Gaming Law 2019

Last Updated November 25, 2019

UK

Law and Practice

Authors



Harris Hagan is currently the only specialist gambling law firm in the City of London. The firm has an international reputation as trusted advisers to many of the world’s largest gambling and leisure operators in all areas of land-based and online gambling, liquor and entertainment. The firm’s outstanding reputation has been founded on unparalleled legal experience, knowledge and an in-depth commercial understanding of the industry. Harris Hagan has also advised overseas regulatory authorities and governments on the regulation of gambling and assisted with draft legislation. The firm is noted for its pre-eminence in advising on highly complex regulatory issues and for advising on a wide range of commercial contracts.

Increased Enforcement

Anti-money laundering, responsible gambling and consumer protection have been continuing areas of key focus across UK gambling sectors in recent years, as reflected in high profile enforcement action, and this is not set to change. In June 2019, the British gambling regulator, the Gambling Commission, confirmed that over the past year it had carried out over 160 investigations, with operators paying a total GBP19.6 million in penalty packages for their breaches. This has been coupled with an increased focus on the accountability of personal licence holders (including CEOs), as reflected in various high-profile enforcement cases since late 2018.

Affordability

In recent years, the Gambling Commission has identified, through its compliance and enforcement work, numerous cases of a similar nature where players have gambled beyond their means through the misappropriation of funds (for example, using stolen monies from their employer) or by taking out unaffordable loans. The Gambling Commission’s view is that common to all these cases has been the ineffective controls framework used by the operators to identify and manage the risk. Its view is that operators should be revising their triggers by using disposable income levels as a starting point to identify, as early as possible, and interact with vulnerable customers. For the first time, affordability was a separate theme in the Gambling Commission’s enforcement report this year and it seems inevitable that mandatory affordability checks will be introduced in the foreseeable future. Given the regulatory burden and cost of affordability checks, their introduction is likely to transform the British market with many leaving these shores (by surrendering their licences or having them revoked by the Gambling Commission) or through M&A activity.

New Licence Conditions

The Gambling Commission issued new licence conditions regarding alternative dispute resolution (ADR) and customer interaction, which came into force on 31 October 2019. The focus of these is on providing consumers with greater reassurance regarding ADR impartiality and consistency, and more effective identification of and interaction with those at risk of gambling related harm.

Additional licence conditions are expected to come into force on 1 January 2020 regarding financial contributions by operators towards problem gambling research, prevention and treatment, which will affect all licence holders.

Fourth National Lottery Licence Competition

The Gambling Commission is set to run the competition for and regulate the next National Lottery licence (the current licence held by Camelot is due to expire in 2023). Gambling Commission CEO, Neil McArthur has stated, “[the National Lottery] is increasingly moving towards tech-based, media-based, personal device-based. We want to find out what’s interesting to finance providers and technology providers to get the broadest possible input”, further adding that the franchise holds “significant untapped potential”.

Marketing

The gambling industry introduced self-imposed advertising ban which came into effect on 1 August 2019. No gambling advertisements will now be shown during televised live sports before the 9pm watershed, starting and ending five minutes before and after a match. The intention is to curb the potential impact of gambling advertisements on children and others vulnerable to gambling-related harm.

See 1.1 Current Outlook.

The following online sectors are regulated in Great Britain:

  • betting (live, in-play, fixed-odds and pari-mutuel, betting exchanges and intermediaries);
  • bingo;
  • casino;
  • fantasy sports;
  • gaming machines;
  • gambling software;
  • lotteries; and
  • poker.

Free to play social gaming is not regulated. The Gambling Commission concluded, following a scoping review in 2015, that the sector did not require regulation but would continue to be monitored by the Gambling Commission for any potential risks.

See 2.2 Land-Based for product definitions.

The following land-based sectors are regulated in Great Britain:

  • Arcades can be divided into three categories:
    1. adult gaming centres;
    2. licensed family entertainment centres; and
    3. unlicensed family entertainment centres.

Each arcade category can offer a specific subcategory of gaming machine. Those under 18 years of age may not be allowed access to the adult-only section of a licensed family entertainment centre or an adult gaming centre.

