Gaming Law 2019

Last Updated November 25, 2019

Isle of Man

Law and Practice

Authors



MannBenham Advocates Limited has evolved with, and has a real passion for, the global eGaming market, strengthened by its expert lawyers and advisers. The firm has been providing legal and advisory services to its clients in the Isle of Man and the international gaming sector for over 23 years. Within MannBenham, the advisory team draws on all the resources within the group of companies, which include their expert lawyers, multi-jurisdictional gaming advisers, regulatory and compliance professionals, and administrators. Having evolved from MannBenham Advocates’ heritage and legal pedigree, the team and company as a whole have been extremely well placed to give impartial, factual and balanced online gaming advice across multiple jurisdictions. The team is responsible for advising on eGaming licence applications along with compliance and procedural consultation, working closely with the directors and the business team to solve issues, create value, maximise growth and improve business performance by providing operational and practical advice.

An Isle of Man Online Gambling licence provides an operator with a well-regulated, safe and reputationally secure jurisdiction from which to conduct its business. While the online business has moved on from the days when an operator could comfortably conduct their international business with one or two licences, the Isle of Man continues to be a central cog in any credible international online gambling operation. While the Island is similar to its offshore colleagues in that it has low gaming duty and an attractive tax system, this alone is not what attracts the experienced operator to the Island's shores. It is the lack of corruption, no organised crime, political stability, family safety and an excellent healthy lifestyle that makes the Island the jurisdiction of choice.

With the international push towards substance and tax transparency, it is expected that the Island will continue to have a key role to play as it has the capacity to provide substance and tax transparency is the norm. The Island’s regulator, the Gambling Supervision Commission (GSC), acts as watchdog, protecting not only the Island’s reputation by maintaining high regulatory standards but that of its operators by ensuring that those that operate on the Island do so in a compliant manner.

The online gambling industry has been undergoing a period of consolidation with big names joining forces or being absorbed by rivals. While this is a normal process in the evolution of any industry, the online gambling sector has a reputation for innovation and the advent of new technology and the opening up of new markets can quickly change the status quo. The Isle of Man has embraced new technologies such as blockchain and cryptocurrency as they have emerged, which has given its operators the ability to try new technology and maintain their competitive edge.

Changes such as the move towards a point of consumption taxation model, advertising restrictions and bans within Europe call into doubt the old idea that holding a licence issued in a European country would provide unfettered European market access. The reality of the situation is that operators now need to hold multiple licences and deal with complex and diverse regulatory and tax systems. This has served to highlight the importance of jurisdictions such as the Isle of Man that offer a relatively tax-neutral base in a safe, business-friendly environment. This "Old School" approach has been tested and survived the passage of time, international regulation and new technology.

With the exception of spread betting, all forms of online gambling are potentially licensable under the Online Gambling Regulation Act 2001 (OGRA). The following forms of gaming when conducted online require an OGRA licence:

  • sportsbooks;
  • betting exchanges;
  • online casino games (for example, roulette, blackjack, slots);
  • live dealing;
  • peer-to-peer games (for example, poker, bingo, backgammon, mah-jong);
  • mobile phone betting;
  • fantasy football (or similar);
  • financial trading (but not spread betting);
  • pari-mutuel and pool betting;
  • network gaming;
  • lotteries;
  • certain spot-the-ball style games; and
  • network services.

The GSC has recently introduced a new variant of an OGRA licence, being a software supplier licence or a token-based software supplier licence. While the licence is not mandatory to supply software to Isle of Man licensed operators, obtaining this type of licence will create a simpler process for operators seeking to deploy games content. Suppliers' software will be listed on a central register.

Any software or service listed on the central register will be deemed certified and any Isle of Man operator wishing to deploy those games or services will be permitted to do so without requiring notice to, or permission from, the GSC. Operators will not be required to obtain testing certificates for software that is listed on the central register. In order to list software or services on the register, the software company will be required to supply its certification directly to the GSC and not via an operator.

A token-based software supplier licence will be necessary for any licensee that wishes to make available software or related services that depend upon a blockchain-dependent token as the primary means of exchanging value. Token-based software suppliers are entities that have created blockchain-based tokens for use as currency in a gambling eco-system.

An OGRA licence is not required for:

  • gambling that is covered by a Betting Office licence;
  • gambling that is covered by a casino licence;
  • spread betting; and
  • "free play" games.

Other excluded activities are listed in the Online Gambling (Exclusions) Regulations 2010 and the Online Gambling (Exclusions) Amendment Regulations 2014 and include:

  • advertising and marketing analysis and services;
  • IT provision and maintenance;
  • web and software design; and
  • purely administrative procedures.

Betting

It is an offence to use non-licensed premises for betting or to operate as a bookmaker without a permit (Section 11 and Section 14 of the Gaming, Betting and Lotteries Act 1988, or GBLA).

Racecourse Betting

Operators of racecourse betting must hold a licence, the conditions of which are set out in regulations made under Section 21(2) of the GBLA and/or specified by the GSC.

On-course pool betting can only be carried on at an approved racecourse and under the relevant permit (Section 23, GBLA).

Pursuant to Section 24 of the GBLA, the GSC may, if it thinks fit, grant to any person of good character and aged over 25 years a licence authorising him to set up, keep and operate a totalisator on an approved racecourse.

Casino Games

The Casino Act 1986 relates to casino games and the following games, pursuant to the Casino Regulations 2011, are prescribed and may be played in the gaming rooms of a casino:

  • roulette;
  • blackjack;
  • pontoon;
  • punto banco;
  • bingo;
  • gambling on horse races shown on film or video;
  • casino brag;
  • poker;
  • games of dice;
  • baccarat;
  • chemin-de-fer;
  • backgammon;
  • Keno;
  • playing on automatic machines;
  • Wheel of Fortune; and
  • Super Pan 9.

