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Fundamental changes to the way online gambling is regulated in Great Britain: our views

The Government proposed fundamental changes to the way remote gambling is regulated in Great Britain when it published the draft Gambling (Licensing & Advertising) Bill in December 2012.

March 2013

What is the real motivation for the Bill and the changes to the UK's Gambling Act 2005 – is this really about player protection, or taxation, or something else?

It is difficult to criticise the Government’s concern about the level of regulation and consumer protection in new and emerging European jurisdictions where online gambling sites have started to target the British market. It certainly does not seem unreasonable to want to change the current situation where operators, without adequate regulatory supervision, can benefit from an automatic right to deal with British consumers.

targetThe Government does state, however, that "the majority of operators currently targeting British customers are subject to established and effective regulatory regimes". It would have given more legitimacy to its publicly stated consumer protection rationale for the Bill if it had specified which regulatory regimes it had in mind. After all, why should all operators need to obtain a licence from the Gambling Commission if the majority operate under established and effective regimes? It seems implausible to suggest that tax is not a real driver behind the Bill. After all, George Osborne has stated that, with 90 per cent of remote gambling now supplied from outside Great Britain, “this is clearly not fair – and not a sensible way to support jobs in Britain”.

Will changing to a point of consumption basis positively impact on any of the UK Government’s concerns in drafting the Bill?

The current point of supply basis seems unsustainable on the basis that, without specific requirements imposed by overseas jurisdictions, operators may not be compelled to report certain information to the Gambling Commission (such as instances of suspicious betting activity). Although some operators voluntarily share information with the Gambling Commission in addition to their home regulator, it is often of insufficient detail to be used in an investigation. This is a particular issue in respect of the new and emerging European jurisdictions that form part of the EEA where locally based operators have an automatic right to sell into the British market.

It follows that specific requirements imposed by the Gambling Commission on overseas operators who transact with British consumers are much needed to compel them to report information. The change to a point of consumption basis is the only effective approach to achieve consistent reporting requirements and therefore address the Government’s publicly stated reason for the Bill, consumer protection.

Does the Bill align with European law?

Does the Bill align with European law?

Most EU Member States either currently tax gambling transactions on a point of consumption basis, or are in the process of implementing laws to do so.

It is ultimately for each Member States to decide upon the objectives their respective gambling policies should adopt. The European Commission published its action plan in respect of online gambling on 23 October 2012, where it stated that “Member States must demonstrate that the public interest objectives they have freely chosen to ensure are being pursued in a consistent and systematic manner and they must not undertake, facilitate or tolerate measures that would run counter to the achievement of these objectives.”

Nonetheless, the Government is undoubtedly aware that several Member States are currently the subject of infringement proceedings under Article 49 and Article 56 (of note, Germany, Greece, the Netherlands and Sweden) of the Treaty on the Functioning of the European Union. This explains why the Government states at length that the public interest objectives behind the Bill are being pursued in a consistent and systematic manner. After all, the Bill does not give preference to those operators located in Great Britain over those based abroad, as all operators who sell into the British market will require a licence.

What about online operators who do not target the UK?

Those operators without a licence from the Gambling Commission will face similar risks under UK law, should the Bill be passed, as they currently face in respect of those countries where local licences are already required (such as France) or even where there is an outright ban (such as the United States).

debit/credit cards

If an operator does not intend to obtain a licence from the Gambling Commission, it should use the same measures as it implements in respect of other restricted territories. For example, such operators would be advised to take the following precautions: (i) not operate a website with a UK top-level domain (i.e. a website address that ends with “.co.uk”); (ii) refuse to process debit/credit cards registered here; and (iii) geo-block UK-based IP addresses.

Will overseas online operators be put off entering the Great British market?

It is likely to depend on what HMRC proposes as the rate of gambling tax under the proposedregime. If it is very low, then operators based in traditional 'white listed' jurisdictions will not be subject to significant burdens as a result of the Bill. The Government has stated, for example, that "operators in well-regulated jurisdictions whose regulators can provide, for example, the necessary compliance information, will not face significant increases in licensing costs – those whose regulators cannot provide such information will need to pay the compliance costs associated with being subject to the same requirements as other Gambling Commission licensees.”

Is the Gambling Commission right to be concerned about the unregulated operators from "new and emerging European jurisdictions"?

EU FlagAs noted above, it is difficult to criticise the Government's concern about the level of regulation and consumer protection in new and emerging European jurisdictions where online gambling sites have started to target the British market. It certainly does not seem unreasonable to want to change the current situation where operators without adequate regulatory supervision can benefit from an automatic right to deal with British consumers.

See Draft Gambling (Licensing & Advertising) Bill.

If you have any questions on this article please contact us.

our views
Graham Hann

Graham gives his insight into the questions which the industry wants answered.

"Those operators without a licence from the Gambling Commission will face similar risks under UK law, should the Bill be passed, as they currently face in respect of those countries where local licences are already required (such as France) or even where there is an outright ban (such as the United States)."