July 10, 2013

The initial draft of the Bill would have required operators to obtain a UK licence if their platform was ‘capable of use’ from the UK, that is to say if UK punters were capable of accessing the platform regardless of whether any of them actually did. In commercial terms, you would therefore require a British licence entirely regardless of whether you were ‘in’ the UK market or whether you happened to be offering Sic Bo in Swahili from a Macau server with stakes in North Korean shekels.  If it were possible for UK punters to access your platform, then your non-possession of a UK licence would have been an offence in the UK. One can imagine some bewildered foreign operator with nothing remotely to do with the UK receiving notice of HM’s displeasure at their non-possession of a British licence, preferably delivered by a scarlet-coated footman with a powdered wig. Lord Palmerston would have been delighted. The accompanying commentary to draft one of the Bill rather limply suggested that operators would have to geo-block to avoid the commission of an offence in the UK, but the whole slapdash thing bore eloquent testimony to just what a low priority remote gambling is within the DCMS at the moment. Word is that the Minster sees the matter as something to be avoided on the basis that it is only going to cause unfavourable publicity whatever happens. That would explain a lot, including the apparently dominant role of HM Treasury in the process.

The DCMS does, however, appear to have listened to representations and come to a more sensible view of which platforms should need obtain a UK licence. The current draft Bill imposes the need for platforms to obtain a licence from the Gambling Commission only where the relevant key or core equipment is used from within the UK, i.e. by UK residents. In addition, a gambling platform will only commit the offence of offering unlawful facilities for gambling in the UK if it knew, or should have known, that the platform was being used or was likely to be used from within Great Britain. So the legislation comes a lot closer to the more sensible ‘regulated market’ principle which says that if you’re in our market, you need a licence from us and to pay our duty.

This is a lot more sensible. It aims the requirement to obtain a licence squarely at persons who actually target the UK market. However it still means that a platform accessible to UK players and with even only one registered UK player, will be ‘used’ within Great Britain  – and that fact will presumably be ‘known’ to the operator due to the player having provided geographical data of some sort as part of registration and KYC. Given that the UK is currently an entirely open market, UK citizens are free to gamble anywhere and although most of us will be customers of the major English-language platforms like the Gibraltar, Alderney and Isle of Man platforms, the UK contains a kaleidoscope of ethnicities and who knows where UK citizens ultimately end up. So anyone with a UK punter on the books will need to consider whether to geo-block or obtain a UK licence and even platforms with no UK punters will have to consider whether or not to geo-block as a preventative measure so as to avoid the potential to commit an offence in future should a UK punter register and play.

In terms of practical enforcement policy, the UK Gambling Commission will no doubt start at the top with the big offenders, based on a volume assessment of the UK black market, and so an operator with an occasional UK punter and not really intruding too much on the radar might hope to escape enforcement action from the UK authorities purely on the basis of resources and priorities. In addition, the public sector regulatory Hampton Principles mandate that a UK public service regulator should in the first place aspire to regulate via consensus and agreement with its constituency – hence one might hope that UK regulation might initially take the form of an invitation to obtain a licence rather than notice of an impending prosecution. So in practical terms, the regulation may be more sensible in its enforcement than the wording of the law might suggest.

That, however, takes us into another area of regulatory and legal difficulty. The habit of British legal draftsmen to produce impossibly wide statutory provisions capable of applying to almost any activity causes the UK Gambling Commission all sorts of interpretational difficulties. The intention of the impossibly wide drafting is of course to enable the courts to outflank the devious operator who creates some sort of gambling product in a manner which skirts around the wording of the law and pretends not to need a licence or pay duty but it also creates enormous difficulties for business who can’t tell whether what they want to do is lawful or not. Take, for example, Section 5 of the current Gambling Act 2005 which defines ‘facilities for gambling’ or Section 13 which defines a betting intermediary. Both of these could – on semantics alone – be taken to refer to almost anything connected with a gambling business. Section 235 (definition of ‘gaming machines’) at least provides some carvouts but even Section 36(4) which attempts to limit the application of the Act to remote systems is as wide as a barn door and ultimately unhelpful. The UK Commission has provided guidance in some cases which is sensible (for example in relation to remote gambling equipment) and which sensibly confines the wording of statute to the core or key elements of the gamble but there are still huge interpretational problems with UK gambling laws, not least because ‘guidance’ from a state agency isn’t law and confers only limited legal certainty upon any given operation. The Commission are also extremely cautious about expressing opinions on the basis that they ‘do not give legal advice – but if the legal advice is that the ‘words can mean anything’ then the interpretation of the enforcement authority is crucial to business.

So the new Bill is more in line with business reality but the enforcement and implementation will be interesting to see, as will the reporting and collection of duty. None of this can be taken for granted, under-resourced or neglected because the major platforms who are likely to comply with the regulation are going to expect to see the black market shut down. Add to this the impending challenge from Gibraltar interests and we are guaranteed an interesting old time and plenty of opinionated comment!

For further information, please contact Jason Chess, Partner, Wiggin LLP.