The concept of remote gaming is contained in the Gambling Act 2005 which came fully into force on 1 September 2007. Previously it was generally the Gaming Act 1968 which was looked at when advising on gaming law. The 1968 Act and associated regulations contemplated a restrictive regime where gaming was seen as a land based (rather than an online) activity where players would gather in defined places (eg betting shops) in order to gamble.
Technological developments meant that the old Act was not suited to dealing with the complex issues that arose with gambling. The Act expressly repeals the Gaming Act 1968, the Betting, Gaming and Lotteries Act 1965 and the Lotteries and Amusements Act 1976. However, the Act does not apply to the National Lottery (regulated by the National Lotteries Act 1993) or spread betting (regulated by the Financial Services and Markets Act 2000).
It is important to appreciate that the gambling industry is made up of many organisations involved in gaming, betting and lotteries. Hence, the Act not only applies to traditional providers of gambling activities (such as bookmakers and online gaming providers) but also other organisations (such as advertisers and ad agencies, publishers, TV companies, banks, mobile telephone companies and software companies) that might be involved in gambling-related activities.
Technology lawyers may come across lots of agreements relating to online gaming and so will need to be aware of the fundamental features of the Act when assisting their clients. Here are some of the key points of which they need to be aware.
1. The Objectives
The central objectives of the Act are to:
• protect children and other vulnerable people from being harmed or exploited by gambling
• prevent gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime
• ensure that gambling is conducted in a fair and open way.
The Act introduces a unified regulator for gambling in Great Britain, the Gambling Commission (in place of the Gaming Board for Great Britain), and a new licensing regime for commercial gambling to be conducted by the Commission or by licensing authorities depending upon the matter being licensed. The responsibility for granting gaming and betting permissions (which previously lay with magistrates) will be shared between licensing authorities and the Commission.
In general, the licensing authorities will have powers to license gambling premises within their area whereas the Commission will regulate gaming, betting and certain lotteries.
2. Gambling
The Act deals for the first time with the generic concept of gambling, of which gaming, betting and lotteries are specified kinds.
Gaming
Gaming is playing a game of chance for a prize. A game of chance includes a game that involves both an element of chance and an element of skill, a game that involves an element of chance that can be eliminated by superlative skill and a game that is presented as involving an element of chance but does not include a sport.
Betting
Betting means making or accepting a bet on (a) the outcome of a race, competition or other event or process; (b) the likelihood of anything occurring or not occurring; or (c) whether anything is or is not true.
Lotteries
Lotteries remain illegal under the Act (except for small-scale, private members, societies and local authority lotteries) although the Act does not apply to the National Lottery or spread betting. A simple lottery is if (a) a person is required to pay in order to participate in an arrangement; (b) in the course of an arrangement one or more prizes are allocated to one or more members of a class; (c) the prizes are allocated by a process which relies wholly on chance. A complex lottery occurs in a similar way to a simple lottery except that prizes are allocated by a series of processes, the first of which relies wholly on chance.
This is particularly relevant to certain competitions, such as fairly easy online or television competitions. Here the providers of such competitions will need to ensure that these competitions do not fall within the scope of lotteries.
3. Remote Gambling
The Act covers remote gambling – gambling where people are participating by means of ‘remote communication’. The types of remote communication by which people may participate in remote gambling are the Internet, telephone and television. It also includes ‘any other kind of electronic or other technology for facilitating communication’ which includes mobile phones and will allow the legislation to keep up with any other newly introduced communications.
Section 33 of the Act states that a person commits an offence if he provides facilities for gambling unless one of the exemptions in the Act applies. However, s 36(3) (Territorial application) states that ‘Section 33 applies to the provision of facilities for remote gambling only if at least one piece of remote gambling equipment used in the provision of the facilities is situated in Great Britain (but whether or not the facilities are provided for use wholly or partly in the United Kingdom)’. The term ‘remote gambling equipment’ covers electronic or other equipment used by or on behalf of the supplier providing the facilities for remote gambling but this does not include equipment used by the end-user (ie the player’s computer keyboard and screen etc) provided that the player’s equipment is not supplied by that supplier.
This means that organisations can provide remote gaming facilities from jurisdictions outside the UK (eg from common remote gaming destinations in the EU such as Malta or Gibraltar) for use by players inside the UK (provided that those suppliers do not provide the equipment for players (eg servers or computer equipment storing or processing information) in the UK.
