order that you win a bet is cheating.