An extract from The Gambling Law Review, 5th Edition
Gambling in English law is a term that defines a number of different activities. As a general description, it can be said to cover various forms of entertainment involving gain and loss based upon risk. As such, gambling forms part of a wider landscape of activities including financial transactions, contracts, pure entertainment, sports and other activities. The interfaces between some of these different activities are discussed below. However, at its simplest, English law distinguishes between three forms of regulated gambling: betting, gaming and lotteries. For many years, these terms were part of common law, but over the centuries their definitions have been increasingly based in statute. The current legislation, the Gambling Act 2005 (GA), defines each of the forms of gambling. These definitions are not exhaustive – in the sense that, for example, the terms 'gaming' and 'betting' are both defined but the underlying concepts of 'game' and 'bet' are not. This, it has been said, is deliberately intended to create a measure of flexibility allowing judges to categorise new products and schemes as they arise. However, a summary of terms is given below.
'Gaming' is the playing of a game (being a game of chance or a game that combines skill and chance) for a prize. ('Sport' is specifically excluded from the definition, which gives rise to certain issues in its own right.) As to the issue of skill or chance, the amount of chance required to fulfil the test is not defined and there is no formal de minimis level, (and certainly not a 'balancing act' to see which of the two factors predominates in the outcome, as is the case in some legal systems). Any amount of chance in the game will satisfy the definition. Having said this, tiny amounts of chance in an otherwise fully skilful activity, (such as the toss of a coin to see who will start a game of chess), are not considered to have the necessary impact on the result and are discounted. The concept of a 'prize' is widely drawn, to mean essentially anything of value. However, there are, for example, specific exclusions from the definition of gaming machines covering an award to the player of an extended playing experience – that are not sufficient to be characterised as a prize. This is an important consideration when considering 'social gaming', which is not regulated as a form of gambling.
In practical terms, 'gaming' includes casino games such as roulette, blackjack and poker, dice games, slot machines and games such as bingo.
'Betting' can be summarised as the making of a bet (normally considered to be the hazarding of value on a future uncertain event, or a past event or fact that is not generally known). Various species of bet are distinguished under English law. First, one may consider 'pool betting' – also known as a pari-mutuel – in which the organiser takes in the stakes from the participants and then, from that 'pool', returns a portion of those funds to those who were successful, keeping a profit for himself or herself. Pool betting also covers betting where the prize is non-monetary. 'Fixed-odds' betting is where the operator (bookmaker) offers odds to potential punters that are calculated to deliver an 'over round' profit, and that are then adjusted as volumes of bets on a particular outcome are received. A further species of betting is 'spread betting', where the bookmaker offers a 'spread' of results, and the participant decides whether the actual result will be above or below the upper or lower limit of the spread. The amount to be won (or lost) is a multiple of the staked amount, depending upon the extent to which the actual result exceeds the spread. Such betting carries with it greater risk to both the bookmaker and the participant, and advertising of spread betting is therefore subject to stricter controls. Finally, it is worth considering two forms of betting that created legal uncertainty under the former regime and that were specifically legislated for under the GA. The first of these is 'betting prize competitions', which is a definition essentially designed to cover the playing of 'fantasy league' contests, and involves some form of prediction of an event within the meaning of Section 9 of the GA. The second is 'betting intermediaries'. A betting intermediary is someone who organises a peer-to-peer betting network, in which the bet is struck directly between two end parties, with the operator organising the market place of 'bids and offers', holding the stakes and paying out the winnings (having deducted a small commission). Such operators are classed as 'betting intermediaries', although the open-textured nature of the definition means that it also catches betting agents and brokers. The breadth and uncertainty of the first of these definitions can cause difficulties for the operators of skill-based prize contests, while the second can cause uncertainty in a variety of fields from syndicates to advertisers where a bet is placed as a result of the activities or assistance of third parties.
A 'lottery' is a division of prizes based upon a chance event, where the participants pay for the chance to win the prize. The definition includes both pre-determined lotteries (e.g., the purchase of a pre-printed scratch cards) and post-drawn lotteries where there is a draw after all the tickets have been sold. One other term that is frequently used by the public is 'raffle'. Technically, the term 'raffle' has no legal meaning. However, practically speaking it is generally used to refer to a species of lottery in which each participant purchases a unique ticket, one of which is drawn to ensure a single winner. This may be distinguished from lotteries in which players may choose their own numbers, and in which it is therefore a matter of chance as to whether the numbers drawn match the selection of none, one or more than one of the participants.
