AN OVERVIEW OF THE UPCOMING CHANGES IN UK GAMING LICENSING & TAX REGULATION

Presentation bySteve Donoughue

WHO AM I?

Steve Donoughue – management and political consultant specialising in the gambling industry since 1995

www. Gamblingconsultant.co.uk Secretariat to the Parliamentary All Party

Betting & Gaming Group Special Adviser to the Culture, Media & Sport

Select Committee inquiry into gambling Clients in every sector, channel of gambling

industry

A QUICK HISTORY LESSON

1993 First (mostly US facing) internet gambling sites appear in Caribbean – the ‘wild west’

1993 National Lottery Act etc. 1994/5 Victor Chandler uses Caribbean jurisdictions to offer tax-free

telephone betting to Asian clients 1996 Victor Chandler gets telephone betting licence in Gibraltar – many

big bookmakers start moving their telephone betting offshore 1997 Alderney issues telephone betting licences 1997 Gaming Board for Great Britain argues need for review of gambling

laws and need to accommodate internet gambling 1998 Sportingbet gets internet betting licence on Alderney 2000 Budd Review set up 2001 UK changes betting tax from 9% on stake to 15% GPT in attempt

to woo bookmakers back 2001 Budd review recommends National Licensing of internet gambling

MORE HISTORY (KEEP AWAKE AT THE BACK)

Budd recommends: that an on-line gambling operator seeking a licence from the

Gambling Commission should, at the minimum: be registered as a British company locate its server in Great Britain and use a UK web address for its gambling site (recommendation no.137)

that on-line gaming should be permitted (recommendation no. 139) that the Gambling Commission establishes a portal on its website,

listing licensed online gambling providers. In addition, regulated sites should display the Gambling Commission’s kitemark. It should be an offence for an operator to claim falsely that a site is licensed by the Gambling Commission, or to make unauthorised use of the kitemark (recommendation no. 149)

that only on-line gambling sites that are licensed by the Gambling Commission should be permitted to advertise in Great Britain

(recommendation no. 150)

NEARLY THERE

2001 Isle of Man legalises online gambling 2002 Govt. White Paper ‘A Safe Bet for Success’ rejects idea of national

licensing on basis that it ignores third party servers 2003 Pre-legislative Scrutiny Committee set up to look at Gambling Bill 2003 Draft Gambling Bill published, main focus is on casinos. For

remote gambling: two key concepts put forward are that the gambling takes place where the server was located (and thus that is where it should be regulated) and that with UK regulation, operators and customers would be attracted by it stringency, ‘The draft Bill does not prevent British consumers from gambling with offshore operators, but it would be surprising if they felt the need to do so once the new regime is in place. The Government’s firm belief is that this newest sector of the British gambling industry can establish itself as a world leader’

2004 Malta becomes first EU State to formally licence online gambling

JUST A LITTLE BIT 2004 Pre-leg scrutiny committee publishes its report: Recommendation 115: The regulation of remote gambling operators

should not be delayed. The licensing regime proposed in the draft Bill should be introduced at the earliest opportunity and preparations for the licensing of remote gambling operators should commence as soon as possible

Recommendation 124: Recommend that the Bill should instead contain a general prohibition on advertisements from non-EEA operators but that the Gambling Commission should be able to designate non-EEA territories as permitted if it is satisfied that the standards of regulation in those territories are adequate.

DCMS realise could not stop offshore targeting UK, so wanted to ensure consumer protection, White List franchises out high standards. Tessa Jowell admits they ran out of time in finding an elegant solution

Gambling Bill gets first reading in House in October 2004 and Second Reading in November 2004

Gambling Bill gets Royal Assent 7th April 2005

JUST A LITTLE BIT MORE Gambling Commission takes over from Gaming Board 1st

October 2005 October 2006 Ascot Racecourse Online Gambling Summit –

attempt at shared regulatory principles for all 33 countries. March 2007 Remote Gambling Tax set at 15% - According to

Caborn HMT is dismissive of having an online gambling industry onshore

August 2007 Isle of Man & Alderney put on White List – Antigua rejected

Gambling Act 2005 comes into force on 1st September 2007 November 2008 DCMS added Antigua to its list of approved

jurisdictions after “a reconsideration of Antigua’s application following further representations made to the Secretary of State.”

Rumours are that Antigua is licensed because of WTO deal, friendship between chief regulators and that White List regulations so badly written that Antigua could not be refused (rumour that current suspension of White List is maintained because some ‘dodgy’ jurisdictions have realised this and have applied)

YOU KNOW WHAT I’M LOOKING FOR

The Gambling Commission does not physically visit any of the jurisdictions on the White List

February 2009, Parliament’s Third Delegated Legislation Committee considering the Statutory Instruments which added Antigua, to the White List. Both the Lib Dem and Conservative Spokesmen on Gambling argued that the present system for checking if White Listed jurisdictions maintained strict enough controls on their licensees weren’t good enough

March 2009 Westminster Hall Debate on Online Gambling where more opposition MPs focussed on offshore operators not paying their share of funding for research and the Schaldemose inspired idea that internet gambling was destroying the very integrity of sport

April 2009 Gambling Commission closes the White List as it assists DCMS with an internal review into online gambling regulation

7th January 2010 Ministerial Statement on Remote Gambling Policy and announcement of consultation on new licensing regime for online gambling

March 2010 Public consultation starts

OOH AHH!

Government outlines need for change based on: UK punters not getting consumer protection No suspicious betting activity reporting No contribution to gambling R,E&T Operators moving offshore cause operators to move offshore (?) Differences in standards and software testing No organised crime and sports integrity reporting No covering of Commission’s costs

Govt. proposes national licensing with quasi White List June 2010 Consultation closes 14th July 2011 Ministerial Statement on Remote Gambling Policy

proposes national licensing and phasing out of White List 18th July 2011 Economic Secretary to the Treasury, Justine Greening,

announced review of remote gambling tax. Consultation closed 30/11/11

OPPOSITION

Offshore jurisdictions opposed as it severely damages their business model

Number of operators have expressed their concerns at additional bureaucracy and revenue raising

Make point that reasons for change are rubbish – which is valid Argue that national licensing will create additional cost &

bureaucracy which will force marginal operators into grey market – not much evidence of grey market as consumer choice mostly based on brand and these not marginal players

Point out that Gambling Commission has little experience of online regulation and doesn’t have the capability to handle 400 licensees – which is certainly true

Obvious question is how will it be enforced when operators offshore?

BUT KEY TO ALL OF IT IS THE TAX RATE

WHEN AND IF?

Can be pretty much certain that will happen as DCMS has tried to get it in to Queen’s Speech (May 2012)

Reshuffle in July 2012? – Will Hunt stay (tipped for promotion)? Will Penrose stay (seen as indecisive)? Possible 2010 intake replacement

Olympics in July – success of which will determine DCMS future and ability to get legislation

Could be in 2012/13 session as 2013/14 tabled for big Communications Bill and only get 1 Bill per year. 2014/15 is Election

Persistent rumours that DCMS to be disbanded after Olympics Treasury support will be key - this is a revenue raising exercise after all Still opportunity to kick it in to the long grass it with concerted lobbying

showing how it will a) not raise enough and b) be regulatory minefield (need to show Gambling Commission is incapable)

THANK YOU

Please go to my website www.gamblingconsultant.co.uk

Now over to Peter Wilson

Who will discuss what the new lawcould look like