New UK “secondary licensing” for offshore bookies?

Is the UK government contemplating a ‘secondary licensing’ scheme to regulate offshore bookies? It’s a question the industry is asking following a review of the migration offshore by many UK bookies in an attempt to remain competitive in low tax jurisdictions.

The Guardian newspaper carried a long article on the issue this week, reporting that the UK government could soon act to regulate the increasing number of online bookmakers based offshore.

Apparently the government is planning to recommend a new licensing regime for offshore bookmakers, justifying it as a move to ensure they provide information about suspicious betting patterns.

In April 2009 the government commissioned a study on how regulatory control could be established, notably including how it could ensure that ‘fair contributions’ towards the cost of such a secondary regulation could be made by UK companies operating offshore. It is known that the subject of contributions to British horseracing and other sports is also a goal of non-government sports bodies in the UK.

The results of the study are to be released early 2010 by the Department of Culture, Media and Sport and the UK Gambling Commission, and are said to contain recommendations for a ‘secondary licensing’ initiative, although it is believed that the proposal does not go so far as compelling offshore operators to pay horseracing levies.

“Senior racing industry insiders say they have been reassured by the sports minister, Gerry Sutcliffe, that the move will not close off the debate about the future of the levy,” the Guardian report discloses. “When he launched the review he said “getting a fairer deal for UK operators” was one of his “top priorities”.

The Guardian claims that the move offshore by the online operations of William Hill and Ladbrokes this year has cost racing an estimated GBP 4.2 million, and the overall take from the levy on bookmakers’ gross profits was GBP 93 million in 2008-09, down 20 percent on the previous year.

Under the new system, overseas-based bookmakers would additionally have to be licensed in Britain. That would bring them under the aegis of the Gambling Act, and force them to share information on illicit gambling.

“The mechanism could be a requirement to have a co.uk website address, or a head office based in the UK and to pay a licensing fee to the Gambling Commission. A failure to comply could lead to a ban from advertising in Britain,” the newspaper reports.

Foreign-based bookmakers interviewed by the Guardian said that such measures would be unnecessary and unworkable, potentially cutting off a valuable flow of advertising revenue into Britain and starving sports of sponsorship. They say they are happy to share information on suspect betting patterns and most claim to do so already.

The Remote Gambling Association, which represents the biggest players in the area, appeared to take a more flexible approach, saying it was ready to support the concept of dual licensing, providing a workable solution could be found and it was not seen as a precursor to the government trying to claw back tax revenues or for sports to progress their arguments for a “betting right”.

Clive Hawkswood, chief executive of the RGA, said a formal consultation would be required on any new licensing measures but indicated his members would be prepared to listen to the proposals. The likely six-figure licensing fee, to cover administration costs, would be unlikely to prove a stumbling block, he said.

“The reason our companies are offshore is not because of the Gambling Commission, but because of tax. If they wanted to go for this dual licensing approach, we’d have to sit down and work through the detail. But none of that is undo-able,” he said.

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