Gambling Commission/DCMS Guidance and Consultation

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Since our last update, the Gambling Commission and DCMS have issued further guidance and consultation in a number of areas. Highlights include a joint consultation on licence fees and guidance on the problematic definition of Remote Gambling Equipment, which will be of particular interest to operators of affiliate and white label sites.

Joint Consultation Underway on Fees

The Gambling Commission is currently holding a joint consultation exercise with the Department for Culture, Media and Sport (DCMS) regarding licensing fees. The fee proposals are available for download on the DCMS website (click here); the consultation lasts for 12 weeks and is due to close on Monday 2 June 2008. Industry representatives and other interested parties have the opportunity to express their views about the proposals during this time. Following the consultation, the new fee levels are scheduled to apply to licence holders from 1 August 2008.

The Gambling Act 2005 allows DCMS to set fees to cover the Gambling Commission’s operating costs, so that the cost of providing regulation does not fall on the taxpayer. The review has been undertaken in order to build on the experience of the Commission since it was set up, regarding the licensing, compliance and enforcement work required. The consultation seeks to review the assumptions on which the fees were based, and to make changes where there are 'good grounds' that these assumptions were inaccurate. As the compliance and enforcement arrangements have only been in place since September 2007, the proposal states that, in general, the changes proposed are minor. However, the proposal does also include a more radical approach to setting some remote licence fees.

The Commission has found that more operators applied for remote licences than expected and that the range of activities was also greater than anticipated. Therefore, the following changes in relation to licence fees for remote gambling are proposed:

• to reset the upper boundary for gross sales and annual proceeds, for type G categories at £5m (currently £6m);
• to extend the fee scales for remote casino, bingo, general betting, pool betting and betting at the top of the range; by adding two additional bands (Band I for gross gambling yield from £200m-£500m, and J for over £500m);
• to introduce a different approach to setting fees for licensing operators which offer remote gambling based on the use of random number generators. The fees would be calculated based on the aggregated gross gaming yield (GGY) derived from remote casino, bingo and betting on virtual events, rather than on the individual GGY for each activity. A fixed rate licence fee would be added for each additional activity to cover the additional complexity surrounding a combined licence;
• to create a new remote betting intermediary: trading room only licence for the use of dedicated trading rooms in order to connect to other betting operators. As the majority of the risk does not fall on the provider of the trading room, the licence would be 'based on lower compliance effort assumptions';
• to merge the two types of ancillary licence for hand held terminals, so that one type of licence can be obtained for "for use only on single premises already licensed for gambling" (i.e. bingo clubs, casinos and arcades); and
• to create an additional category of remote linked licences for gambling software and gaming machine technical: software remote licences of up to £50,000. This category is designed to cover non-remote operators which require a remote licence for a small element of their activities, the fees will reflect the lower level of compliance required to issue these licences.

Advice on Remote Gambling Equipment Issued

In March, the Gambling Commission issued an advice note on its interpretation of the elements of a gambling system which meet the definition of remote gambling equipment set out in the Gambling Act 2005 (click here). The Commission provides advice, and specific examples regarding its interpretation of whether equipment is used in the provision of facilities for gambling.

The classification of a piece of equipment as ‘remote gambling equipment’ is determined by the use of the installed components of that equipment 'in the provision of facilities for gambling'. The advice therefore includes a list of components (including software) which meet the definition set out in Section 36(4) of the Gambling Act 2005, as follows:

• Virtual Event and game 'Pages';
• Virtual Event Controller;
• Settling;
• Random Number Generator;
• Gambling Transaction Record; and
• Virtual Event State.

The Commission clarifies the distinction between equipment used for gambling, as opposed to equipment used to store or use information for marketing. Only 'core' equipment used to offer, operate and settle the gamble would be classified as gambling equipment. This narrow interpretation by the Commission means that affiliate sites and companies which enter into white label agreements with gambling operators will not require operating licences themselves, provided that the information which they store in Great Britain is adequately separated from that which relates specifically to an individual's participation in gambling.

Further, the advice states that equipment used for integrity testing, money laundering compliance and monitoring, complaints handling and responsible gambling analysis would not be classified as gambling equipment.

The Commission clarifies that download servers used by operators to deploy "client application" software to end users would not be considered as being 'used in the provision of facilities for gambling' as long as the equipment is not involved once the gambling actually starts.

Finally the advice looks at business continuity arrangements, and concludes that standby and disaster recovery equipment is intended to be used by an operator as a replacement for a live gambling system, and would therefore require a gambling licence if situated in the UK. On the contrary, equipment used to store back-up operational data, will not require a licence as long as the equipment is not itself used as part of the ‘live’ gambling system.

Advice issued on gaming in clubs and alcohol licensed premises

The Commission has issued revised and updated advice to licensing authorities on poker games, bingo and other equal chance gaming in clubs and alcohol licensed premises (click here). This advice includes a summary table of gaming entitlements for different types of clubs and pubs, including limits on stakes and prizes, maximum participation fees and equal chance gaming.

Code of Practice on Large and Small Casinos Published

On 26 February 2008, the Secretary of State for DCMS issued an updated Code of Practice for Large and Small Casinos (click here). The Code of Practice sets out the procedure to be followed and the matters to be taken into account by a licensing authority in making determinations relating to Applications for Casino Premises Licences (as required by paragraphs 4 and 5 of Schedule 9 to the Gambling Act 2005).

The Gambling Act 2005 (Advertising of Foreign Gambling) (Amendment) Regulations 2008

Following the DCMS decision to add Tasmania to the White List, the Gambling Act 2005 (Advertising of Foreign Gambling) (Amendment) Regulations 2008 were passed and came into force on 31 January 2007. These regulations amend the Gambling Act 2005 (Advertising of Foreign Gambling) Regulations 2007 to add Tasmania to the White List. The White-List countries are jurisdictions from which locally-licensed operators can lawfully advertise gambling in the UK under the Gambling Act 2005, as if they were licensed within the EEA or Gibraltar.

As of March 2008, the White-List comprises:

• Alderney;
• Isle of Man; and
• Tasmania.