  • Betting (live, in-play, fixed-odds and pari-mutuel, betting exchanges and intermediaries). See 3.2 Definition of Gambling for Betting definition. 
  • Bingo is not defined in UK legislation, however, the Gambling Commission has published guidance stating that bingo constitutes “equal chance” gaming. See its website for further guidance.
  • Casino constitutes arrangements providing people an opportunity to participate in one or more casino games. “Casino game” means a game of chance which is not equal chance gaming. 
  • Fantasy sports is not defined in the 2005 Act, but the Gambling Commission has issued guidance on its website regarding this product. See 12.3 Fantasy Sports.
  • Gaming machines means a machine which is designed or adapted for use by individuals to gamble (whether or not it can also be used for other purposes). 
  • Gambling software is defined as computer software used in connection with online gambling which does not include used solely in connection with a gaming machine. Given the complexity of this term, the Gambling Commission issued an advice note in June 2014 on what constitutes gambling software.
  • Lotteries (raffles), excluding commercial lotteries See 3.2 Definition of Gambling for lotteries definition.
  • Poker: in spite of the skill element, the chance element which the deal of card introduces means that poker falls within the definition of gaming. See 3.2 Definition of Gambling for gaming definition.

The key legislation applicable to the gambling sector is as follows:

  • Gambling Act 2005 (the “2005 Act”);
  • The Gambling (Licensing and Advertising) Act 2014;
  • National Lottery Act of 1993 (as amended by National Lottery Act of 2006);
  • The money laundering, terrorist financing and transfer of funds (information on the payer) regulations 2017;
  • Fourth Money Laundering Directive; and
  • Proceeds of Crime Act 2002 (Part 7).

The 2005 Act is set out as follows:

  • part 1 interprets key concepts and contains definitions of important terms;
  • part 2 establishes the Gambling Commission's powers and duties;
  • part 3 deals with offences;
  • part 4 addresses the protection of children and young persons; and
  • parts 5, 6, 7 and 8 deal with various types of licences.

The Licence Conditions and Codes of Practice (LCCP) is issued under the 2005 Act, Section 24, and is in the author’s opinion the key reference document with which all licence holders should familiarise themselves. See also 1.1 Current Outlook.

Gambling in the 2005 Act means gaming, betting or participating in a lottery. 

Gaming means "playing a game of chance for a prize", including games where the chance element can be eliminated by superlative skill. “Prize” constitutes money or money's worth and “playing” means a chance of winning, irrespective of whether there is a risk any loss.

Betting means the making of or acceptance of bets on:

  • the outcome of an event;
  • the likelihood of anything occurring or not; or
  • whether anything is true or not.

Sub-categories of betting:

  • real event betting (ie, fixed odds betting);
  • virtual event betting (based on a random number generator);
  • betting intermediary (peer to peer); and
  • pool betting.

Lottery are classed as “simple” or “complex” and they cannot be run for private or commercial gain. Lotteries are “simple” if:

  • payment is required to participate;
  • one or more prizes are allocated to one or more members of a class; and
  • the allocation of prizes relies wholly on chance. 

Complex lotteries differ on the point of prize allocation whereby prizes are allocated by a series of processes, the first of which relies wholly on chance.

Sub-categories of lotteries include:

  • society lotteries (small and large);
  • local authority lotteries;
  • incidental lotteries,
  • private lotteries;
  • customer lotteries; and
  • the National Lottery (subject to separate legislation).

The 2005 Act also addresses the following cross-category activities in the event that products may satisfy more than one of the above definitions of gambling:

  • betting and gaming;
  • lotteries and gaming; and
  • lotteries and betting.

Land-based gambling is not specifically defined under the 2005 Act.

Online gambling is referred to as “remote gambling” and means “gambling in which persons participate by the use of remote communication”. Remote communication includes: the internet, telephone, television, radio or any other kind of electronic or other technology for facilitating communication.

Part 3 of the 2005 Act covers all offences, however, a key offence is:

  • Providing facilities for gambling (2005 Act, Section 33):
    1. without authorisation from the Gambling Commission, whether through a licence or acting in the course of another’s business who holds a licence;
    2. in a manner not in accordance with the terms and conditions of any licence held either by the licence holder or in the course of another’s business who holds such licence. 