Section 41 relates to gambling software and states that a person commits an offence if in the course of a business he manufactures, supplies, installs or adapts gambling software unless he acts in accordance with an operating licence. But note that the Act generally extends only to England and Wales and also Scotland (with a few exceptions) and parties falling outside the territorial scope of the Act will not be affected.
There is also an exception in s 41(3) so that a communication service provider, who enables someone to download or send gambling software to another person, is not treated as himself supplying or installing that gambling software. This is an exception for ‘mere carriers’ of the software.
4. Advertising
Advertising is of course key to gambling to promote the services of suppliers.
Under the old Gaming Act 1968 it was acceptable for remote gaming operators to advertise their services in the UK but they had to comply with strict restrictions in s 42 of that Act. In particular, s 42(1) stated that no person shall issue, or cause to be issued any advertisement….(c) inviting the public to subscribe any money or money’s worth to be used in gaming whether in Great Britain or elsewhere, or apply for information about facilities for subscribing money or money’s worth to be so used.
Section 42 of the 1968 Act applied to non-remote and remote gaming advertising and advertising of overseas facilities. ‘Inviting’ was interpreted to mean inducing or encouraging although factual information (such as the name of an operator’s Web site) would not have been in breach of this section.
Because s 42 was so wide-ranging, it effectively prevented gaming operators from advertising their services in a full manner and they were limited to fairly narrow advertising such as advertising the names of their Web sites. Hence, prior to the new Act coming into force, it was common to see billboards with the name of a Web site and perhaps some dice or playing cards but nothing further to promote the operator’s services.
Gaming operators generally believe that one of the main benefits of the Act is that advertising will now be permitted in a much wider manner, albeit subject to various restrictions (for example, some advertisements being broadcast after the watershed to protect young people from harm). However, if gaming operators are allowed to advertise on TV directly to the public then this may have an impact on how much they invest in sponsoring TV programmes. For example, the Tote has taken the option to end its sponsorship deal with Channel 4 Racing since other bookmakers can now advertise on Channel 4 and perhaps dilute the benefit that the Tote derived from its sponsorship deal.
Foreign Advertising
Section 327 of the Act is very wide and states that ‘advertising’ about gambling is anything which is done to encourage people to take advantage of facilities for gambling, including bringing information about gambling facilities to people’s attention with a view to increasing the use of those facilities.
Section 331 refers to foreign advertising and makes it an offence to advertise non-EEA (or ‘foreign’) gambling. Foreign gambling is gambling which either physically takes place in a non-EEA state (eg a casino in Australia) or is gambling by remote means which is not regulated by the law of any EEA state. Gibraltar is treated as if it is an EEA state and therefore gambling operators based in Gibraltar will be able to advertise their services in the UK.
It is important to note that s 331 also allows the Secretary of State by regulations to provide that a specified country or place is to be treated for the purposes of s 331 as an EEA state. These are commonly referred to as ‘white list’ countries and at present the Isle of Man and Alderney are on the white list. The Gambling Act 2005 (Advertising of Foreign Gambling) Regulations 2007 (SI 2007/2329) have the effect of maintaining that status.
5. Broadcasting
The Act provides that the Secretary of State may make regulations controlling the advertising of gambling. The regulations may in particular make provisions about the form of advertisements, the content of advertisements, timing and location and may require specified wording to be included in advertisements.
When making the regulations regard should be had to the need to protect children and other vulnerable persons from being harmed or exploited by gambling.
It is left to Ofcom to consult with the Gambling Commission to ensure that the standards of gambling advertising comply with the regulations. In particular, all non-broadcast gambling advertisements must comply with the CAP code and all broadcasting advertisements must comply with the BCAP code. These codes embody rules to ensure that gambling advertisements are socially responsible.
6. Tax
An operating licence is required if gaming facilities are to be carried out from the UK. In particular, a remote operating licence can be obtained which authorises an activity to be carried on in respect of remote gambling or by means of remote communication from the UK.
