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The UK election gambling scandal shows the dangers of inside information – but what exactly is it?

  • Written by Jack Anderson, Professor of Sports Law, Melbourne Law School, The University of Melbourne
The UK election gambling scandal shows the dangers of inside information – but what exactly is it?

In the iconic 1980s movie Back to the Future II, the elderly villain, Biff Tannen, steals a Grays Sports Almanac.

He travels back in time to his youth and creates an enriched future for himself by knowing and betting on the outcome of every major United States sporting event from 1950-2000.

The Biff Tannen/sporting almanac drama is one of the key storylines of Back to the Future II.

The UK election campaign is currently having a Back to the Future moment.

This week, Prime Minister Rishi Sunak had to withdraw support[1] from two Conservative candidates suspected of betting on the date of the election.

Craig Williams had been Sunak’s parliamentary private secretary, his closest aid. Laura Saunders[2] is married to the Conservatives’ director of campaigning, who has taken since taken a leave of absence.

Williams, who has been interviewed by Gambling Commission officials, is alleged to have placed a £100 bet[3] (at odds of 5/1), three days before Sunak somewhat surprisingly announced July 4 as election day. Saunders also placed a bet.

The scandal has now encompassed other party officials and five members of the police[4] who provide personal protection to senior politicians.

More generally, it has prompted several politicians[5] across all parties to admit to betting on the outcomes of referenda and elections, even in constituencies in which they are standing.

Arguably, the affair reflects the deep cultural prevalence of gambling in societies such as the UK. It also prompts ethical questions about whether politicians should be expressly restricted from betting on matters of state.

Inside information in politics

Certainly what has happened would appear to be a breach of the House of Commons’ Code of Conduct[6], which mandates members only use information they receive in confidence in the course of their parliamentary activities – and never for other purposes.

That part of the Code of Conduct could be called the Marconi clause[7] after a 1912 scandal which led to accusations that senior members of the UK Liberal government had transgressed in their public duties by purchasing shares in the Marconi company in advance of the corporation being granted a lucrative public tender.

Similarly, in Australia, under the Federal Code of Conduct[8], ministers must not use any information they gain in the course of their official duties for personal gain or the benefit of any other person.

In both the jurisdictions, the misconduct might, at its most grave, be considered a criminal act as, respectively, misconduct in public office (UK) or an abuse of public office under the Australian criminal code[9].

The more likely criminal offence in the UK is that under section 42 of the Gambling Act 2005, it is an offence to use confidential information to gain an unfair advantage when betting (cheating at gambling).

Conviction can lead to a fine or up to two years in prison. Similar provisions exist in the crimes acts of various states in Australia, such as New South Wales[10] and Victoria[11].

These provisions have been used primarily in a sporting context.

In the UK, the Gambling Act was used to convict some of those involved in fixing a cricket test at Lord’s between England and Pakistan in 2010[12]. Three Pakistan players, through their agent, were offered financial inducements to play in a pre-determined way to allow others to manipulate the betting markets[13] in what turned out to be a newspaper sting.

In 2020, two men in NSW were convicted when, with prior inside knowledge of the result, they placed bets on the 2019 NRL coach of the year award[14].

And, in another case, an AFL umpire in Victoria has been accused of allegedly exploiting inside information on the award of the Brownlow Medal in 2022[15].

Common to all the above is claims of abuse of inside information. But what exactly is meant by that term?

What is inside information exactly?

Inside information is similar to insider trading. This is when a senior executive in a company uses information not yet publicly available to make a profit or avoid losses, typically on the company’s share price.

Insider trading is seen to undermine public confidence in the integrity of the financial system and can attract a lengthy jail sentence. Equally, cheating at gambling undermines the integrity of sport and is seen as a fraud on all consumers who legitimately bet.

In a gambling sense, there are four elements to inside information.

First, it is “privileged”. That is, it is information obtained in a trusted capacity on the understanding that it should not be made generally available.

Second, it must be sufficiently meaningful to be capable of having value ascribed to it. What this means is that if the information were generally available, it would likely influence or change the betting decisions of those who commonly bet on that event.

In a sporting context, an assistant coach knowing in advance that a star athlete in not going to play is both privileged and meaningful information. Knowing the team is going to play with different colour socks is not.

The third element relates to how the information in acquired.

For example, when a jockey on the morning of the Melbourne Cup speaks enthusiastically about their chances in the race, or when a director speaks glowingly about the immediate future of the company, a punter or investor may be influenced to bet on that horse or acquire stock in that company.

But neither example is the type of inside information relevant to a criminal charge. Such examples are of inferred not inside information.

Fourth, in both insider trading and cheating at gambling, it generally doesn’t matter if the person in receipt of inside information commercially exploits it on the stock or betting exchanges. The act of receiving the inside information with the intention of using it illicitly suffices.

The more money that is made on the back of such information – millions on a share price or thousands on the gambling markets – will usually correlate to the severity of the sanction.

In the UK, Craig Williams stands to make a £500 profit from his bet on the July 4 election, but a bit like old Biff Tannen, the collection of his winnings will not have been worth the wait.

Sometimes in politics, as in sport and in life, you can know too much, too soon.

References

  1. ^ withdraw support (www.theguardian.com)
  2. ^ Laura Saunders (www.theguardian.com)
  3. ^ alleged to have placed a £100 bet (www.theguardian.com)
  4. ^ police (www.theguardian.com)
  5. ^ several politicians (www.theguardian.com)
  6. ^ House of Commons’ Code of Conduct (publications.parliament.uk)
  7. ^ Marconi clause (www.library.wales)
  8. ^ Federal Code of Conduct (www.pmc.gov.au)
  9. ^ the Australian criminal code (www.legislation.gov.au)
  10. ^ New South Wales (www.austlii.edu.au)
  11. ^ Victoria (classic.austlii.edu.au)
  12. ^ Lord’s between England and Pakistan in 2010 (www.bailii.org)
  13. ^ to allow others to manipulate the betting markets (theconversation.com)
  14. ^ 2019 NRL coach of the year award (www.theage.com.au)
  15. ^ Brownlow Medal in 2022 (www.theage.com.au)

Read more https://theconversation.com/the-uk-election-gambling-scandal-shows-the-dangers-of-inside-information-but-what-exactly-is-it-233442

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