Upcoming issues for UK-licensed gambling operators

There are a number of legal and regulatory issues which are likely to dominate 2017 for UK-licensed gambling operators.

The UK’s Competition and Markets Authority (CMA) announced on 21 October 2016, that it is launching an investigation into whether online gambling operators are treating their customers fairly. This investigation follows concerns raised by the UK Gambling Commission about potential breaches of consumer law in the online gambling industry. We expect an update on that investigation in early 2017 on what Sarah Harrison, UK Gambling Commission Chief Executive, has recently referred to as “a joint programme of work to ensure terms are fair and transparent”.

The UK Gambling Commission currently requires that all gambling sites refrain from using ‘unfair terms’. It is undoubtedly great news for consumers that another consumer regulator, the CMA, is now looking into unfair terms in the specific context of online gambling – it will hopefully lead to greater clarity and certainty (for both online gambling operators and consumers) on what practices and procedures are deemed ‘unfair’ and could lead to regulatory action in cases of their inclusion (as opposed to the current regulatory approach where the gambling operators themselves are left to determine what is ‘unfair’ within the meaning of the UK’s general consumer legislation – namely the Consumer Rights Act 2015).

We consider this investigation from the CMA to be similar to its investigation in 2013 (when it was called the UK’s Office of Fair Trading) into in-game purchases in web and app-based video games further to claims that these were sometimes misleading, commercially aggressive or otherwise unfair. What resulted was a published set of principles (which can be accessed here). Although these principles do not constitute new legislation/regulation, they help to apply existing consumer protection laws in the context of in-app purchases, particularly in respect of mobile apps which target children. Similarly we anticipate that the investigation of the CMA into unfair practices and procedures of online gambling operators will likely result in a new set of principles which applies existing consumer protection laws in the context of online gambling.

Further clarification on how general consumer legislation should be applied in the context of online gambling will also be helpful for the online gambling operators. It is important to bear in mind that certain verification checks and procedures, which can result in delays (or sometimes even refusals) around the paying-out of winnings, are in place for the purposes of consumer protection which can leave gambling operators in a ‘no win’ situation. There is, for example, a regulatory requirement on gambling websites to have satisfactorily completed age verification checks on new consumers within 72 hours. If these have not been completed then the relevant customer’s account must be frozen without the opportunity to withdraw any winnings. However, if such customer is identified as underage then he/she will have all of his/her deposited funds reimbursed (even if these were wagered and lost in that period of 72 hours). Online gambling operators also have to run checks around the prevention of money laundering and terrorist financing which can lead to further delays.

There is currently a difficult line to tread for gambling sites – they must complete the required verification checks and procedures (or otherwise risk breaching their operating licence from the UK Gambling Commission) while, at the same time, endeavouring not to disrupt or delay consumers’ opportunities to bet. The CMA investigation should serve to make that blurred line somewhat clearer.

Creation of a multi-operator self-exclusion scheme

The Remote Gambling Association has taken responsibility for the creation of an online multi-operator self-exclusion scheme for online gambling operators licensed in the UK (compliance with which is required under the UK Gambling Commission’s LCCP RS Code 3.5.5). The UK Gambling Commission hopes that such scheme will be introduced later in 2017, but no specific date for its introduction has been set.

Taxation of freeplays in online gaming

The UK Government announced in its 2016 Budget that it will amend the treatment of freeplays (i.e. discounted or free gaming such as free spins and bonus credit) for the purposes of Remote Gaming Duty. There are provisions in the draft Finance Bill 2017 which look to bring the tax treatment of online gaming freeplays into line with free bets. The changes will take effect for accounting periods beginning on or after 1 August 2017 and be applied to all online gaming participation by consumers in the UK.