This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
The Gambling Commission has responded to a number of industry enquiries about whether a product should be classified as remote betting or remote gaming by issuing an advice note. Whilst the distinction is less important now that both activities can be provided lawfully under licence from the UK, it remains of significance because the two activities require different operating licences in relation to which different fees and regulatory requirements apply.
In order to assist operators in understanding what licence they require, the Commission has formulated two tests, as follows:
Is the product a virtual version of a known casino game, a derivative of one or designed to resemble one?
If the answer is yes then the Commission considers that the product is gaming and a remote casino operating licence is required.
If the answer is no then Test 2 becomes relevant.
Does the product meet the following criteria?
1. Is it a virtual game which is not a sport?
2. Do the customers participate in or bet on the outcome of the game?
3. Is there an element of chance involved? Is the outcome determined by anything other than skill?
4. Is there a prize?
If the answer to all four questions is yes then the Commission considers that the product is gaming and a remote casino licence is required.
This guidance clarifies that holders of remote betting licences cannot, without also obtaining a remote casino licence, offer games which look like (by way of example) roulette, on the old FOBT argument that customers are simply placing a fixed odds bet on a particular colour or number being thrown up by a random number generator. This is consistent with the reclassification of FOBTs as gaming machines.
However, the guidance is perhaps confusing in relation to offerings such as virtual horse racing where a prize is available for winners. Applying question 1 of Test 2, is virtual horse racing of itself a sport? Assuming not (on the basis that it is not an activity that exists of its own accord on which people then bet), then this suggests that any form of virtual horseracing should be regulated as gaming not betting.
The Commission's second question is poorly phrased. The Gambling Act 2005 makes a clear distinction between playing a game (a characteristic of gaming but not betting), and betting on the outcome of a game (characteristically betting). However, question 2 of Test 2 seems to combine them. In light of this, it seems that the answer to question 2 of Test 2 will always be "yes", with the result that the requirement to actually "play" a game of chance falls away.
The Commission's third question in Test 2 is also rather confusing. In addressing the difference between a game of chance and a game of skill, the Commission understandably echoes the Gambling Act 2005, which provides that any game which involves an "element of chance" is a game of chance, even where the chance "can be eliminated by superlative skill". However, under the Act this is relevant to determining whether or not a game is gambling at all (an issue that itself is in need of clarification) and not the difference between betting and gaming. A "bet" is not defined in the legislation. Question 3 also comprises two parts, which is of itself rather confusing, as whilst this approach may distinguish between betting and gaming in most circumstances, it seems likely that some products will still fall into a grey area. An example of this might be those products which do have an element of chance but in relation to which it is questionable whether or not the outcome is really determined by anything other than skill.
Whilst clearly the line between betting and gaming has to be drawn somewhere, in the absence of any further guidance from the Commission, we will most likely have to wait until the issue makes it to the Courts to get clarity – a point that is itself stressed in the Commission's advice.