UK software supplier licences delayed until January 2015 but significant problems remain for B2B's
The Gambling (Licensing and Advertising) Bill (the ‘Bill’) will completely change the nature of online gambling supply in the UK market. As the requirement to hold a UK licence becomes determined by the point of consumption of gambling services rather than the place from which those services are supplied (i.e. if you have or intend to have a UK customer you will require a UK licence), there are a number of issues that need to be resolved.
The UK Gambling Commission (UKGC) has recognised that the legislation creates some difficulties with regard to B2B software suppliers and last week announced a delay to the introduction of licensing conditions affecting B2B companies serving UK licensed operators.
What is the position for ‘pure’ gambling software suppliers?
At present a ‘pure’ B2B supplier of gambling software needs to hold a UK gambling software licence if they are based in the UK, or, if they are based overseas and they supply a gambling operator who is based in the UK (and therefore requires a UK operating licence). As a large proportion of gambling operators are based outside of the UK and do not require a UK operating licence, consequently B2B suppliers to these operators do not need to obtain a UK gambling software licence.
Following the passing of the Bill, B2C operators with UK customers will require a UKGC operating licence, and consequently any B2B supplier that provides gaming software to them will also need a UKGC licence. Effectively this extends the net for B2B companies requiring a UK gambling software licence worldwide. UKGC has announced that these B2B software supplier companies now have until January 2015 to apply for their licence and B2C operators will not be required to enforce this licence condition until then.
The recent guidance also noted that the extension of time will allow B2C operators more time to adapt their controls to ensure that they are not in breach of the proposed new licence requirement.
Licensing requirements still to be resolved….
The 9 month delay for B2B software suppliers to obtain their UKGC licences is welcome as it is hoped that this additional time period will enable UKGC to provide useful guidance on issues currently unresolved, as well as allow time for B2Cs and B2Bs to ensure they are compliant with the new regime.
One of the biggest issues requiring further guidance and perhaps regulation is the type of licence that B2B companies are expected to apply for. Although the circumstances in which a B2B company needs to obtain a gambling software licence are sufficiently clear, there is significant uncertainty about the circumstances in which a B2B company needs to obtain a full operating licence, as well as a gambling software licence.
UKGC issued its proposed changes to the Licence Conditions and Codes of Practice in September 2013, and in this document it stated that those B2Bs providing some aspect of networked activity, such as peer-to-peer poker and pooled jackpots must hold an operating licence, as well as a gambling software licence, because in providing the networked activity UKGC is of the opinion that the B2B company is providing “facilities” for gambling as defined in the Gambling Act. This makes sense from a regulatory perspective. Such B2B network operators (as well as B2C operators) holding a remote gambling licence in another EEA country or white-listed jurisdiction will be covered by transitional arrangements permitting them to continue to lawfully supply UK customers pending issue of a new UKGC operating licence.
There has however been some indication that the location of gambling software on the B2B’s servers rather than that of the B2C operator could also trigger a B2B company to require a full operating licence. This arises because the Gambling Act only loosely defines “gambling software” and the definition of “providing facilities” for gambling is ambiguous and open to interpretation. In our view the question of whether a B2B company requires an operator licence should not be dependent on the location of the installed server (especially given the increased use of cloud computing services) but rather based on whether the operator has direct obligations to the customer whether as a contracting party with the customer or as a person responsible for network activity between customers and different B2C operators.
Any regulatory concerns with respect to B2B games that are served from a B2B’s server rather than the B2C’s server are met by requiring any B2C licensed operator to ensure that the games are supplied by a UKGC licensed gambling software supplier and by confirming that the B2C is responsible for ensuring the games platform is compliant (whether hosted on its own servers, in the cloud (eg Amazon), or by a third party). In effect, such B2B server arrangements are better treated as B2C outsourcing arrangements that require approval.
Jessica Calvert & Peter Howitt
Ramparts advises a wide range of B2C & B2B gaming and betting operators on Gibraltar, UK and EU law including licensing requirements.