A report by Tony Coles and Nick Nocton, Attorenys-at-law, Jeffrey Green Russell, England

Background

The Gambling Act 2005 (the “Act”) governs the provision of gambling services within the UK, and came into effect in September 2007.

Key Concepts

At the Act’s core are the licensing objectives of keeping gambling crime-free, fair and open, and of protecting children and other vulnerable people from being harmed or exploited.

Other key concepts include defining “gambling” to cover gaming, betting and participating in a lottery (each of which is further defined) and defining “remote gambling” as gambling in which people participate by the use of the Internet, telephone, TV, radio or “any other kind of electronic or other technology for facilitating communication”.

“Gaming” means playing a game of chance for a prize and a “game of chance” includes a game involving both chance and skill, and also a game that involves an element of chance that can be eliminated by superlative skill as well as a game that is presented as involving an element of chance.

A “casino” is defined, not as any kind of building, but as an arrangement whereby people are given an opportunity to participate in one or more casino games. It therefore includes a traditional casino in a building as well as remote casino gaming.

“Casino game” means a game of chance which is not equal chance gaming and “equal chance gaming” is gaming which does not involve playing or staking against a bank but where the chances are equally favourable to all participants. Thus, for example, roulette is a casino game but Texas Hold’em is not.

The Act provides new definitions of “betting” and “pool betting” and a new concept of a “betting intermediary” as someone who provides a service designed to facilitate the making or acceptance of bets between others (e.g. a betting exchange).

Commercial lotteries continue to be prohibited under the Act, with lottery operating licences being available only to non-commercial societies, local authorities or external lottery managers acting on their behalf. And the UK’s National Lottery continues to be regulated by separate legislation.

The Gambling Commission

The Gambling Commission is responsible for licensing and regulating all gambling (other than spread betting and the National Lottery). It is directed to aim to permit gambling so far as reasonably consistent with the licensing objectives. This means that, in theory at least, the restrictive and conflicting rules in the previous law have been reversed.

Operating Licences

To “provide facilities for gambling” (a key defined term) it is necessary for operators to obtain the relevant operating licence from the Commission. Various classes of operating licences permit the operator to provide specified facilities, including casino, bingo, general betting, pool betting, betting intermediary and lottery operating licences.

There is also a gaming machine general operating licence (which may specify the operation of an adult gaming centre or a family entertainment centre, the latter having machines of lower stakes and prizes than the former), a gaming machine technical operating licence (for the manufacture, supply, installation, etc. of machines), and a gambling software operating licence, (for the manufacture, supply, installation, etc of gambling software).

A single operating licence may authorise more than one activity, but may only permit either terrestrial or remote facilities and not both. Accordingly, a terrestrial operator who also provides remote gambling facilities must obtain two operating licences.

In considering applications for operating licences, the Commission must have regard to the licensing objectives as well as the applicant’s suitability and the suitability of the equipment to be used in the licensed activities.

Certain “mandatory” conditions have been attached to all licences, as have certain “default” conditions which may be specifically waived by the Commission. The Commission may also attach further conditions to individual operating licences (or to all in a specified class), as it sees fit. Mandatory conditions include, for example, the obligation to comply with the relevant codes of practice.

An operating licence must not contain a condition restricting the physical location of the licensed activities since, for a terrestrial facility, a premises licence is also required, but may include a condition limiting the number of people for whom the activities may be provided.

Operating licences generally have effect indefinitely but are subject to variation, suspension, revocation, etc and a new and wide-ranging power of review by the Commission.

Personal Licences

At least one person (and all those occupying certain specified management offices) as well as other staff in key operational positions (generally where their functions allow them to influence the outcome of the gambling) must hold personal licences issued by the Commission.

Premises Licences

A premises licence granted by the relevant municipality is required to use a building for the provision of gambling facilities.

The Act imposes an initial cap of one regional, eight large and eight small new terrestrial casinos (defined by reference to their floor areas) but after much political wrangling the regional casino will not proceed.

Meanwhile casinos licensed under the pre-2005 Act regime continue to be permitted, albeit with certain operational restrictions which will not apply to the 16 new casino licences when they are eventually granted. In casinos licensed under the old law there can be no sports betting (unlike all of the 16 new casinos) and no bingo (unlike the eight large casinos) and the old law casinos will be limited to only 20 gaming machines (slots) whereas the new small casinos will have up to 80, and the large up to 150. A considerable advantage of the “old” licence is that they are “portable” between premises (within the same municipal area) whereas, because of the need to show planning gain and the level of scrutiny in granting 2005 Act licences, none of the 16 new ones will.

General Offences

It is an offence to provide facilities for gambling without the requisite licences (or the benefit of an exemption).

The Act has also established a new offence of “cheating” and there are a number of specific offences aimed at protecting children (those under 16) and young people (those under 18). These offences include inviting or causing or permitting a child or young person to participate in gambling activities in which it is illegal for them to participate. A defence relying on reasonable belief as to age is available for offences relating to a child or a young person.

Advertising

The 2005 Act provides for the old restrictions on the advertising of gambling facilities to be relaxed, and new regulations are now in place. Generally they allow the advertising of gambling using all media subject to a number of detailed, but sensible, provisions intended to protect children and the vulnerable. Under a voluntary code (essentially agreed to avoid more onerous restrictions) there can be no television advertising of gambling before 9 p.m. except for bingo and the advertising of betting scheduled around sports events. The National Lottery can also be advertised on TV at any time.

It is an offence to advertise unlawful gambling. Likewise, it is an offence to advertise “foreign gambling”. “Foreign gambling” includes remote gambling, none of the arrangements for which are subject to a law concerning gambling of any EEA State (including for these purposes Gibraltar). The UK Government has produced a “white list” of countries which are for these purposes to be treated as if they were an EEA State and this list now covers Alderney, the Isle of Man and Tasmania. Therefore, operators duly licensed within an EEA State, Gibraltar or one of the three “white listed” places are able to advertise as if they were licensed in the UK.

Broadly speaking, the new gambling advertising regulations apply to remote (including Internet) advertising which is intended to come to the attention of, or likely to be accessed by, British residents.

Gaming Machines

A gaming machine is (very broadly) defined as a machine designed or adapted for use by individuals to gamble, whether or not it can also be used for other purposes. Exceptions to the new definition include domestic or dual-use computers, certain bingo and betting terminals and electronic lottery machines, provided the machine itself does not determine and announce the result within intervals of an hour or less.

The categories of gaming machines are determined by reference to their stakes and prizes and the number and categories of machines allowed in various locations are strictly controlled.

Taxation

A 15% “gross profit tax” for remote gaming has meant far less interest in the UK as an online jurisdiction than many had hoped, although the rate matches that already payable by bookmakers and bingo operators. Also, the effective rate of gaming duty for terrestrial casinos rose recently following adjustments to the relevant bands of gross gaming yield.

Gambling services are generally exempt from VAT in the UK, although certain participation fees are chargeable to VAT.

Enforceability

For the first time in English law, gambling contracts and all gambling debts are enforceable through the Courts. Gambling contracts now have exactly the same status as all other contracts and so will now be subject to the UK’s consumer protection legislation.