“Providing facilities for gambling'' occurs where a person satisfies at least one of the following:

  • Inviting others to gamble in accordance with arrangements made by him.
  • Providing, operating or administering arrangements for gambling by others.
  • Participating in the operation or administration of gambling by others.

Other key offences of note include:

  • Inviting, causing or permitting a child (under the age of 16) or young person (not a child, but less than 18) to gamble (2005 Act, Section 46).
  • Manufacturing, supplying, installing or adapting gambling software without an operating licence whilst physically located in the UK (2005 Act, Section 41).
  • Cheating at gambling or doing anything to enable or assist another person to cheat at gambling (2005 Act, Section 42).

A person commits an offence if in the course of a business they manufacture, supply, install or adapt gambling software, unless they act in accordance with an operating licence.

See 9.5 Sanctions/Penalties for advertising sanctions and penalties.

The penalties for the key offences listed in 3.5 Key Offences and 9.5 Sanctions/Penalties are a maximum of 51 weeks imprisonment and/or an unlimited fine.

There is no pending legislation, however, an updated LCCP, as issued under the 2005 Act, is expected to come into force on 1 January 2020 with new licence conditions regarding at-risk gambling research, prevention and treatment.

The Gambling Commission and various Licensing Authorities enforce the 2005 Act. Under the 2005 Act, Part 2, the Gambling Commission’s primary functions include:

  • issuing operating licences;
  • issuing personal licences;
  • specifying general licence conditions for each type of licence and any individual licence conditions which it considers appropriate;
  • issuing codes of practice concerning the way in which facilities for gambling are to be provided;
  • regulating licence holders;
  • investigating and prosecuting illegal gambling and other offences under the 2005 Act;
  • issuing guidance to local authorities on their role; and
  • advising the Secretary of State on the incidence of gambling, how it is carried out, its effects and its regulation.

The Advertising Standards Authority regulates gambling advertising in the UK. See 11 Enforcement.

The Gambling Commission’s approach to regulation is risk-based with the aim of continuing to raise standards. The Gambling Commission indicated in its Business plan, 2019-20, that its five strategic priorities continue to be:

  • protecting the interests of consumers;
  • preventing gambling harm to consumers and the public;
  • raising standards in the gambling market;
  • optimising returns to good causes from lotteries; and
  • improving the way the Gambling Commission regulates.

The types of licences are:

  • Generally, for companies: operating licences and if applicable, premises licences.
  • For individuals: personal licences.

Generally, the operating licences types are:

  • non-remote for land-based activities (these will require an accompanying premises licence, as detailed below); or
  • remote for online activities.

The 2005 Act enables the Gambling Commission to authorise all regulated land-based and online activities outlined at 2.1 Online and 2.2 Land-Based above, including gambling software. Licences authorising multiple licensable activities (for instance, bingo and casino) are classed as a “combined operating licence”. Subject to exceptions, licences are also amenable to “umbrella” arrangements for those acting in the course of another’s business. “Umbrella” arrangements are approved at the Gambling Commission’s discretion following review of factors including but not limited to:

  • consolidation of company accounts;
  • ownership structure;
  • responsibility for compliance;
  • governance arrangements.

See also section 6 Online Gambling.

Premises Licence

Premises licences, issued by the relevant Licensing Authority (not the Gambling Commission), are available which authorise the following activities:

  • casinos;
  • bingo;
  • an adult gaming centre for making Category B gaming machines available for use;
  • a family entertainment centre, for Category C gaming machines;
  • betting.

See 5.1 Premises Licensing for requirements.

Personal Licences

Personal licences are governed by the LCCP and issued by the Gambling Commission. They allow the Gambling Commission to regulate individuals and hold key decision makers accountable for any inadvertent or deliberate breaches of the LCCP. General conditions for licences, as stipulated by the 2005 Act, Section 75, are listed under Part 3 of the LCCP.

The two types of personal licences are:

  • personal management licence (PML); and
  • personal functional licence (PFL).

The LCCP requires persons with responsibility for any of the below key positions to hold a PML:

  • overall strategy and delivery of gambling operations;
  • financial planning, control and budgeting;
  • marketing and commercial development;
  • regulatory compliance;
  • gambling-related IT provision and security; and
  • money laundering reporting officer.

