Despite the relative permissiveness of the UK government towards online and mobile gambling in all forms, especially when compared to markets such as Australia, Canada, the US or New Zealand, there are nevertheless strict rules, regulations and guidelines operators must follow for access to the lucrative market. These regulations tend to have one of three purposes: to protect the public, to prevent monopolies and to ensure the UK government is compensated by gambling operations in Britain.
In terms of legislation that directly affects remote gambling in the UK, there are two landmark laws which govern most activity: the 2005 Gambling Act and the 2014 Gambling Act. Together, these laws regulate all aspects of the online and mobile casino market, from advertising and game development to fairness and taxation.
While the 2005 gambling act is relevant for remote gambling, its focus is broader and relates to all gambling operations, whether land-based or remote. When the bill was first created, it had three main stated aims: to ensure that gambling wasn’t used for criminal activity or to support criminal activity or disorder, to create standards of fairness and ensure gambling business operate in an open and transparent way, and to protect children and vulnerable people from coming to harm or being exploited through gambling.
Despite being the most comprehensive and broad ranging pieces of gambling legislation to date, the 2005 bill was enacted before remote gambling had become such a large force as it is today. It quickly became clear that not enough previsions were in place for the growing online gambling market, leading to the need for the creation of the later 2014 Gambling Act.
Though not exclusively focused on remote gambling, the 2014 bill created many more rules directed at online and mobile operators. The main areas that the bill made changes were on the promotion of gambling (what gambling could be advertised, when, when and how it was to be done, and to whom), the licensing of remote operators and the taxation of earning of foreign companies from UK gamblers.
The two major points which influenced the way the industry was structured were the new requirement for all companies operating in the UK or creating gaming content produced in the UK to hold a UK Gambling Commission license (where previously a number of other, foreign licenses were tolerated), and the requirement for all companies based overseas to pay a 15% tax levied on profit made from UK gambling operations – the Place of Consumption Tax.
For the majority of operators, the most significant part of the 2014 Gambling Act was the implementation of the 15% Place of Consumption Tax. Despite the UK being one of the most lucrative markets for remote gambling, prior to the Gambling Act the vast majority of companies with UK facing gambling operations were based outside the UK, namely in territories with lower corporate tax rates.
With these companies being based overseas, not only were they able to make much higher profit margins than if they were in the UK, but there was a net loss to the UK economy as a steady flow of money left the UK untaxed. The introduction of the 15% tariff and requirement for gambling companies operating in the UK to be licensed in the country was, then, an attempt to stem this flow or at least to ensure that some of the profits remained in the UK.
In many ways this proved to be successful, as the UK government now makes more tax revenue from remote gambling than ever before. Yet, there were some unexpected side effects which in some ways hurt the industry.
In the short term, a number of operators simply quit the UK market altogether, choosing to focus their efforts on less regulated markets. In the longer term, some smaller operators allowed larger entities to purchase them in the face of higher operating costs. This has meant that competition within the industry has seen a real decline since the tax’s introduction, with many commentators ringing alarm bells about the creation of monopolies.
The UK Gambling Commission is the governmental body charged with ensuring that all gambling activity, and the promotion of such activity, complies with UK law. Before an operator can launch a business in the UK, they must first attain a license from the UK Gambling Commission, meaning that every element of their operation will be open to scrutiny from the commission and they’ll be subject to the 15% Place of Consumption Tax.
Some of the UK Gambling Commission’s main focuses include reviewing the promotional material put out by operators and their affiliates to ensure they are honest, conform to regulations and don’t intentionally target problem gamblers or those under 18. The commission is also responsible for regulating the gaming content featured on remote gambling sites and requires developers of such games to hold a license also, which confirms their products meet the standards of fairness set by the UK government.