Consultation gives an insight into the future of UK online gambling

Last week’s launch of the UK Gambling Commission‘s consultative phase on regulations for the coming secondary licensing and point-of-consumption taxation gives an interesting insight into the shape of the on line gambling industry post-December 2014.

From a player perspective, the protection of player deposits is an imperative, and this has clearly occupied the Commission’s thoughts following various operator debacles in which players were left prejudiced despite provisions in some offshore licensing jurisdictions that were clearly not policed properly.

The Commission acknowledges that in the past it has taken a caveat emptor approach for all forms of funds held with operators, and currently places no specific burden on operators to protect customer funds in the event of insolvency, but it has now addressed this area.

“A change in approach for remote gambling operators particularly may be appropriate for several reasons,” the document explains, noting that:  “The Commission currently regulates approximately 15 percent of the UK remote gambling consumer market, because some operators based offshore are permitted to offer gambling to UK customers under current legislation.

“The total value of funds held in customer accounts by all those operators which we regulated averaged GBP 162.32 million,” the Commission explains, acknowledging that this is likely to grow substantially under the new secondary licensing and taxation regime.

The Commission appears to be considering several different options for preventing operators from using player deposits as cash flow, including:

*     Segregated bank accounts – as the lowest standard of protection.
*     Quistlose Trusts
*     Insurance Against Insolvency
*     Independent Trust Accounts
*     Mandatory Reserves Held by Regulator
*     Possibility of restricting segregation of accounts to specific higher risk gambling genres i.e. poker.

Other issues the Commission places on the table for discussion include requirements for operators to disclose an assessment of the level of protection of customer funds they offer to their customers, under a standard rating system, and how prominently this information should be displayed.

Another stand-out requirement concerns operator transparency – long a demand from the player community. Under the Commission proposals, operators will have to publicly and clearly identify (on its website) the company holding the licence, the number on the licence and furnish a link to the Commission’s website.

The days of operators ignoring player complaints may also be over, along with the practise some operators adopted of passing on the costs of mediating such complaints through third parties. In terms of the new regulations operators will have to include in their terms and conditions full details of their dispute resolution structure, and the identity of the manager responsible for it.

Providers of networks and software to online operators in the British market will also have increased and formalised responsibilities.

Software providers will be required to hold special ‘remote gambling software’ licenses from the Commission, and so will network providers, who will in addition be required to scrutinise members of their network to ensure they have the requisite UK licensing before accessing Brit punters – a requirement that may be difficult to implement.

UK-licensed networks will also be required to more actively keep an eye on their member skins regarding financial status and compliance with EU anti-money laundering precautions and KYC procedures.

Marketing affiliates promoting online gambling venues in the UK market have also clearly been considered, with provisions that require they comply with those regulations that are relevant to their activity on behalf of operators, or as the Commission puts it:
“…as if they were bound by the same licence conditions and subject to the same code of practice.”

All-in-all these measures should considerably enhance the protection levels of players, which the UK government has claimed is its main priority… but there’s ample opportunity yet to comment on the proposals, with a deadline for submissions of December 4 this year.