In the draft Gambling (Licensing & Advertising) Bill (29-page / 1.48MB PDF) published by the Department for Culture, Media and Sport (DCMS) on Monday, the Government proposed that remote gambling be regulated on the basis of where bets are placed - from the 'point of consumption' (POC). It said that the overseas operators would be obliged to tell the Gambling Commission, the regulator of commercial gambling in the UK, about suspicious betting patterns involving UK consumers and that they would need to pay some of the costs of tackling problem gambling and regulation.
The Government said that gambling operators in 'white-listed' countries will not face significant extra costs as a result of the plans and that the reforms were needed for the benefit of consumers.
"These proposals are an important measure to help address concerns about problem gambling and to bridge a regulatory gap, by ensuring that British consumers will enjoy consistent standards of protection, no matter which online gambling site they visit," Hugh Robertson, Minister for sport and tourism, said. "For example, previous work by the Gambling Commission has highlighted deficiencies in some remote operators’ arrangements for preventing underage play, and, for the first time, overseas operators will be required to inform the UK regulator about suspicious betting patterns to help fight illegal activity and corruption in sports betting."
"These reforms will ensure consistency and a level playing field as all overseas operators will be subject to the same regulatory standards and requirements as British-based operators," he added.
Under the Gambling Act foreign companies must currently be licensed in certain 'white-listed' jurisdictions in order to operate within the UK. At the moment, any gambling operator which wants to offer its services in the UK must be licensed or regulated by one of the states approved by the Gambling Commission.
Licenses issued in these 'white listed' countries are treated as having been issued in the UK. However, offshore operators do not require a licence in order legally to take transactions from UK consumers.
The Government said, though, that it is concerned that some gambling operators, which are targeting UK consumers but are based in some European countries, may not be subject to "sufficient regulatory oversight" to benefit from the "automatic right" to do business in the UK. It said that operators based in those countries "may not be compelled" to report suspicious betting activity to the Gambling Commission.
Information voluntarily shared with the Commission by those operators is often lacking in enough detail to allow the Commission to "conduct thorough investigations", with the foreign companies and regulators sometimes citing data protection laws as the reason why more information cannot be shared, the Government added.
In order to close the regulatory gaps it said currently exist, DCMS proposed that gambling operators be subject to UK licensing and regulation requirements on the basis of a POC approach.
Robertson said that the changes would mean that "all operators selling into the British market, whether based here or abroad, will be required to hold a Gambling Commission licence to enable them to transact with British consumers and to advertise in Great Britain". As a result of that, the companies would also have to adhere to UK gambling laws as well as pay licence fees and "contribute to research, education and treatment in relation to British problem gambling and regulatory costs," the Minister added.
However, the Government said that gambling operators based in traditional 'white listed' jurisdictions would not face huge extra burdens as a result of the reforms.
"Operators in well-regulated jurisdictions whose regulators can provide, for example, the necessary compliance information, will not face significant increases in licensing costs – those whose regulators cannot provide such information will need to pay the compliance costs associated with being subject to the same requirements as other Gambling Commission licensees," the Government said.
"The Government is clear that the proposals are not designed to duplicate the work of other regulators or to unnecessarily increase burdens imposed on operators. Rather, the system will be light-touch, avoiding duplication by relying on the work of other regulators, subject to sufficient on-going assurance of quality and rigour," it added.
DCMS said that operators, which already have business in the UK but are based within the European Economic Area (EEA) or other white-listed countries, would benefit from a "period of transition" during which they would be automatically given a "provisional licence" so they would not have to "cease trading". The 'white list' regime would eventually be phased out, it said.
Philip Graf, chairman of the Gambling Commission, said: "We welcome the proposed changes as currently we regulate less than 20% of online gambling by British consumers and cannot insist on overseas operators providing us with information about suspicious sports betting transactions."
Under the UK's current tax regime UK-based betting operators pay a 15% tax based on gross profits on bets, but many high street bookmakers, including Ladbrokes and William Hill, have moved their online operations abroad where they are not currently liable for a tax on profits earned. Separately, UK bookmakers must also currently pay a levy on gross profits taken on horse racing bets.
Earlier this year a William Hill-commissioned study warned that gamblers could turn to unregulated markets if Government plans to tax betting operators on a POC basis was introduced.