Lottery-style schemes that do not include the element of payment, or that rely to a substantial extent on skill, fall outside the statutory definition and are therefore not regulated as a form of gambling by English law. They may either be considered 'free prize draws' or 'skill contests'. Consequently, there are countless consumer contests operated as marketing incentives that avoid characterisation as a lottery by these means. For the avoidance of doubt, a requirement to pay for goods at their normal price in order to obtain a chance of winning a prize, does not constitute a payment for lottery purposes.
Some activities fit within more than one of the statutory definitions above, and the legislation contains a number of extra tests to determine whether such an activity is to be treated as one or the other form of regulated activity. For example, roulette is a form of gaming that shares many of the characteristics of a bet on a future uncertain outcome, and also has the features of a division of prizes by chance – but it is ultimately treated as gaming by virtue of these rules of disambiguation.
Any form of contest for a prize that does not fall within the definition of either betting, gaming or a lottery is defined as a 'prize competition' and is not regulated as gambling, though it may nonetheless be subject to some forms of legal control under the general law of contract and some consumer protection legislation.
Finally, some forms of speculative investment, contracts for difference or insurance are taken outside the definition of gambling but are regulated under financial services legislation. Spread betting and binary betting are both still technically forms of betting but are regulated by the Financial Conduct Authority and not the Gambling Commission.ii Gambling policy
Gambling has a long history in Great Britain. In past centuries, many forms of gambling were heavily controlled by reference to the places where they could take place or the nature of the participants. However, it is fair to say that gambling has never been the subject of an outright ban and, indeed, lotteries have a long history as tools of government to raise funds. In the past 50 years, Great Britain has experienced a significant liberalisation of its gambling market, and now it is considered one of the more progressive and liberal jurisdictions in the world. As a consequence, it has the largest gambling market in Europe. The current legislation permits the existence of casinos, adult gaming centres, high-street bookmakers and bingo halls as well as the location of gaming machines in venues licensed to serve alcohol. Great Britain has both a National Lottery and a range of private lotteries designed to raise money for charities and good causes. The current legislation permits the operation of gambling through remote communication (online, by telephone, etc.) and also permits foreign operators to offer those services to British citizens provided that they are licensed and pay tax. In short, almost all forms of gambling are permitted for those of 18 years and over, and some minor forms of gambling (lotteries and some minor amusement machines) for those over 16. Since 2005, contracts in relation to gambling (e.g., a bet or a gaming contract, or credit given to permit gambling) are enforceable at law just as any other form of contract.
The guiding principle of gambling regulation is that individuals should have the freedom to partake in gambling as part of normal adult leisure activity and that, provided that there are adequate protections to ensure that those who operate gambling are fit and proper to do so and operate in a way that ensures fairness for the general public and protections for the vulnerable and children, then gambling should generally be permitted.iii State control and private enterprise
Gambling in the UK generally operates in the realm of private enterprise and principles of free competition apply. Private citizens and companies (whether foreign or UK-based) are all entitled to apply for a licence to operate gambling, and the number of licences is not limited provided that the operator fulfils the tests of being fit and proper to operate gambling set out in legislation and subject to the discretion of the regulator. The one exception to this policy of free competition is the National Lottery. This was established in 1993 and is the subject of separate legislation to other forms of gambling, although it is still regulated by the Gambling Commission. Under the legislation, a single licensee is chosen to operate the National Lottery following a competitive tender. Once appointed, the licensee enjoys a monopoly right that was initially set at 10 years and most recently extended to 14 years with the possibility of sub-licences for some aspects of the overall scheme. The National Lottery is protected from competition from other lotteries by virtue of its unique status and government backing, and also because of limits on the prizes available in private lotteries. Taking bets on the National Lottery (and, following a recent change in the law, taking bets on EuroMillions) is prohibited for those with a UK licence. For the avoidance of doubt, EuroMillions is not itself a 'pan-European lottery' (since no legislation exists that could permit such a scheme). Instead, it is a collaboration of several national lotteries, based upon a single draw number and an effective (though not actual) pooling of proceeds.iv Territorial issues
There is often (even among English lawyers) a good deal of confusion about the British Isles and its various legal subdivisions. The British Isles is a geographical rather than a legal concept and comprises England, the Republic of Ireland, Northern Ireland, Scotland, Wales and a number of islands that have an historical attachment to Britain, including the Channel Islands of Guernsey, Jersey, Sark and Alderney, and the Isle of Man. It should be noted that each of Jersey, Alderney and the Isle of Man are separate legal jurisdictions (being technically crown dependencies) and with completely different gambling law regimes. The same is true of Gibraltar.
