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Online Gambling Regulation in the United Kingdom

By: Joan Peppin, Sunday October 16th 2011
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The United Kingdom was one of the first major countries to legalize and regulate online gambling. However, despite having a head start the relationship between the government and the online gambling operators has been fraught with friction.

The basis of online gambling legalization and regulation in the United Kingdom is the Gambling Act of 2005, which came into effect in September 2007. This Act created the Gambling Commission as the authority to oversee online gambling in the country. Any operator that had its servers located in the United Kingdom was required to obtain a license from the Gambling Commission for offering gambling services over the Internet, be it casino, poker, bingo or sports betting. Most of the leading online gambling operators obtained such licenses.

The three main objectives of the Gambling Commission are keeping crime out of gambling, ensuring gambling is conducted fairly and openly and protecting children and vulnerable people from being harmed or exploited by gambling. The commission has established a code of practice that all its licensees have to adhere to and works closely with them to ensure compliance of the code. The Gambling Commission has legal powers to confer punishments on those licensed operators who do not comply with the established code.

The Gambling Commission permitted certain online gambling operators based outside the United Kingdom to cater to British players and even advertise in the British media. The commission released a while list of reputed online gambling jurisdictions in September 2008 and any operator licensed by these jurisdictions could participate in the United Kingdom market. The commission ensured that these jurisdictions followed the same strict regimen in issuing licenses and regulating online gambling operators. Some of these white listed jurisdictions were Alderney, Gibraltar, Antigua and Isle of Man.

This white list resulted in a major standoff between the Gambling Commission and the United Kingdom online gambling operators directly licensed by it. These operators had to pay license fees to the Gambling Commission and a 15% tax on gambling profits. These levies were much higher than those charged in the white listed jurisdictions. As a result, the costs incurred by the white listed online gambling operators were much lower and they offered more competitive services. The United Kingdom operators asked for a reduction on the license fees and taxes so that they could compete with the offshore operators. When the government rejected this demand, the United Kingdom operators began to take licenses from white listed jurisdictions and move their establishment to offshore locations.

After the last general elections the United Kingdom government decided to overhaul the Gambling Act of 2005. The Department for Culture, Media and Sport, which handles gambling in the United Kingdom, carried out consultations with the industry and commissioned reports from the independent experts. In August 2011 the government released its proposals for leveling the playing field. Offshore operators wishing to cater to British players and wishing to advertise in the United Kingdom would require a secondary license from the Gambling Commission. They would also be required to pay taxes in the United Kingdom.

This proposal has drawn flak from United Kingdom operators and offshore operators. Both are saying that if the tax and levies on regulated online gambling are high then the black market run by unregulated operators will get a boost and this will go against the interest of the state and the players. The ball is now in the government's court.

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