Games and activities other than these may not be played, offered or conducted without the written permission of the GSC.

Amusements with Prizes

The keeping of amusement machines that come under the control of the Gaming (Amendment) Act 1984 is subject to the certification and registration requirements and procedures set out in Part II and in Schedules 1 and 2 of that Act.

Land-Based Lotteries

The GBLA and the National Lottery Act 1999 regulate lotteries in the Isle of Man. Apart from small society lotteries, the UK National Lottery is the only legal land-based lottery operated on the Isle of Man. A lottery that forms part of the National Lottery under the National Lottery etc. Act 1993 (UK Act of Parliament) is not an unlawful lottery if it is designated in an order made by the Treasury (for example, National Lottery (Designation) Order 2009).

Restrictions

General restrictions on gaming include (Sections 2 to 6, GBLA):

  • playing or staking against a bank, whether the bank is held by one of the players or not;
  • the nature of the game is such that the chances in the game are not equally favourable to all the players;
  • charging for games;
  • stake levies;
  • betting in the street; and
  • advertising.

The Isle of Man gambling legislation is split between gambling that takes place online and land-based activities, such as casinos, bookmaking and lotteries.

Online Gambling

The regulation of online gambling is primarily covered by OGRA, which also makes provision for regulations to be made under the Act.

Currently the following regulations are in force under OGRA:

  • Online Gambling (Advertising) Regulations 2007;
  • Online Gambling (Prescribed Descriptions) Regulations 2007;
  • Online Gambling (Systems Verification) (No 2) Regulations 2007;
  • Online Gambling (Betting and Miscellaneous Provisions) Regulations 2007;
  • Online Gambling (Disaster Recovery) (No 2) Regulations 2007;
  • Online Gambling Duty Regulations 2008;
  • Online Gambling (Registration and Accounts) Regulations 2008;
  • Online Gambling (Registration and Accounts) (Amendment) Regulations 2014;
  • Online Gambling (Licence Fees) Regulations 2009;
  • Online Gambling (Exclusions) Regulations 2010;
  • Online Gambling (Exclusions) (Amendment) Regulations 2014;
  • Online Gambling (Participants' Money) Regulations 2010;
  • Online Gambling (Participants' Money) (Amendment) Regulations 2014;
  • Online Gambling (Network Services) Regulations 2011;
  • Online Gambling (Amendments) Regulations 2016; and
  • Online Gambling (Software Supplier Licensing) Regulations 2019.

Land-Based Gambling

The principal legislation for land-based gambling is the GBLA, which sets out legal requirements and restrictions relating to:

  • lotteries;
  • betting (including at racecourses);
  • bookmaking;
  • amusements with prizes (AWP); and
  • totalisator (that is, a computer that registers bets and divides the total amount of the bet among those who won).

The GBLA also gives power to the GSC to make regulations. Regulations under the GBLA include:

  • the Bingo Nights (Prescribed Conditions) Regulations 2010, which prescribe the conditions to be complied with where bingo is played as part of a fund-raising event;
  • the Racing Nights (Prescribed Conditions) Regulations 2010, which prescribe the conditions to be complied with by a lottery forming part of a fund-raising event;
  • the Society Lottery Advertisements Regulations 2011, which provide how a registered charity (as defined) may advertise its fund-raising lotteries; and
  • the Licensed Betting Office (Opening Hours) Regulations 2017, which amend the days and times when licensed betting offices may be open.

Other relevant legislation includes:

  • the Pool Betting (Isle of Man) Act 1961;
  • the Pool Betting (Isle of Man) Act 1970;
  • the Betting Act 1970;
  • the Casino Act 1986;
  • the National Lottery Act 1999;
  • the Gaming (Amendment) Act 1984;
  • the Gaming, Betting and Lotteries (Amendment) Act 2001;
  • the Gambling (Amendment) Act 2006;
  • the Gambling Supervision Act 2010;
  • the Casino (Amendment) Act 2018; and
  • the Gambling (Anti-Money Laundering and Countering the Financing of Terrorism) Act 2018.

The following regulations are currently in force under the Casino Act 1986:

  • the Casino (Licence Application) Regulations 1986, which set out to whom an application for a casino licence should be made and matters that should be included in such a licence application;
  • the Casino Regulations 2011, which, in addition to prescribing the games that may be played, also provides for the administration, operation, financial provision, and enforcement and licensing of casinos; and
  • the Casino (Temporary Premises) Regulations 2013, which describe the procedures and requirements in respect of temporary certificated premises.

The Gaming (Amendment) Act 1984, and the regulations made thereunder, set out the provisions relating to the keeping for use, and the sale and supply of amusement or controlled (or slot) machines.

The following regulations are currently in force under the Gaming (Amendment) Act 1984:

  • the Controlled Machines Regulations 1985;
  • the Controlled Machines (Exemption) Order 1992;
  • the Certification of Premises (Application Fees) Order 2003;
  • the Controlled Machines (Suppliers Licences) (Fees) Order 2003;
  • the Controlled Machines (Prescribed Amounts and Percentages) Regulations 2014; and
  • the Controlled Machines (Exemption) Order 2016

The National Lottery Act 1999 extends the UK National Lottery to the Isle of Man.

