A recent update of the UK Gambling Commission’s (UKGC) FAQ on the new UK laws demands that licensed operators justify the legality of their operations in countries where they do not hold a gaming license.
Natesh Ramasamy, Creative Commons Attribution 2.0 License

A recent update of the UK Gambling Commission’s (UKGC) FAQ on the new UK laws demands that licensed operators justify the legality of their operations in countries where they do not hold a gaming license.

If they get more than 3% of their total revenues from that source, they have to provide the UKGC with the legal rationale for doing business in that jurisdiction.

Operators must also report on their activity in other jurisdictions that they are “actively targeting in order to grow their business,” even if it constitutes less than 3% of their revenues.

Non-UK Operations Will Be Considered in Integrity Test

In a section titled “How does the Commission assess the integrity of licence applicants?,” the FAQ explains that the UKGC “will also look at the manner by which the applicant has conducted any previous business with specific regard to the provision of gambling in other jurisdictions and in particular any operations in black or grey markets.”

In the following section the UKGC explains how it determines whether an operator is “actively targeting” markets, and therefore, whether operators must justify the legal basis for their activity in those markets.

Reports must be made if, for example, a “home page is directed towards a jurisdiction and is in that jurisdiction’s language and/or that jurisdiction’s currency can be chosen and/or payment methods available include those only available in that jurisdiction and/or the homepage has a customer service for that jurisdiction or material aimed at particular countries.”

The impact could be severe. Almost all the large operators offer online poker without a local license in some countries. Even if less than 3% of their revenues come from one of these operations, they still have to demonstrate to the UKGC that they have procedures in place to comply with local laws.

The UKGC’s provision will in effect monitor operators’ compliance not just with UK laws, but with the law in all countries where the operator does business. The implication is that any evidence of “bad actor” behavior will put an operator’s UK license at risk.

Competing Interpretations of the Law

In particular, if the UKGC takes a strict interpretation of its stance, then arguments that local laws are in breach of EU treaties, may not be sufficient. For example, in bwin.party’s latest financial report, it repeated its view that the Greek blacklist—where its main domains are listed—and other restrictions were unlawful.

The FAQ explains that the UKGC understands the issue, pointing out that “it is perfectly possible for different people to come to different views on the issue of the risks of providing facilities for gambling in a given jurisdiction.” The UKGC is interested to know “that the views taken rest on reasonable assumptions and a coherent rationale.”

Light Touch Regulatory Philosophy Adds Legal Risk

The difficulty for operators arises from the underlying philosophy of UK regulation. In the US, regulatory compliance is more black and white. In general, if the operator follows the prescribed steps, then they are compliant.

Under the continental European model, such as that in France, operators get a level of regulatory support that amounts to consultancy, but in the UK, operators are expected to make their own way, and comply with the spirit, rather than just the letter of the law.

UKGC Chairman Philip Graf has identified this as a strength of the British system, but from an operator’s perspective the UK process involves additional legal risk. Operators may be put in a position where they have to balance the value of the UK market against the value of continuing operations in countries where the law is unclear.

Even though the FAQ has been written to clear up misunderstandings, how the UKGC will deal with the issue of operators who serve customers in markets where the law is disputable remains unclear.