To obtain remote licences in the UK, an operator would have to pay remote gaming duty (RGD) which would be the charge levied on remote operators’ gaming profits. The gaming industry had generally hoped that this would have been set by the UK government at around 2% to 3% (or less). However, in the March 2007 Budget this was set at 15%. Compare this with much lower remote gaming duty taxes in offshore jurisdictions such as Gibraltar and Malta (and now the Isle of Man and Alderney) and it is not surprising that many remote gaming operators are based in those jurisdictions.
7. The US
Many people will be aware that US government policy is generally not in favour of online gaming. The Unlawful Internet Gaming Enforcement Act of 2006 made it illegal for banks and financial institutions to process transactions for online gaming sites for US customers. It is reported that around US$7 billion was wiped off the share price of US-facing online gaming companies the week after that Act was enacted.
Prior to the UIGEA, the US Department of Justice maintained that online gaming of all types was illegal in the US under the 1961 Wire Act. However, the Wire Act provides that ‘whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest…shall be fined…or imprisoned’. However, it has been subsequently held that in plain language the Wire Act does not prohibit internet gambling on a game of chance and it has also been held that ‘the object of the gambling must be a sporting event or contest’ and online poker should not be classed as a sporting event. Debate still continues over the Wire Act but it appears that the effect of UIGEA has effectively prevented large numbers of US customers participating in online gaming.
8. Current Hot Legal Topics
The Gambling Act 2005 has more than 360 sections and so there is of course going to be a huge amount of legal debate over various sections of the Act. Current hot topics include:
(a) Self-exclusion policies – Self exclusion policies are where players who recognise that they have a gambling habit voluntarily ask operators to bar them from playing. To what extent (if any) are operators (eg bookmakers, online gaming sites owners etc) liable if they have self exclusion policies but, despite a player notifying an operator to be excluded, the player is still allowed to play and incur losses? Currently a greyhound trainer is suing William Hill for £2million on the basis that William Hill allowed him to continue opening accounts and betting despite him asking to be excluded from betting.
(b) Data Sharing – This has come into the spotlight since operators would like to share information between themselves and others (eg sports governing bodies) regarding unusual betting patterns (perhaps indicating cheating or match fixing). Betfair has 24 MOUs in place which it treats as information sharing agreements with the first one being signed with the Jockey Club (now the British Horse Racing Authority) in 2006. This issue was recently highlighted on the Davydenko tennis match where Nicolas Davydenko (world number 4 and top seed) played Vassallo Arguello (rated 87 in the world) in a fairly minor tournament in Poland. Arguello attracted most of the £3.5m in bets. Even after Davydenko took the first set Arguello continued to be heavily backed. Davydenko then subsequently retired with a foot injury. However, in sharing such information operators will need to be aware of and comply with the provisions of the Data Protection Act 1998. This is particularly because s 352 of the Act states that nothing in the Act authorises a disclosure which contravenes the Data Protection Act 1998.
(c) White List – Although the Isle of Man and Alderney have achieved white list status, there are other jurisdictions such as Antigua and Curacao that would certainly like to be given this status too and lobbying is still likely to occur by these jurisdictions. It should be noted that further information has been required from Antigua and also the Canadian Indian nation of Kahnawake where these parties will have an early second chance of consideration for white list status.
9. The Future
It will certainly take some time for the Act to bed in and for rules and regulations to be generally understood and consistently implemented by the gambling industry and those associated with it. Because of this, it is difficult to assess the overall impact that the Act will have on the UK. However, possible trends that may occur are that:
(a) gaming operators facing legislative hurdles in the US may begin to focus more of their operations in Europe where the legislative framework is generally more favourable;
(b) operators in so-called ‘white list’ jurisdictions (eg the Isle of Man and Alderney) and certain other EEA jurisdictions (such as Gibraltar and Malta) will continue to be based there if the current tax regime regarding online gambling in the UK continues;
(c) operators based in jurisdictions that are in the EEA but are a long way from the UK (eg Malta) may be tempted to set up in the Isle of Man or Alderney which are closer to the UK if this leads to cost savings;
(d) gaming operators will focus upon spending more of their money advertising their services via television and radio advertisements; and
(e) the number of television programmes sponsored by gaming operators may decrease since those operators can now take advantage of being able to advertise their own services directly to the public via television and radio advertisements and other advertising channels.
Jimmy Desai is a partner in the Gaming & Technology Group at Blake Lapthorn Tarlo Lyons.
