The Gambling Commission investigated the online betting firm’s dealings with a customer who was allowed to deposit £758,000 between November 2014 and April last year without being subject to proper controls.
There were “at least 22 incidents which indicated the customer was a problem gambler – but instead of checking if they needed help, 32Red gave them free bonuses”, the watchdog said.
It said the customer had admitted to staff that they had spent too much, “displaying frustration and chasing losses”, but the signs went unchecked.
The watchdog also found the firm failed to check if the customer could afford what they were spending on the site.
Gambling Commission executive director Richard Watson said: “Instead of checking on the welfare of a customer displaying problem gambling behaviour, 32Red encouraged the customer to gamble more – this is the exact opposite of what they are supposed to be doing.
“Operators must take action when they spot signs of problem gambling and should be carefully reviewing all the customers they are having a high level of contact with.
“Protecting consumers from gambling-related harm is a priority for us and where we see operators failing in their responsibility to keep their customers safe we will take tough action.”
Swedish firm Kindred – which last year snapped up 32Red in a £175.6m deal – accepted the penalty.
It highlighted initiatives including the use of behaviour monitoring systems, but conceded “work remains to be done”.
“Kindred remains committed to ensuring customers can enjoy gambling in a safe and secure environment,” it said.
The fine comes after the Government last month announced plans to cut the maximum amount people can stake on fixed-odds betting terminals (FOBTs) to £2 to meant to protect vulnerable consumers.
That was alongside plans to toughen up online protections, such as introducing stronger age verification rules and affordability checks.