Individuals working in a casino who are involved in gaming or handling cash (for example, croupiers, dealers and cashiers) must hold a PFL. Under the 2005 Act, Section 133, personal licences may not be issued to individuals who already hold one but may authorise the performance of more than once function.

Operating licences and personal licences are readily available subject to the fulfilment of application criteria and payment of the application fee. 

Land-based casinos premises licences are sub-categorised into “small”, “large” and “converted”. ‘Converted’ casino premises licences were awarded under the repealed Gaming Act 1968. They may be moved to alternative premises within the same Licensing Authority area but there are no new licences available. Sixteen “small” and “large” casino premises licences were issued under the 2005 Act and awarded by the relevant licensing authority area following a public competition. The majority of these licences have now been awarded, meaning that no other casino premises licences are available (see Premises licence in 4.3 Types of Licences).

Pursuant to the 2005 Act, Section 110, operating licences are indefinite in duration, subject to payment of annual fees and compliance with licence terms and conditions.

Key Application Requirements for Operators

Operating licence applications must be submitted to the Gambling Commission, who will conduct an extensive investigation (having regard to the licensing objectives) in order to determine whether the applicant’s suitability to carry on the licensed activities. The Gambling Commission broadly uses the following principles to assess any application:

  • identity and ownership;
  • finances;
  • integrity;
  • competence; and
  • criminality.

The 2005 Act, Section 69(2) requires that operating licence applications:

  • specify the activities to be authorised by the licence;
  • specify a UK correspondence address;
  • be made in the form and manner decided by the Gambling Commission (applications must now be made via the Gambling Commission’s online system);
  • disclose any relevant offences;
  • include documents and information requested by the Gambling Commission; and
  • be accompanied by the prescribed fee.

Currently, there are no server location or data storage obligations.

Key Differences, if any, Between Application Requirements for Land-Based and Online Operators

Land-based casinos are generally considered to be a high impact activity in terms of the Gambling Commission's work, which means that applications may attract a high level of scrutiny and interest. In addition, non-remote casino operating licence applications must be accompanied by a casino premises licence application, which must be submitted to the licensing authority of the area in which the premises is situated.

Key Application Requirements for Directors, Owners or Senior Management

Individuals holding 10% or more equity and/or voting rights in an existing or proposed licensee must apply for an Annex A authorisation from the Gambling Commission. 

Individuals occupying a management holding a key position or being are able to exercise significant influence over the operator must hold a PML.

Key individuals for small-scale operators may be exempt from this requirement to hold a PML and may apply instead to hold an Annex A authorisation. See 4.3 Types of Licences for further information on personal licences.

The Gambling Commission assesses personal licences according to the same suitability criteria listed above for operating licences. Furthermore, the Gambling Commission introduced a new policy, from April 2018, to reject incomplete applications.

Subject to full information being provided, Gambling Commission guidance indicates that operating licence applications take approximately 16 weeks to process. However, in the author’s experience this can take longer depending on several factors, including but not limited to product complexity, ownership structure and source of funding and the Gambling Commission’s workload.

Application fees for operating licences are determined by the types of activities and financial projections for the first year. These can be calculated using the Gambling Commission’s online fees calculator. Discounts are provided for multiple licensable activities.

At the time of writing, application fees for personal licences are GBP370. There is no application cost for Annex A applications.

Annual fees are determined in the same way as application fees, outlined in 4.8 Application Fees. Annual fees may be found on the Gambling Commission’s website or may be calculated using the online fees calculator.

The requirements for a premises licence are:

  • they must be held, or applied for in conjunction with an operating licence authorising the activity for which the premises is to be used;
  • right to occupy the premises (freehold, leasehold or tenancy); and
  • only one premises licence can apply to a particular premises at a time (subject to exceptions).

Fixed-odd betting terminals (FOBTs), defined as Category B2 gaming machines under the 2005 Act, have been subject to recent intense public and political scrutiny regarding the maximum stake permissible. Subsequently, the permitted maximum stake was reduced from GBP100 to GBP2.