Descending to the next level is the United Kingdom, which is comprised of England, Wales, Scotland and Northern Ireland. Southern Ireland is a separate sovereign state with its own gambling laws. Northern Ireland shares many statutes and legal principles with England and Wales, but its gambling law is separate (and currently the subject of proposed change). In fact, two sections of the GA (Sections 43 and 340) apply directly in Northern Ireland, and in 2013 the government of Northern Ireland announced its intention to reform the existing law, to create a more up-to-date legislative framework but those changes remain at the stage of proposals and to date the rules in Northern Ireland somewhat resemble the legislative framework existing in England prior to the enactment of the GA in 2005. However, no progress has yet been made with reform of the law.
The next level is the concept of 'Great Britain', a term that covers England, Wales and Scotland only. The GA generally applies to the whole of this territory, although there are some modifications to language and penalties in relation to offences and procedures that take place in Scotland.
Within England, Wales and Scotland, there are no further special divisions or territories that affect the application of gambling law, with one exception: the policy in relation to the licensing of gambling premises is, within an overall framework, a matter for local authorities and local licensing committees (which also deal with the licensing of establishments serving alcohol or providing late night entertainment). Technically, the airspace above and the territorial waters around Great Britain are also within the jurisdiction for the purposes of gambling, and rules cover vessels, aircraft and vehicles passing through that territory.v Offshore gambling
Prior to the 2005 when the GA was passed, the position was that all gambling that took place outside Great Britain was not justiciable under the English courts. The basic legal principle governing legal culpability in relation to offences such as unlicensed gambling laid down a test by which, if the last act in the actus reus took place outside Great Britain, that conduct was not justiciable by the British courts. So someone offering unlicensed online gambling services from London would have triggered an offence, but someone offering gambling services to British citizens from a location outside Britain would not. The only types of offences that could be tried before the English courts would be, for example, the advertising of gambling, which was completed at the point of the advertisement being published or available to British citizens.
The 2005 Gambling Act created a regime that for the first time permitted online gambling within Great Britain. The following question therefore arose: would the new law seek to criminalise those who offered gambling to British citizens from abroad? The answer was a rather generous compromise. First, in deference to principles of freedom of movement of services and freedom of establishment of businesses under the European Treaty, the legislation provided that any operator established in the European Economic Area would be permitted to advertise and offer those services in Great Britain. Further, operators in certain other states who had been approved by the Secretary of State as having regimes that offered an equivalent degree of regulatory protection to that in the UK, could also offer and advertise their services ('whitelisted' states). Operators in other states could still provide gambling services, but could not advertise those services (based upon the approach to criminal justiciability discussed above and that had remained fundamentally unchanged, the act of gambling would be taking place outside the reach of the English criminal jurisdiction).
However, that regime was itself amended in 2014. By that time, it had become increasingly apparent as a result of developments in EU case law, that Member States were legally able to restrict gambling services to those who were licensed within that particular Member State (France and Italy are good examples of this more conservative approach). There were also pressures for change from those licensed within the British regime, who argued that the then current approach created competitive disadvantages from a fiscal point of view compared with operators in white-listed states. The law changed with the introduction of the Gambling (Licensing and Advertising) Act 2014 (GLAA). This provides that any operator that either had gambling equipment located in the UK, or knew or ought to know that British citizens were using its services (wherever that equipment was located) would require an operating licence (and would have to pay gambling duty on profits generated from business in Great Britain). Thus, the current position is that all such operators with equipment in or who target the UK market must obtain an appropriate operating licence and pay UK gambling duty in relation to business with UK citizens. The old offence of 'advertising foreign gambling' was repealed, because the strictures of the new regime render it otiose.