Links to the legislation and regulations can be found at https://www.gov.im/about-the-government/statutory-boards/gambling-supervision-commission/legislation/

The Gambling Supervision Act 2010 defines gambling as (Section 3):

  • gaming (within the meaning of the GBLA) (see 3.3 Definition of Land-Based Gambling);
  • making, negotiating and receiving bets and wagers;
  • organising, managing, promoting or participating in a lottery; and
  • supplying or operating controlled machines (within the meaning of the Gaming (Amendment) Act 1984).

See also 3.3 Definition of Land-Based Gambling and 3.4 Definition of Online Gambling.

Gaming is defined in the GBLA as ''...the playing of a game of chance for winnings in money or money's worth, whether or not any person playing the game is at risk of losing any money or money's worth'' (Section 1(1), GBLA).

Section 1(4) of the GBLA provides that “game of chance” “...does not include any athletic game or sport but, with that exception, includes a game of chance and skill combined and a pretended game of chance or of chance and skill combined...”

Section 1(1) of OGRA defines online gambling as:

  • gaming, where a player enters or may enter the game, or takes or may take any step in the game, by means of telecommunication (see below);
  • betting that is negotiated or received by means of telecommunication; and
  • lotteries in which any participants acquire a chance by means of telecommunication.

For the purposes of OGRA, Section 1(2) of OGRA provides that a person “conducts” online gambling where:

“(a) in the case of gaming or a lottery, he takes part in its organisation, management or promotion;

(b) in the case of a bet, he carries on any business involving the negotiating or receiving of the bet; or

(c) he maintains, or permits to be maintained, in the Island any computer or other device on or by means of which the game or lottery is operated, or the bet is received, as the case may be.”

Telecommunication is defined as a communication sent, transmitted or received by means of a telecommunication system (which has the same meaning as in the Telecommunications Act 1984).

Online

The key offences in respect of online gambling are:

  • conducting online gambling, otherwise than in accordance with an online gambling licence granted; and
  • permitting a minor or a person who at the material time is in a prescribed country or territory to participate in the online gambling.

Land-Based

The key offences in respect of land-based gambling are:

  • using or causing, or permitting any other person to use, any premises for the purpose of the effecting of any betting transactions by that person or, as the case may be, that other person with persons resorting to those premises without holding the requisite licences; and
  • being concerned in the organisation or management of unlawful gaming.

The legislation provides for a detailed list of penalties for unlawful gaming, which range from fines through to imprisonment.

There is no pending legislation.

The Isle of Man regulator of all gambling activity is the GSC, an independent statutory board established in 1962. The GSC comprises the Inspectorate and the Commission.

The Inspectorate is managed by its Chief Executive.

The Commission comprises five independent members of the public, who are appointed by the Isle of Man Treasury. Typically, the Commission sits once a month to consider regulatory matters and licence applications.

The GSC adopts a hybrid model of prescriptive regulatory requirements combined with risk-based oversight. The statutory framework of gambling legislation and underlying regulations provides the skeleton upon which the inspectorate monitors the activities of the operator through regular compliance reporting and active contact and interaction with the operator and its key staff.

Online Gambling

Any person who establishes its operations in the Isle of Man and conducts any online gambling (within the meaning of OGRA) must hold a licence under OGRA.

There are a number of different licences under OGRA, including:

  • a Full OGRA Licence – operators with a full licence can offer technology such as games, software and network access to sub-licensees;
  • Sub-licences under OGRA – these are obtained where the applicant wishes to operate exclusively with a technology provider with a full OGRA licence regulated by the GSC;
  • a Network Services Licence – this is obtained where the operator wishes to allow one or more foreign registered players onto its Isle of Man server without re-registering the player details; and
  • a Software Supplier Licence (Software Supply and Software Supply (Token-Based)) – see 2.1 Online for further details.

Land-Based Gambling

Betting

In order to use premises as a betting office in the Isle of Man, the premises need to be licensed as a betting office by the GSC (Section 11, GBLA).

A bookmaker must also hold a permit in addition to a betting office licence if he carries on business at premises other than a racecourse (Section 14(1), GBLA).

Bookmaking or a pool betting carried on at a racecourse requires a licence in respect of the specified racecourse, provided that the occupier of the racecourse holds a racecourse licence (Section 22 and Section 23, GBLA).

The Commission may separately grant to any person of good character and aged 25 years or over a licence authorising him to set up, keep and operate a totalisator on an approved racecourse (Section 24, GBLA).

Casinos

A maximum of two casino licences can currently be issued by the Island's Council of Ministers.

The licence prescribes the types of games that can be played at the casino. The Island's regulators have adopted a fairly flexible approach and new varieties of the traditional casino games have been trialled in the Island's current sole casino.

Gambling machines

Prize machines are subject to a licensing regime and low-value jackpot slot machines in public houses must be licensed.

Lottery

The National (UK) Lottery is available on the island and apart from small society lotteries, this is the only legal lottery operating on the Island. See also 2.2 Land-Based.

Online Gambling

There is no restriction on the number of licences that can be issued under OGRA.

Land-Based Gambling

There are no restrictions on the number of licences that can be issued under the Gaming, Betting and Lotteries Act 1988 or the Gaming (Amendment) Act 1984 (amusement or controlled machines).

However, in relation to land-based casinos, a maximum of two casino licences can currently be issued by the island's Council of Ministers. Currently one casino licence is in issue.

Online Gambling

Subject to Section 8(2) of OGRA, an OGRA licence, unless it is cancelled or surrendered, remains in force for a period (specified in the licence) of up to five years. Licensees can apply to the Commissioners for renewal of the licence at any time before the expiry date, for subsequent five-year periods (Section 7, OGRA).