Most recently, in response to a review which showed that 84% of public houses (“pubs”) in England and Wales are failing to prevent under 18s from playing fruit machines, defined as Category C gaming machines under the 2005 Act, the Gambling Commission issued a call in October 2019 for the pub sector to take faster action to prevent under 18s from accessing gaming machines in pubs.

Historically, remote operating licences did not reflect the distinction between B2B and B2C business models. B2B operators hosting games through B2C websites required a licence authorising remote casino, bingo, betting (virtual events) or betting (real events), in addition to gambling software, as hosting games constitutes providing facilities for gambling. However, new legislation introduced in April 2017, the Gambling (Operating Licence and Single-Machine Permit Fees) Regulations 2017 (SI No 303, 2017), created B2B-specific “host” sub-categories:

  • casinos (game host);
  • bingo (game host);
  • general betting (host) (real events); and
  • general betting (host) (virtual events).

However, these licences are subject to various requirements, including:

  • the company must hold a gambling software operating licence; and
  • the company must not contract players directly.

See 6.1 B2C Licences.

Affiliates are not regulated by the Gambling Commission, as companies only providing advertising services or branding to a gambling operator do not require an operating licence. Social responsibility code provision 1.1.2 provides that responsibility for third-party compliance lies squarely with the licence holder who must ensure that third parties “conduct themselves in so far as they carry out activities on behalf of the licensee as if they were bound by the same licence conditions and subject to the same codes of practice as the licensee”.

The Gambling Commission’s July 2019 article “Free-to-play games being available through gambling affiliates” provides some additional guidance on how licensees should approach affiliate marketing, especially in view of the May 2019 LCCP updates on age verification.   

See 6.3 Affiliates.

See 1.1 Current Outlook.

There are no technical measures in place regarding consumer protection and the Gambling Commission does not have direct powers to enforce either payment or website blocking. However, it seeks to protect consumers rights, through its powers under the 2005 Act, to seek enforcement action. 

Responsible gambling – now coined “safer gambling” by the Gambling Commission – is one of the Gambling Commission’s biggest areas of focus, across licensing, compliance and enforcement. Its oversight and requirements are broad, meaning they cannot be summarised in this publication. The focus, which stems from the third licensing objective (protecting children and other vulnerable persons from being harmed or exploited by gambling) is proper identification and engagement with those who may be at risk of or experiencing harm, ensuring terms and conditions are clear, fair and straightforward for consumers and do not target vulnerable or self-excluded customers.

There have been repeated examples of customers being allowed to gamble significant sums of money in short time frames, significantly beyond their personal affordability, and without any intervention from the operator. Whilst there are signs of meaningful progress, the industry as a whole has been slow to collaborate, evaluate and raise standards, and has, to this point, merely been reactive. 

Key RG requirements include:

  • detailed requirements regarding customer interaction (see guidance from the Gambling Commission published in July 2017);
  • provision of gambling management tools (see 7.2 Gambling Management Tools);
  • licensees must, as soon as practicable, take all reasonable steps to prevent any marketing material being sent to a self-excluded customer;
  • at the end of any self-exclusion period chosen by the customer, self-exclusion remains in place, for a minimum of seven years, unless the customer takes positive action to gamble again; and
  • notwithstanding the expiry of the period of self-exclusion chosen by a customer, no marketing material should be sent to them unless and until they have asked for or agreed to accept such material.

Gambling management tools include:

  • making information readily available to customers on how to gamble responsibly and how to access information about, and help in respect of, problem gambling;
  • self-exclusion (operator and national) with a minimum of six months (up to 12 months);
  • financial limit (deposit, spend or loss);
  • timers;
  • reality checks; and
  • time outs (24 hours, one week, one month or such period as reasonably requested by the customer, up to six weeks).

The Multi-Operator Self-Exclusion Scheme (MOSES) assists land-based operators with identifying at-risk gamblers. GAMSTOP is the intended online equivalent, initiated by the Gambling Commission and led by the Remote Gambling Association. The soft launch in April 2018 provided the option for early registration, however, all online gambling operators will be required, under the LCCP, to join the scheme in due course, with the provision coming into force one month after notification by the Gambling Commission.