It is uncertain how many operators from overseas continue to take business from British citizens. The British regulator, the Gambling Commission (the Commission), has indicated that it believes that the new regime is being complied with and policed effectively. However, we are not aware of any proceedings or enforcement actions that have been brought since the change in the law and, since gambling offences are not of a type or severity that permit a claim for extradition, it is difficult to see in practical terms how such enforcement could be effected in relation to an operator who ignored the law, but did not have a presence or assets within Great Britain. For the avoidance of doubt, it is not an offence for a UK citizen to gamble with a foreign operator, even if that operator is not licensed under the UK regime.
For those licensed under the British regime, the Commission has recently imposed, as part of the licensing criteria, an obligation that licensees must be able to demonstrate on objective grounds (presumably, at least, a legal opinion from a specialist lawyer) that their operations are legal in all the states in which they do significant business. Apart from that protection, however, there is no explicit prohibition or control on a British licensed operator from taking business in any jurisdiction in the world, although the power to create such a ban remains in the hands of the Secretary of State.
Legal and regulatory frameworki Legislation and jurisprudence
The law on gambling in Great Britain is set out in the GA (as amended) and, for the National Lottery, under the National Lottery etc. Act 1993. Taxation of gambling is dealt with under the annual Finance Act, which makes amendments to the Betting and Gaming Duties Act 1981. There are more than 70 statutory instruments that inform the detailed implementation of the basic regime set out in the GA.ii The regulator
The GA created a single regulator for all forms of gambling (now including the National Lottery) in the form of the Commission. The Commission is a statutory corporation with its offices in Birmingham. The main officers of the Commission are the commissioners, aided by a staff including enforcement officers and licensing officers responsible for dealing with the day-to-day functions of the regulator. Responsibility for spread betting and binary betting lies with the Financial Conduct Authority.iii Remote and land-based gambling
The GA distinguishes between remote gambling and non-remote gambling. Remote gambling includes gambling through any form of remote communication (telephone, internet, etc.) but not gambling conducted through postal services (e.g., sale of lottery tickets). Non-remote gambling is generally confined to specific licensed premises, such as betting shops, race courses, casinos and adult gaming centres (and requires a further licence covering the premises themselves, which is issued by the local authority responsible for the area in which the premises are located). There are provisions for temporary licences, which can be obtained for certain premises like sports arenas that allow gambling to be conducted for a limited number of days each year. An operator may provide both remote and non-remote gambling under a 'combined licence'. To give a practical example, a large bookmaker may offer betting through a chain of betting shops, through telephone betting with those shops, and through a website that might offer both betting and gaming products. In such circumstances, it would require a betting operating licence (non-remote and remote), a gaming licence (remote only) and a premises licence for each of the shops. As far as telephone betting is concerned, this would be covered either by a full remote licence or, in some circumstances, through an ancillary or linked licence permitting certain remote gambling as part of a non-remote general betting licence.iv Land-based gambling
The GA defines a number of different locations in which forms of gambling can take place, with different restrictions based upon the type of gambling to be performed and conditions imposed by a premises licensing regime. There is no formal limit on the number of gambling premises of a particular type that can be granted.
Casinos are designed primarily for gaming, in the form of table games and slot machines, but are also permitted to offer ring games such as poker, and also betting and bingo. Different sizes of casino are defined by the number of table games and the floor area. There are currently 140 casinos in Great Britain.
Betting shops (sometimes referred to as 'licensed bookmaking offices' or 'LBO's) are entitled to offer fixed-odds and pool betting, and to install a certain number of gaming machines (including, usually, certain 'fixed-odds betting terminals'). Apart from bookmaker premises, betting is also offered on tracks and at courses during sporting events. In total, there are just under 10,000 such establishments in Britain.
Bingo halls are entitled to offer bingo (main stage and cash-prize mechanised bingo) as well as some forms of gaming machines. Although the playing of organised bingo has diminished over recent years (especially following the introduction of the ban on smoking in public places), there is still a large number of regular attendees at bingo halls in the UK.