The licensee who holds an OGRA licence may surrender the licence by notice in writing to the Commissioners. The surrender or expiry of a licence does not affect liability for anything done or omitted under the licence (Section 7, OGRA).

Section 13 of OGRA sets out circumstances in which the Commissioners may cancel or suspend an OGRA licence.

A licence can be cancelled or suspended by the authorities where a holder:

  • is convicted of an offence under the Casino Act 1986, OGRA, GBLA or any other indictable offence;
  • fails to pay fees due; or
  • for any other reason, ceases to be eligible.

Licences Issued under GBLA

Licences issued to persons under the GBLA who are conducting gambling activities will continue in force for the period stated in the licence, unless it is cancelled or surrendered.

Schedule 1 of the GBLA sets out the circumstances in which the Commission may refuse to grant or renew a licence.

Land-Based Casino Licence

A casino licence remains in force for a period of one year from the date on which it is granted, unless it is cancelled or surrendered (Section 5 (1), Casino Act 1986).

Subject to Section 5(3) and Section 5(4) of the Casino Act 1986, the Board may renew a casino licence for successive periods of one year on the application of the holder of the licence (Section 5(2), Casino Act 1986).

Section 5(3) of the Casino Act 1986 provides: "...A casino licence shall not be renewed so as to be in force after the expiry of 10 years after the date on which it was originally granted..."

Section 5(4) of the Casino Act 1986 provides: "The Board shall not renew a casino licence if, after consultation with the Council of Ministers, it is satisfied that the holder of the licence would not be eligible to be granted a licence anew on one or more of the grounds specified in Section 3(6)…"

Section 3(6) of the Casino Act 1986 provides:

"(6) The Council of Ministers shall not grant a casino licence to any person unless it is satisfied —

(a) that he is a person of integrity;

(b) that he has adequate knowledge and financial means available to operate the casino;

(c) that he is the occupier of the whole of the casino and any associated premises and has such security of tenure of the casino and any associated premises as the Council of Ministers considers adequate;

(d) that he intends to operate all the facilities and amenities to be provided at the casino and any associated premises;

and, in the case of a licence intended to be granted to a body corporate, —

(e) that the body is incorporated in the Island; and

(f) that the relevant share capital of the body is beneficially owned by a person or persons of integrity."

In addition, Section 5(6) of the Casino Act 1986 provides:

"(6) Subject to subsections (3) and (4), the Board shall not refuse to renew a casino licence unless the holder of the licence —

(a) is convicted of an offence under section 39 of the Gaming, Betting and Lotteries Act 1988 (cheating);

(b) is convicted of an indictable offence by any court in the British Islands or the Republic of Ireland;

(c) is convicted twice within any period of 12 months of an offence under section 134(1) of the Licensing Act 1961 (drunkenness in licensed premises);

(d) has failed without reasonable excuse to comply with the conditions of the licence;

(e) has ceased to be the occupier of the whole of the casino or has ceased to control the operation or management of all the facilities of the casino; or

(f) has failed without reasonable excuse to comply with any provision of this Act or regulations thereunder relating to the management or operation of the casino..."

Online Gambling

The application process is easily accessed and supported by comprehensive guidance notes (https://www.gov.im/categories/business-and-industries/gambling-and-e-gaming/application-forms-and-guidance-notes/).

The applicant for an OGRA licence must be an Isle of Man company and must have at least two local directors. The applicant must also appoint at least one Designated Official. If the Designated Official is not resident in the Isle of Man, the applicant must in addition appoint an Operations Manager.

Details of all directors of the application together with details of the applicant's Designated Official and Operations Manager must be included in the application; such persons are also required to complete personal declaration forms, provide references and complete a vetting process.

The application process also requires details of the shareholder and beneficial owners of the applicant to be included and such parties are also required to complete application forms, provide references and complete a vetting process. The requirements for due diligence for shareholders varies slightly for publicly listed companies.

Investors who provide a prescribed level of investment to the applicant are also required to complete application forms, provide references and complete a vetting process.

The application forms and supporting documentation are submitted to the GSC together with the application fee. After completion of a vetting process, the applicant is invited to a licensing hearing before the Commission. If successful, the applicant must pay the licence fee before going live. It typically takes ten to 12 weeks for the GSC to process the application.

Licences Issued under the GBLA

Pursuant to Section 16 of the GBLA, "...Schedule 1 shall have effect in relation to the grant, transfer and renewal of, and other matters relating to, bookmakers’ permits and betting office licences..."

Applications under the GBLA are made to the GSC, with copies of such applications being provided to the Chief Constable and to the Collector of Customs and Excise in the Isle of Man.

Within a prescribed period, the applicant must also cause notice of such application to be published in a newspaper, published and circulating in the Isle of Man. Such notice shall state that any person who desires to object to the grant of the permit or licence should notify the GSC, by the date stated in the notice.

See GBLA Schedule 1 for further details.

Casino Act 1986

A maximum of two casino licences can currently be issued by the Island's Council of Ministers. Currently one licence is in issue. Casino (Licence Applications) Regulations 1986 set out the application procedure for a land-based casino licence; however, specific guidance should be sought from the GSC in relation to applications for licences under the Casino Act 1986.

See also 4.5 Duration of Licences.

See 4.6 Application Requirements.

Online Gambling

The current costs are as follows: a GBP5,000 administration fee with the initial application for a network services, full or a sub-licence, or software supplier licence.

Land-Based

Please refer to the GSC website (https://www.gov.im/about-the-government/statutory-boards/gambling-supervision-commission/).