The current primary legislation is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (implementing the 4th Anti-Money Laundering Directive (Fourth AMLD). The Fifth Anti-Money Laundering Directive will be transposed to national law no later than 20 January 2020 and provide additional regulation on matters including, but not limited to, increased levels of scrutiny required for transactions from high-risk countries and virtual currencies.

Money laundering offences are outlined in The Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 (TACT).

The Gambling Commission has also issued guidance for casinos, and separately for non-casinos, regarding their duties and responsibilities under the POCA 2002. The most recent edition was published January 2019. 

See 8.1 AML Legislation. The AML requirements are complex and cannot be adequately summarised here, particularly given the Gambling Commission’s ongoing focus and extensive casework in this area. Generally, the Gambling Commission expects licensees to comply fully with the terms of their licence, as relevant to AML and CTF, and pay close regard to the various guidance documents it issues. 

Compliance and enforcement activity continue to reveal that operators’ AML policies, procedures and controls are not fit for purpose and, in many cases, customers are allowed to gambling using the proceeds of criminal activity. The Gambling Commission has warned the industry that “a failure to digest [its] guidance and implement the legislative requirements applicable to Great Britain…must change, for these are not just regulatory matters but breaches of UK law. Those failing to learn these lessons will face further draconian action”.

The Advertising Standards Authority regulates UK advertising and, therefore, gambling advertising. However, it does not carry any enforcement powers. Instead, and as the LCCP has specific rules on advertising, any gambling advertising breaches by a licence holder may lead to enforcement action by the Gambling Commission. This includes seeking criminal prosecution, as breach of a licence condition is a criminal offence under the 2005 Act, Section 35.

“Advertising” is widely defined under the 2005 Act, Section 327, and generally encompasses any action which encourages one or more persons, either directly or through an agent, to engage in facilities for gambling. This covers most forms of advertising, including online content and emails to consumers.

See 9.2 Definition of Advertising. Advertising must be socially responsible and comply with the LCCP, in particular Ordinary Code Provision 5.1.6. The key LCCP advertising provisions are:

  • all advertising of gambling products and services should be undertaken in a socially responsible manner;
  • operators should comply with the CAP Code, the BCAP Code and the Industry Code;
  • adverts must not include a child or young person and no one who is or seems to be under 25 may be featured participating in gambling;
  • operators must satisfy themselves that their adverts are not misleading;
  • operators must comply with any provisions of the CAP and BCAP codes in relation to free bet and bonus offers, including by stating significant terms and directing customers to the full terms, which should be no further than one click away;
  • no adverts should appear on any webpage that provides advice or information on responsible gambling;
  • operators must not place adverts on websites providing unauthorised access to copyrighted content and must take all reasonable steps to ensure that third parties (eg, affiliates) do not do the same; and
  • operators must be able to terminate contracts with third parties who breach this provision.

The below codes are also applicable as follows:

  • all UK gambling advertising: Gambling Industry Code for Socially Responsible Advertising (Industry Code), administered by the Industry Group for Responsible Gambling (IGRG);
  • broadcast advertising: the UK Code of Broadcast Advertising (BCAP Code), administered by the ASA; and
  • non-broadcast advertising: the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code), administered by the ASA.

The ASA also provides the below additional guidance:

  • “Gambling advertising: responsibility and problem gambling” (February 2018); and
  • “Gambling advertising: protecting children and young people” (April 2019).

The Gambling Commission’s webpage “Advertising/marketing rules and regulations” provides an overview covering the various LCCP and industry regulations.

See 9.3 Key Legal, Regulatory and Licensing Provisions. In addition, since 1 November 2014, gambling operators wishing to advertise in the UK must hold a Gambling Commission operating licence pertaining to the type of activity advertised. Separately, the Gambling Commission confirmed that advertising-only licences will not be granted.

As of 1 August 2019, a voluntary "whistle to whistle" sports betting advertising ban initiated by the UK betting sector (including but not limited to a ban on all TV betting adverts during pre-watershed live sport) came into force.

The following constitute criminal offences and attract up to 51 weeks imprisonment and/or an unlimited fine:

  • inviting another person under 18 to gamble (Section 46, 2005 Act); and
  • advertising unlawful gambling (Section 330, 2005 Act)– excepting lottery promotion, advertised gambling is held to be unlawful if:
    1. the gambling advertised requires a licence, notice, permit or registration and, at the time of advertising, these arrangements have not been completed; or
    2. arrangements for the advertised gambling are not such as to ensure that any exceptions to the offence apply.