In addition to the above forms of gambling establishment, there are a number of locations that permit the installation of gaming machines or the operation of equal chance gaming (i.e., gaming where there is no 'house advantage'). These range from adult gaming centres (a form of 'mini casino' offering only machine gaming rather than table games), licensed family entertainment centres (which provide amusements like 'toy grabbers' and 'penny pushers' mostly of interest to children but that may include some very low-value machine gaming), venues licensed for the sale of alcohol on the premises without food (essentially 'pubs') and private members' clubs and travelling fairs.
The grant and administration of a premises licence is a matter for local planning authorities rather than the Commission (it being thought that it is a matter of local policy how venues such as clubs, theatres, pubs, restaurants, cinemas, night clubs and gambling premises are located and managed). The detail of the application process is outside the scope of the present summary of the law but has considerable similarity to the process for alcohol licensing – having regard to issues such as the nature of the neighbourhood, proximity of schools and churches, potential for public nuisance, and so on.v Remote gambling
Remote gambling is generally permitted. That means that an operator that is licensed by the Commission may provide gambling services to British citizens in the UK via all forms of remote communication (and using equipment that may be located in the UK or abroad). Equally, a remote operator may be licensed by the Commission to offer gambling services to citizens in any jurisdiction in the world using equipment located in the UK. The Act provides that, for each type of gambling (betting, gaming, etc.), there will be two forms of licence available: remote and non-remote forms. Normally, a single licence may only permit either remote or non-remote gambling. However, there are also 'ancillary licences' that permit non-remote operators to offer a modicum of remote services (e.g., permitting a bookmaker to offer a telephone betting service) without the full requirements of a remote operating licence.
Nowadays, with widely distributed hardware deployment, care needs to be taken about which types of equipment are physically present in the British jurisdiction and whether the location of particular resources will trigger a licensing requirement.
The legislative rules that apply to remote and non-remote operators are generally the same, although there are differences to take into account in matters such as fairness of random number generators, protection against underage gambling and social responsibility issues that arise more in remote gambling given that the player will not be in the presence of the operator when the gambling takes place.vi Ancillary matters
In addition to the licensing of operators, the legislation provides for the licensing of a number of other activities, outlined in this subsection.Personal licences
First, there is the concept of the 'personal licence', which can apply to individuals in gambling organisations who either perform a particular management function or a particular function (e.g., being a croupier). Personal licences are a guarantee that those occupying a position of trust within an operator are fit and proper individuals, and are personally accountable to the Commission, having specific reporting requirements in relation to 'key events' within the operator. As such, the granting of a personal licence not only represents a badge of quality, but also gives the Commission 'eyes and ears' within an organisation. The procedure for applying for a personal licence is the same as for an operating licence, though clearly the type of due diligence performed by the Commission in relation to personal licences is more restricted.Gaming machine manufacture
The GA recognises that, although they do not operate the machines, those who make, repair or install gaming machines have a special responsibility because they can influence the outcome of gaming. Consequently those who operate in this part of the industry also must apply for an operator licence and ensure that all machines that they make comply with technical standards imposed by the Commission.Software
One potentially difficult area of licensing relates to gambling software. Those who produce gambling software on equipment based in the UK or who propose to supply such software to operators licensed by the Commission require a licence. The definition of gambling software is limited to software for remote gambling, but otherwise the scope of the term is broad. There are sometimes difficulties in determining whether a provider of software (particularly one who provides third-party operators with access to equipment on which the software is hosted) has become so involved in the delivery of the overall gambling process that it should be reclassified as a full operators. There are also difficult distinctions as to whether software that is essentially ancillary to the gambling process (e.g., back-office accounting) should require licensing at all. Recently, the Commission has created a further sub-category of software licences to cover the situation where the provider is a host of the software when in operation.Unlicensed gambling
Finally, certain very common forms of gambling do not require premises licences. The sale of lottery tickets can take place at normal retail premises or even on the street. Pools coupons can be collected and distributed through normal newsagents and, of course, private betting and gaming is permitted on domestic premises without a licence of any sort. The scope and conditions for this latter exception are complicated and nuanced.