Online Gambling

The current costs are as follows:

  • GBP50,000 per annum thereafter and GBP5,000 for every foreign operator, for a network services licence;
  • GBP35,000 per annum thereafter, for a full licence;
  • GBP5,000 per annum thereafter, for a sub-licence;
  • GBP35,000 per annum thereafter for a software supplier licence; and
  • GBP50,000 per annum thereafter for a token-based software supplier licence.

Land-Based

Please refer to the GSC website (https://www.gov.im/about-the-government/statutory-boards/gambling-supervision-commission/).

Licences may be obtained for a betting office licence by the holder of a bookmakers permit, for a certificate to operate controlled machines (slot machines) from a premises and for a casino.

While the land-based sector is mature and there is little new activity or legislative change, operators are subject to the Anti-Money Laundering Code and are required to update their systems and procedures to comply with the amendments of the Code from time to time.

An advantage of the Isle of Man over other jurisdictions is the sheer simplicity of its licensing system and the proactive and helpful way the regulator works with the operators to create a business-friendly environment. Most operators only require one licence for all of their business requirements and the complex web of licences, fees and regulations found in other jurisdictions simply does not exist on the Island.

A standard online gambling licence allows the operator to conduct almost all forms of online gambling on a B2C basis under one licence. Operators can be divided into those that specialise in bookmaking, those that specialise in gaming and those that provide a full suite of different gambling products on a global basis. An operator can also use the same licence for its B2B operations as long as those operations do not fall with the requirements of a network licence, which is discussed below.

There are no restrictions on where the operator may take play from and it is up to the operator to obtain its own legal advice to determine the legal position of its operation. In practice, operators will combine the Isle of Man licence with licences in jurisdictions where a local operator’s licence is required.

A standard online gambling licence can be used for both B2C and B2B and there is not a separate licensing system just for B2B. Where operators wish to operate within a gambling network and take play from the customers of operators based off the Island without having to register those players as their own then they require a network licence. The network licence combines all of the powers of a standard licence but adds in the ability to operate within a gambling network. Network licences are used by a variety of operators and, for example, give access to greater liquidity for poker networks and slots tournaments.

A new software supplier licence is now available that enables the suppliers of software to be licensed and to have their games listed on a central register on the Gambling Commission website. The licence is attractive to software suppliers that wish to operate in a safe, regulated, tax-neutral environment.

The majority of B2B activities that would potentially be licensable under the Online Gambling Act 2001 are excluded from licensing by the Online Gambling (Exclusions) Regulations 2010. This enables support services to the online gambling industry to operate on the Island without the need for a special licence or any licensing fees.

The provision of affiliate services is not a regulated activity on the Isle of Man.

An OGRA licence covers a number of white label sites. The GSC guidance notes provide that players are required to register with the licensee and the white label sites are treated as though they were different URLs of the licensee even though the control of the URL and its marketing (for instance) may be controlled by a different company and the games may be skinned differently to reflect the brand.

The software services licence is the latest addition to online gambling in the Isle of Man.

The value of a registered player’s account with an Isle of Man licensed operator is protected at all times by a licence condition in the operator's licence. This means that if an operator goes into liquidation, the player’s funds can be repatriated to the player. Agencies that arrange and administer the mechanisms that guarantee the players’ monies do not need an OGRA licence to provide this service.

It is the responsibility of the Designated Official to ensure that the operator remains socially responsible in its operations by excluding youth, crime, unfairness and problem gambling from its operations. The operator's terms and conditions must include rules on self-exclusion for problem gamblers.

Operators are required to pay a percentage of their revenue to support problem gambling initiatives.

The Gambling Code

Gambling activities have been separated out from the AML/CFT Code 2019 (see 8.2 AML Requirements) into an industry-specific code, the Gambling (Anti-Money Laundering and Countering the Financing of Terrorism) Code 2019 SD 2019/0219.

An operator must not enter into or carry on an ongoing customer relationship or carry out an occasional transaction (that is, a transaction, whether carried out singly or as several transactions that appear to be linked, conducted outside of an ongoing customer relationship) with or for a customer unless the operator institutes, operates and complies with the systems, procedures, record-keeping, controls and training requirements of the Code, the principal elements of which are:

  • a risk-based approach – risk must be assessed at a business, technology and customer level;
  • customer due diligence – an operator must in relation to each new ongoing customer relationship or transaction that exceeds the occasional transaction threshold (that is, an occasional transaction that exceeds EUR3,000) establish, record, maintain and operate appropriate procedures and controls;
  • record-keeping and reporting – this includes the keeping of a Register of Disclosures (internal, external and any others made to the Financial Intelligence Unit) and a register of money laundering and financing of terrorism enquiries;
  • staffing, training and monitoring compliance – this includes the appointment of an AML/CFT compliance officer of a sufficient seniority and experience; and
  • these procedures and controls must (i) have regard to the size and risks of the operator; (ii) apply to foreign branches and majority-owned subsidiaries; and (iii) be approved by the senior management of the operator.

An operator must register on the designated reporting platform as provided by the Financial Intelligence Unit (a requirement of Sections 142 to 144 of the Proceeds of Crime Act 2008 and Sections 11, 12 and 14 of the Anti-Terrorism Crime Act 2003).

The ultimate responsibility for ensuring that customer due diligence complies with this Code is that of the operator, regardless of any outsourcing.

Any person who contravenes the Code is guilty of an offence and liable (i) on summary conviction to custody for a term not exceeding 12 months or to a fine not exceeding level 5 on the standard scale (that is, GBP10,000 as set out in Section 55 of the Interpretation Act 2015), or to both; or (ii) on conviction on information to custody not exceeding two years or to a fine, or to both.