The Gambling Commission also has the power to take regulatory enforcement action for breaches, including seeking to prosecute offenders. In a May 2018 public statement, it was announced that online gambling operator, LeoVegas, was penalised by the Gambling Commission for advertising and marketing failings. The regulatory settlement included a GBP600,000 penalty, divestment of any funds received as a result of the failings and payment of the Gambling Commission’s investigatory costs.

Disclosure to the Gambling Commission is required within five working days (or as soon as possible) via a key event notification using the Gambling Commission’s eServices, an online self-serve portal.

Separately, a change of control application providing detailed information and the appropriate fee must be submitted to the Gambling Commission for assessment of the new controller(s)’s suitability to uphold the licensing objectives regarding the existing licence. The application or notification of licence surrender must be provided within five weeks of the change occurring otherwise the licence will be revoked.

Under the 2005 Act, Section 103, advance applications for persons or entities expected to become a controller can also be made prior to the change occurring.  Subject to the Gambling Commission's assessment of all necessary information, which they indicate typically takes around 12 weeks, the existing licence will either be granted continuance under the new controller(s) or it will be revoked.

A change of corporate control is defined in Section 102 of the 2005 Act and occurs when a person or legal entity becomes a new “controller” (as derived from the Financial Services and Markets Act 2000, Section 422). This is a complex definition, and needs to be considered in detail, but is generally broken down as:

  • 10% or more shares in the licensee, as filtered by the corporate layers;
  • 10% or more voting power;
  • 10% or more of the rights to profits/dividends; or
  • the ability to exercise significant control over management of the licensee.

Where there is a non-alignment, a cumulative assessment must be made.

The same requirements apply as there are no exemptions for passive investors.

Under the 2005 Act, Part 2, the Gambling Commission has the power to investigate and prosecute offences directly. Its regulatory powers also include calling licences for review and initiating investigations in the following circumstances:

  • to establish whether its conditions are being complied with;
  • where it fears a licensee has been convicted of a relevant criminal offence;
  • where it considers a licensee to be unsuitable to continue holding a licence; and
  • generally, where a review is deemed appropriate.

The Commissions sanctions are:

  • issuing a warning to a licence holder;
  • attaching an additional condition to a licence;
  • removing or amending a condition to a licence;
  • suspending a licence;
  • revoking a licence; and
  • imposing a financial penalty following breach of a licence condition.

The Gambling Commission also has the power to commence a criminal prosecution.

The Gambling Commission’s approach to enforcement is currently set out in three key documents. They are:

  • the Statement of principles for licensing and regulation;
  • the Licensing, compliance and enforcement, policy statement; and
  • the Statement of principles for determining financial penalties.

Contravention of the 2005 Act, including the LCCP (issued under the 2005 Act) results in criminal liability. In August 2017, the Gambling Commission set out its “new vision” for its enforcement, emphasising its focus on putting consumers first. The key changes we proposed included:

  • putting all regulatory tools, including licence review (both of the operator and personal management licences), on an equal footing by removing the then current bias in favour of settlement;
  • introducing higher penalties for breach, particularly where systemic and repeated failings were seen; and
  • using time-limited discounts to create better incentives for early settlement.

In recent years, the Gambling Commission has garnered a reputation for taking enforcement against its licensees. In certain cases, a “regulatory settlement” is reached meaning that it is not a sanction and stops short of a formal licence review. This is subject to the Gambling Commission’s discretion and will only be considered if various factors are met, including:

  • open and transparent in its dealings with the Commission;
  • able to demonstrate that they have insight into apparent failings;
  • a timely disclosure of material facts;
  • preparedness to agree to the publication of a public statement setting out the failings in order to deter future non-compliance by others and/or share learning;
  • preparedness to make a divestment of any amount accrued as a result of the failing;
  • preparedness to follow advice and implement procedures to ensure there is no repetition of failings;
  • preparedness to contribute to the direct costs to the Commission of investigating the matter in respect of which regulatory settlement is sought; and
  • preparedness to volunteer a payment in lieu of the financial penalty the Commission might otherwise impose for breach of a licence condition.

