In what has turned out to be an exceptionally costly technical error, the BBC reported that the online betting firm 888 has just been slapped with a £7.8m penalty for a malfunction in the “self-barring feature” of its online platform. In applying the penalty, the UK’s Gambling Commission accused 888 of needing to rectify “serious flaws” in how the company interacts with its customers and identifies the minority with gambling problems.

While the penalty is a record, the company’s struggle to keep an eye on potential issues shouldn’t come as much as a surprise.

The UK’s online gambling industry has experienced an explosive of late, and neither online companies nor the institutions responsible for regulating them have quite caught up with the sheer scale of this new sector.

Young players, in particular, seem to have a strong preference for the online versions of the popular pastime over more traditional variants, like the National Lottery. 14 per cent of 16-24-year-olds and 19 percent of 25-34-year-olds have participated in some form of online gambling over the past year. Figures released last year showed that online gambling is now the largest gambling sector in Britain, generating £4.5 billion a year. British and Irish bookmakers have capitalised on the lack of competition from the U.S., where online gambling is illegal, to grow into global champions of an industry projected to be worth more than $67 billion globally by 2020, Business Wire reported.

Gambling entrenched as a leisure activity

Now that online gambling has become firmly entrenched as a leisure activity for millions of users, consumer protection advocates have launched campaigns to see greater accountability in the industry. Their strategy has focused on bringing to light cases in which online bookies have dragged their feet in making payouts to winners.

In once case, Guardian reported that the bookmaker Bet 365 was taken to court by a punter after it failed to transfer £54,000 in winnings to her account despite their being no dispute about the validity of her winnings. In 888’s case, the issue was a technical glitch that let customers who’d cut themselves off from the company’s betting services continue to play.

Another report by the Gambling Commission that came out earlier this year confirmed this mounting anecdotal evidence that the industry is lagging when it comes to customer care. The report notes that there has been a 300 per cent increase in the number of people contacting the Commission regarding practices in the industry. And in what perhaps should come as the biggest wake-up call of all for bookies, it found that only 38 per cent of respondents thought that the industry was fair and could be trusted - a sharp fall from the 61 per cent who agreed with that statement in 2007.

Online gambling in the USA

These are important issues for the industry to address, but they are by no means insurmountable.

On the same day 888’s penalty was announced, for example, ProActive Investors report that its stock rallied back into the FTSE250. Gambling is a major cash cow for the UK Treasury. The industry is already global in scale, and attempts to ban it have been farcically ineffective. The US is a case in point: even if online gambling is illegal, many Americans are simply opting to place their bets with foreign websites.

Other than offering counselling to the minority of gamblers who struggle with an addiction to fixed odds betting terminals (FTOBs) or the latest online craze – which takes time and money Whitehall doesn’t seem to be willing to spend – improving consumer protection should be at the top of the government’s list of priorities.

Measures are beginning to be put in place to improve the customer complaints procedures in the industry. Last year, the Gambling Commission launched the Alternative Disputes Resolution scheme - independent bodies that customers can bring their case to if they fail to reach an agreement with the betting company. Now it has plans to introduce Resolver, an online dispute resolution tool that offers users a step-by-step guide to lodging a complaint.

But neither measure goes far enough. Further inspiration on how to assist players in need comes from Malta. The small island nation has transformed itself into an online gambling hub and the industry is now worth some 1.2 billion in annual revenues – or 12 per cent of the country’s GDP.

Malta was energised by the UK’s forthcoming exit from the EU and is touting itself as a premiere online gambling location. 888 has already announced that it would consider relocating its headquarters from Gibraltar to Malta, according to Malta Gaming Summit.

Malta sets the example

Given that gambling is so important to Malta’s economy, it’s no surprise that it takes the rights of its consumers seriously. For example, the Malta Gaming Authority is the only major regulator of its kind to have a dedicated player support unit, which handles around 400 complaints a month. A white paper due to be published in September is set to bring significant reforms to the regulatory framework that governs the industry.

Apart from streamlining the various gambling law into one Gaming Act, it is expected that much of the focus will be on how to further tighten consumer protection. It would do this by formalising the role of the player support unit as an arbiter of disputes. It would also introduce the concept of administration into Maltese law meaning players funds will be protected in cases where a company goes bankrupt.

Like many new industries that have grown by leaps and bounds, online gambling is a challenge for any government. Britain’s Gambling Commission would be wise to borrow a page from Malta’s book and strengthen its consumer safeguards, instead of allowing the problem to go unaddressed.