Full details of the provisions are available at https://www.gov.im/media/470625/gambling-anti-moneylaunderingandcounteringthefinancingofterrorism-code2019.pdf

On 1 June 2019 the Anti-Money Laundering and Countering the Financing of Terrorism Code 2019 (“the Code”) came into effect.

Schedule 4 of the Proceeds of Crime Act 2008 lists the businesses to which the Code applies (https://legislation.gov.im/cms/images/LEGISLATION/PRINCIPAL/2008/2008-0013/ProceedsofCrimeAct2008_22.pdf).

The requirements of the Code (which is available at https://www.iomfsa.im/media/1520/appendixa.pdf) include the following.

  • A risk-based approach to customer due diligence, including enhanced customer due diligence for higher-risk customers. There must be a business risk assessment, customer risk assessment and a technology risk assessment.
  • Identification and verification of identity of applicants for business and beneficial owners; eg, through satisfactory evidence of name, date of birth, address and nationality.
  • Provisions dealing with relationships involving Politically Exposed Persons (PEPs), including determining whether any applicant for business, beneficial owner or existing customer is a PEP and requiring approval of senior management to continue or commence a business relationship with a PEP.
  • Provisions concerning correspondent banking services – additional steps to be taken where relationships involve correspondent banking services and prohibition from entering or continuing relationships with shell banks.
  • Provisions with respect to foreign branches and subsidiaries – ensuring measures taken by foreign branches and subsidiaries are consistent with the Code.
  • Ongoing monitoring of existing business relationships – including reviews of customer due diligence information and scrutiny of transactions.
  • Report suspicious transactions – when merited, following a robust assessment of the circumstances.
  • Maintain adequate records – in terms of completeness, format, location and period of retention, including a register of all enquiries made to the institution by the investigating authorities.
  • Adopt adequate internal controls and communication procedures – written procedures for preventing money laundering, and a register of all disclosures made by the relevant person to the investigating authorities.
  • Maintain procedures and controls to prevent the misuse of technological developments for money laundering or terrorist financing.
  • Screen staff – in order to be satisfied as to the integrity of new directors or partners and new appropriate employees.
  • Provide appropriate training for employees – to educate them on a regular basis about money laundering techniques, their obligations under the law, the internal procedures to forestall and prevent money laundering, and the procedures to follow where money laundering is known or suspected.
  • Establish internal reporting procedures – relevant businesses must establish written internal reporting procedures covering:
    1. to whom staff should report suspicious transactions;
    2. the establishment of a reporting chain;
    3. the appointment of a money laundering reporting officer (MLRO);
    4. the MLRO having access to all relevant information, and that the MLRO takes account of it;
    5. the prompt reporting of suspicious transactions by the MLRO as soon as practicable to the Financial Crime Unit; and
    6. the establishment of a register recording certain minimum information.

The current version (September 2019) of the Financial Services Authority’s Anti-Money Laundering and Countering the Financing of Terrorism Handbook is available at https://www.iomfsa.im/media/1475/amlcfthandbookfinalversiond.pdf

Civil Penalties

Following a public consultation in early 2019, the Anti-Money Laundering and Countering the Financing of Terrorism (Civil Penalties) Regulations 2019 SD 2019/0201 have been brought into force. This extends the range of sanctions in relation to contraventions of compliance with the AML/CFT Code 2019 (previously only criminal sanctions could be imposed for a Code breach). Available at: https://www.iomfsa.im/media/2598/anti-money-laundering-and-countering-the-financing-of-terrorism-civil-penalties-regulations-2019.pdf

The Specified Non-Profit Organisations Code

A further carve-out from the AML/CFT Code 2019 is The Specified Non-Profit Organisations Code 2019 SD 2019/0200, which is available at http://www.tynwald.org.im/business/opqp/sittings/20182021/2019-SD-0200.pdf. An SNPO is defined in the SNPO Code as:

"a body corporate or other legal person, the trustees of a trust, a partnership, other unincorporated association or organisation or any equivalent or similar structure or arrangement established solely or primarily to raise or distribute funds for charitable, religious, cultural, educational, political, social, fraternal or philanthropic purposes with the intention of benefitting the public or a section of the public — (a) which has an annual or anticipated annual income of £5,000 or more; (b) which has remitted, or is anticipated to remit, at least £2,000 in any one financial year to one or more ultimate recipients in or from one or more high risk jurisdictions; and (c) where the decision of where to remit the funds is made within the [Isle of Man]."

The GSC is the regulatory authority for advertising by operators.

“Advertisement" includes every form of advertising or promotion, whether by means of the internet, in a radio or television programme or message (whether broadcast or not) in a written or printed publication, by the display of notices, signs, labels or showcards, by means of circulars or other documents, or through any other medium.

Land-Based

It is an offence for a person to issue or cause to be issued any advertisement that (Section 7, GBLA):

  • informs the public that gaming takes place or is to take place on the premises;
  • invites the public to participate in any such gaming;
  • invites the public to subscribe money or money's worth to be used in gaming on the Island or elsewhere; or
  • invites the public to apply for information about facilities for subscribing any money or money's worth.

This wide-ranging prohibition on the advertising of gaming is subject to an equally wide set of exemptions, the key ones of which are as follows.

  • Casinos – a land-based casino can advertise itself and its games. The advertising is controlled and subject to specific casino advertising regulations.
  • Prize machines – controlled machines, more commonly known as slot machines, may be advertised.

