iGaming reform plans - how could you be affected? (1)
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This article was featured in Tech Bytes, our technology law newsletter.
In March 2010 the UK Department for Culture, Media and Sport (DCMS) began a consultation exercise into the regulation of remote gambling in the UK. In July this year, the DCMS announced the long awaited result of this consultation; the DCMS plans to lay a draft bill before Parliament which, if enacted, will bring about major changes to current UK online gambling regulation. Importantly, if the DCMS gets its own way, all remote gambling operators who wish to provide services to UK customers must first obtain the requisite licence from the UK's Gambling Commission, even if they are based outside of the UK. This is in contrast to the present regime, which permits operators to be licensed in any country in the European Economic Area (EEA) or countries which are on the so called "white list" (i.e. Gibraltar, Antigua, Alderney, the Isle of Man and Tasmania). In essence, the new licensing regime would mean that operators are licensed at the point of consumption rather than the point of supply.
You may be forgiven for thinking that the UK government's main aim is to ensure that remote gambling companies who operate in the UK must pay their fair share of tax. Currently, UK based operators alone must pay 15% tax on their remote gaming profits. This is in addition to the licence fee payable to the Gambling Commission. By way of comparison, operators in Malta only pay 4% corporation tax. This being so, it is easy to see why many iGaming operators base their operations elsewhere within the EEA or in other countries that are on the white list.
Not so, says John Penrose, the UK Minister for gambling policy and recreation:
"The current system for regulating remote gambling doesn't work. Overseas operators get an unfair advantage over UK based companies, and the British consumers who gamble online may have little or no protection depending on where the operator they deal with happens to be based. So our new proposals are an important step to help address concerns about problem gambling and to plug a regulatory gap, ensuring a much more consistent and higher level of protection for those people in the UK who gamble online."
The Gambling Commission has offered reassurance to those iGaming operators who are currently based overseas and supplying UK customers. As these operators are in so called "trusted jurisdictions", the party line is that they will receive favourable treatment and that they "will not have to duplicate regulatory work". Similarly, the DCMS has said that there will be a transitional period in which these operators will be allowed to continue trading under a transitional licence which will be automatically provided, although it is still unclear how this will work in practice.
At the date of writing, a draft bill is yet to be published. In view of this, it is currently unclear whether any of the DCMS's plans will become law. Even after a draft bill is published, it will have to be approved by both the House of Commons and the House of Lords, the end result being one of three outcomes: (1) the bill is enacted and becomes law; (2) the bill is substantially amended before being enacted and becoming law; (3) the bill is rejected and everyone goes back to the drawing board. This being the case, now is the time for those with views on the proposed licensing regime to look for ways to lobby the legislative process.
Nevertheless, overseas iGaming operators would be wise to consider what their business strategy would be if the DCMS's proposals do become law. Also, any UK based iGaming operators who are currently considering re-locating their operation to elsewhere within the EEA or to a country on the white list would be wise to keep a close eye on how these proposals progress in the coming months.