The regulatory settlements and licence reviews are detailed in numerous public decisions or public statements issued on the Gambling Commission’s website and usually include a financial penalty (a record penalty package of over GBP7.8 million was issued to 888 UK Limited in August 2017). 

The Gambling Commission is responsible for issuing and enforcing financial penalties regarding any LCCP breaches. Any contravention of the 2005 Act itself is a criminal offence and will trigger a potentially unlimited fine, enforced by the courts, and imprisonment up to 51 weeks (see 3.6 Penalties for Unlawful Gambling and 9.5 Sanctions/Penalties).

It is worth noting that any payment made as part of a regulatory settlement is not a financial penalty (as it is not a sanction) and is a payment made in lieu of a financial penalty. These are treated differently by the Gambling Commission and could, theoretically, be enforced by recommencing the licence review.

There have been no additional significant updates in this sector since the Gambling Commission’s consideration in 2016. See the Gambling Commission’s webpage on “Social gaming” and their March 2017 position paper “Virtual currencies, eSports and social gaming” for further information.

See 12.1 Social Gaming.

There has been an increase in bookmakers offering fantasy sports in the UK. The Gambling Commission’s position remains that any fantasy leagues run in the course of business may require a licence (pool betting) where prize values are determined by the number of paying entrants. See the Gambling Commission’s webpage “Fantasy football and gambling” for additional guidance. 

This is not applicable in our jurisdiction.

Although blockchain-related gambling is not currently regulated, the Gambling Commission has responded to stakeholder interest with guidance on its website regarding “Blockchain technology and crypto-assets”. The guidance focuses, in particular, on the importance of source of funding, third-party social responsibility and, for existing licensees', general notification requirements regarding funding and payment.

See 1.1 Current Outlook.

The following rates apply for the tax year 2018-2019:

Bingo:

  • 10% of bingo promotion profits.

Betting:

  • 15% of ''net stake receipts'' for fixed odds bets, totalisator bets on horse or dog races and bets taken on betting exchanges;
  • 3% of ''net stake receipts'' for financial spread bets;
  • 10% of ''net stake receipts'' for all other spread bets; and
  • 15% of bookmaker's profits from bets that are not at fixed-odds and are not on horse or dog racing.

Casino ("gaming duty" on or after 1 April 2015):

  • 15% of gross gaming yield for the first GBP2,347,500;
  • 20% of gross gaming yield for the next GBP1,618,000;
  • 30% of gross gaming yield for the next GBP2,833,500;
  • 40% of gross gaming yield for the next GBP5,981,500; and
  • 50% of gross gaming yield for the remainder.

Lottery:

  • 12% of the price paid or payable on taking a ticket or chance in a lottery.

Machine Games:

  • 5% of net takings from dutiable machine games with a maximum cost to play not more than GBP0.20 and a maximum cash prize not more than GBP10;
  • 20% of net takings from dutiable machine games with a maximum cost to play not less than GBP0.21 and not more than GBP5 and a maximum cash prize more than GBP11; and
  • 25% of net takings from all other dutiable machine games with a maximum cost to play of more than GBP5.

Remote Gaming Duty (as of 1 April 2019):

  • 21% of Remote gaming duty, gross gaming revenues on all transactions with customers whose usual place of residence is in the UK.

Please note, the majority of gambling activities are exempt from VAT.

Harris Hagan

6 Snow Hill
London
EC1A 2AY
United Kingdom

020 7002 7636

info@harrishagan.com www.harrishagan.com
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Law and Practice

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Harris Hagan is currently the only specialist gambling law firm in the City of London. The firm has an international reputation as trusted advisers to many of the world’s largest gambling and leisure operators in all areas of land-based and online gambling, liquor and entertainment. The firm’s outstanding reputation has been founded on unparalleled legal experience, knowledge and an in-depth commercial understanding of the industry. Harris Hagan has also advised overseas regulatory authorities and governments on the regulation of gambling and assisted with draft legislation. The firm is noted for its pre-eminence in advising on highly complex regulatory issues and for advising on a wide range of commercial contracts.

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