Online

Operators of online gambling sites must comply with the Online Gambling (Advertising) Regulations 2007. Every advertisement must comply with the following general requirements:

  • it shall not be indecent or offensive;
  • it shall be based on fact;
  • it shall not be false, deceptive or misleading in any material particular;
  • it shall not contain any statement as to the legality or otherwise of online gambling or any kind of online gaming, online betting or the like in any other jurisdiction;
  • it shall not be directed at any jurisdictions in which online gambling or any kind of online gaming, online betting or the like is prohibited;
  • it shall not have any sexual content;
  • it shall not be directed at persons under 18;
  • it shall not contain any material in breach of copyright; and
  • if it makes any claim as to the potential payout or win in relation to any online gambling, it shall contain sufficient information to enable a person to determine readily and easily the expected percentage return to him over a period of time, disregarding any exercise of skill by him.

See 9.3 Key Legal, Regulatory and Licensing Provisions.

Section 7 of the GBLA sets out restrictions on advertising relating to gaming. See 9.3 Key Legal, Regulatory and Licensing Provisions for further details regarding Section 7 of the GBLA.

Any person who contravenes Section 7(1) of the GBLA shall be guilty of an offence, which may result in a custodial sentence or fine or both.

The advertising of a land-based betting office is also restricted and must comply with GSC guidelines and the GBLA. Any person who publishes an advertisement or causes or permits it to be published, or in the case of an advertisement in connection with the office or offices of a particular licensee, that licensee, in contravention of such provisions shall be guilty of an offence, which may result in a custodial sentence or a fine or both.

In respect of a breach of the adverting rules for online gambling, the operator and the designated official can be subjected to a fine of up to GBP5,000.

If subsection (6) is contravened, (i) any person who published the advertisement or caused or permitted it to be published, or

(ii) in the case of an advertisement in connection with the office or offices of a particular licensee, that licensee, shall be guilty of an offence.

The GSC must be notified when any of the following occur:

  • a Designated Official ceases to be a director of the licence-holder;
  • a new director is appointed to the company;
  • the beneficial ownership of the operator changes;
  • an official (DO, OM or MLRO) dies; or
  • the licence-holder is being targeted for a merger or a takeover bid where the beneficial owners or officials are likely to be reviewed or changed.

Beneficial owners may not become involved in an Isle of Man licensed gambling operation until the GSC has conducted and concluded its diligence checks. All changes in ownership must be notified to the GSC, which may apply percentage shareholding thresholds to determine the nature of the checks that are required.

See 10.2 Change of Corporate Control Triggers.

OGRA – Online Gambling

Certain procedures must be completed before certain key personnel can begin their duties. These are detailed below.

Changes in beneficial ownership

Beneficial owners may not become involved in an Isle of Man licensed gambling operation until the GSC has conducted and concluded its diligence checks. All changes in ownership must be notified to the GSC, which may apply percentage shareholding thresholds to determine the nature of the checks that are required.

Changes in Designated Official or Operations Manager

New Designated Officials and Operation Managers may not commence their duties until they have been approved by the GSC.

Changes in directors

All directors of an operation must be approved by the GSC before they commence their duties (Guidance for On-line Gambling, Version (XI):16052018, Isle of Man Gambling Supervision Commission – https://www.gov.im/media/1349489/guidance-notes-16518.pdf).

Casino Act 1986

Section 4(3)(b) of the Casino Act 1986 provides: “(b) that the holder of the licence, if a body corporate, shall notify the Board of any change in the beneficial ownership of any relevant share capital in the body”.

Section 4(3)(c) of the Casino Act 1986 provides that: “(c) where the holder of the licence is a body corporate, that no person shall be appointed to be a director of the body unless the Board is satisfied that he is a person of integrity”.

Gaming Betting and Lotteries Act 1988

Section 16 of the GBLA provides: “16 Grant of permits and licences

Schedule 1 shall have effect in relation to the grant, transfer and renewal of, and other matters relating to, bookmakers’ permits and betting office licences.”

Schedule 1 paragraph 15 provides: “15. (1) Where the holder of a permit is a body corporate —

(a) no person shall be appointed as a director thereof, except with the prior approval of the Commission; and

(b) the body corporate shall not permit the acquisition by any person of a majority of its issued share capital, except with the prior approval of the Commission, and, where the person acquiring such share capital is a body corporate, sub-paragraph (a) shall have effect as if that person were the holder of a bookmaker’s permit.

(2) If the holder of a permit is a body corporate and any person is appointed a director in contravention of sub-paragraph (1)(a), or the holder of the permit fails to comply with sub-paragraph (1)(b), that person or the holder of the permit, as the case may be, shall be guilty of an offence.”

See 10.2 Change of Corporate Control Triggers.

The GSC’s powers of enforcement include:

  • suspending, varying or cancelling the online gambling licence;
  • removing approval of key officials of the operator;
  • obtaining an order from the High Court for disclosure of the beneficial owner of an operator;
  • the power to enter any premises that they have reasonable cause to believe are, or have been used, for any purpose connected with the conduct of online gambling;
  • requiring any person to produce any documents or other records relating to or connected with the conduct of online gambling, and to take copies of such documents or records;
  • requiring any person to provide them with access to any computer program used, or to be used, in connection with the conduct of online gambling; and
  • obtaining a warrant from a justice of the peace to enter and search premises.

Proceedings for offences under OGRA or the gambling regulations can only be instituted by or with the consent of the Attorney General. The proceedings would then be instituted through the Island's criminal courts.

Financial penalties are enforced by the Isle of Man courts as court fines.

