Last year, the UK Gambling Commission held a very important hearing in which they came up with a plan to further their interest in the online gambling market, while extending their duty to impose strict measures of consumer protection. The Gambling (Licensing and Advertising) Act of 2014 was the end result; “an act to make provision about the licensing and advertising of gambling”. That act is scheduled to go into effect on October 1st, just six weeks from now, and could send seismic tremors throughout the global online poker, casino and sports betting industry.
The most notable aspect of the new UK Gambling Act will require any online gaming operator that accepts UK customers to apply for a license directly from the UK Gambling Commission. At present, operators are allowed to accept UK customers so long as they are licensed in any jurisdiction that meets the UK’s guidelines; known as the ‘White List’. These include jurisdictions like Malta, Gibraltar, Alderney and the Isle of Man, many of which are considered tax havens.
Once the new legislation takes effect in October, these operators will have two options. They can obtain a license in the UK to continue accepting the region’s customers, thereby paying the heightened taxes to do so, or they can pull out of the UK market. There are some very high-profile competitors that fall into this category, including Ladbrokes, William Hill, bwin.Party, Betfair and Victor Chandler; none of which hold a UK license at the moment.
Simply applying for a license to operate online poker, casino and/or sports betting websites isn’t the only requirement, though. The application process is a tedious one with heavy restrictions on localized markets. In order to qualify for a UK license, the operator must not offer services in any region where online gambling is illegal, nor harvest more than 3% of its annual revenue from those that fall into a ‘grey area’ of the law.
Operators who choose to accept customers from a grey market will have to provide legal rationale for their presence in that market, which could prove extremely difficult in some regions like Australia, Russia and South Africa where the laws unambiguously restrict such activity. Other territories, like Canada, Finland, Germany and Sweden may be easier to circumvent since their regulatory definitions are comparably vague.
Despite the restriction on markets and hefty taxation on customers wagering from within the confines of the UK, it’s expected that most operators will make the move to apply for a license from the Gambling Commission. In terms of numbers, it only makes sense to do so. Last year, the UK accounted for 8% of the global online gambling industry, generating £2.5 billion overall; £329 million form online poker alone. Needless to say, exiting the UK market could be a devastating blow even to top-tier operators; even more so than the expected loss of profit from elevated taxation and licensing fees.
On a brighter note, unlike other major European markets such as France, Italy and Spain, the UK does not impose ring-fenced online gambling restrictions. Online poker players from those regions would surely like to see their governments opening the virtual doors to outside markets. If the UK Gambling Act produces the results industry analysts are expecting, it could potentially result in other countries loosening their ring-fence mandates and permitting players to participate in cross-border internet gambling activities through interior licensure.