The definition of online gambling within OGRA is arguably sufficiently wide so as to include social gaming that is conducted for money or money's worth.

What may be considered relevant to social gaming is the use of virtual currencies in online gambling.

Pursuant to the Online Gambling (Registration and Accounts) Regulations 2008 (as amended by the Online Gambling (Amendments) Regulations 2016, it is now possible to open an account with an Isle of Man gambling operator by using anything that has a value in money’s worth. This includes convertible and non-convertible virtual currencies (CVCs and VCs respectively).

Convertible virtual currencies include cryptocurrency (such as bitcoins) that can be bought and sold through independent exchanges for fiat currency.

Non-convertible virtual currencies include virtual goods such as digital “skins” for avatars and weapons in video games, and other digital objects that have functions in video games, in addition to in-game currencies that can be used to buy such objects.

Currently permitted models identified are:

  • CVC/VC to fiat conversion prior to play;
  • CVC/VC-in, CVC/VC-out – peer-to-peer;
  • CVC/VC-in, CVC/VC-out – against the house; or
  • VC-in, Conversion, VC-out.

Models not currently permitted are:

  • CVC/VC-X-in, CVC/VC-Y-out;
  • CVC/VC-in, fiat-out; or
  • fiat-in CVC/VC.

(Guidance for On-line Gambling, Version (XI):16052018, Isle of Man Gambling Supervision Commission - https://www.gov.im/media/1349489/guidance-notes-16518.pdf)

The Island is a popular location for eSports operators, with Luckbox being the first cryptocurrency-supported eSports betting platform to be granted an online gambling licence.

Fantasy sports operators only need a standard online gambling licence in order to operate from the Island. In practice, fantasy sports would be offered as one of a number of sports games by a sports betting operator under its online gambling licence.

Skill games are not currently specifically regulated by statute.

The Isle of Man has launched the Blockchain Office and the Isle of Man Blockchain Sandbox, established to guide blockchain businesses through current (and future) regulatory landscapes. This new strategy for the Isle of Man is set to position the island as an international hub for blockchain businesses. Within this strategy are a number of new policies that set the Isle of Man apart from other jurisdictions as a fast follower of international regulation, enabling the Island to offer a highly attractive and responsive regulatory environment.

Kibo Lotto was recently granted an online gambling licence to run a blockchain lottery from the Island. The platform uses a player protection model that solely relies on the concept of smart contracts using a blockchain-based distributed computing platform, Ethereum. As a result of the new player protection model, there will be no human intervention with the movement of player funds, mitigating the risk of funds being lost or misused.

There are no current public plans for any gambling reforms.

Corporate Tax

Isle of Man companies are subject to tax on their worldwide income. The standard rate of corporate income tax in the Isle of Man is 0%.

VAT

Online gambling is exempt from VAT, which means that while no VAT is due on income, VAT is not recoverable on expenses and overheads. The current VAT rate is 20%.

Gambling Duty

  • Gambling duty is charged as a percentage of gross gaming yield or retained profit on online gambling, pool betting and betting. It is not charged on gambling on gaming machines, which are subject to machine games duty (see below, "Machine Games Duty").
  • Gaming in a casino.
  • Bingo unless conducted online.
  • On-course betting or National Lottery games.

Gross gaming yield means the total amount of all bets or stakes made, and the price of all chances sold, less the value of all winnings and prizes due, in the course of gambling.

Gambling duty is generally charged on the gross gaming yield basis. The exceptions to this general rule are the following forms of gambling, which are charged on retained profit basis:

  • prize draws, prize competitions or lotteries;
  • poker or other games where individual players play against one another using systems or facilities provided by the operator;
  • sponsored pool betting and pari-mutuel betting that employs the use of a totalisator, or any form of pool betting;
  • a betting exchange;
  • where the operator acts as a bet-broker; and
  • spread betting.

The rates of gambling duty are as follows:

  • for gross gaming yield or retained profit not exceeding GBP20 million per annum – 1.5%;
  • for gross gaming yield or retained profit of more than GBP20 million per annum, but not exceeding GBP40 million per annum – 0.5%;
  • for gross gaming yield or retained profit exceeding GBP40 million per annum – 0.1%; and
  • the prescribed proportion of gross gaming yield for pool betting is 15%.

Machine Games Duty

This is payable by any person or organisation that operates machine games. In general, machine games are fixed odds betting terminals, slot machines and quiz machines, where the prize can be bigger than the stake.

The operator of the machine is required to register with Customs and Excise and account for the duty. Machine games duty is 15% of the net takings (profit) on an inclusive basis.

MannBenham Advocates Limited

49 Victoria Street
Douglas
Isle of Man
IM1 2LD

01624 639350

01624 617961

milesbenham@mannbenham.com; carlystratton@mannbenham.com mannbenham.com
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Law and Practice

Authors



MannBenham Advocates Limited has evolved with, and has a real passion for, the global eGaming market, strengthened by its expert lawyers and advisers. The firm has been providing legal and advisory services to its clients in the Isle of Man and the international gaming sector for over 23 years. Within MannBenham, the advisory team draws on all the resources within the group of companies, which include their expert lawyers, multi-jurisdictional gaming advisers, regulatory and compliance professionals, and administrators. Having evolved from MannBenham Advocates’ heritage and legal pedigree, the team and company as a whole have been extremely well placed to give impartial, factual and balanced online gaming advice across multiple jurisdictions. The team is responsible for advising on eGaming licence applications along with compliance and procedural consultation, working closely with the directors and the business team to solve issues, create value, maximise growth and improve business performance by providing operational and practical advice.

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