The Gambling Commission has published a guidance note aimed at assisting the industry determine what constitutes “gambling software” and which entities within a supply chain require a licence from the Gambling Commission.

This is a key issue for the industry as, from 30 January 2015, it will be a licensing condition that operators only use gambling software from licensed developers. This places the onus squarely on operators to ensure their suppliers, where required, hold the requisite licence, regardless of where the supplier is located.

The Commission considers any software which is designed for use in connection with remote gambling, that is intended to be used or is used by a gambling operator, to be gambling software. This includes any gambling specific application, such as software used in:

  • Virtual event web pages
  • Virtual event control
  • Bet capture / matching
  • Settlement
  • Random number generation
  • Gambling records, showing detailed results of games

Do I need a licence?

Whether a licence is needed comes down to what constitutes the activities of manufacture, supply, installation and adaptation of gambling software (s.41 of the Gambling Act).

  1. Supply

If an entity were to supply gambling software to a licensed entity, it would need a remote gambling software licence. We understand that there are only two instances where this would not be the case:

  • Intra-group supply arrangements. For example, if a group had an entity that developed gambling software and an IP holding company that supplied the software intra-group, the Commission is only likely to require the developing company to hold a licence and the IP holding company is likely to benefit from “umbrella” licensing. It is yet to be confirmed however if one or two licence fees would be payable in this scenario.
  • Supply not to a licensed entity. The Commission will not require an entity to hold a remote gambling software licence insofar as it purchases gambling software and then sells it to a third party (not licensed by the Commission) without any involvement in the manufacture, adaptation or installation.
  1. Installation

Any company that installs gambling software on the system of a Commission licensed operator must do so in reliance on a gambling software licence issued by the Commission.

  1. Manufacture

It is sometimes the case that a number of companies within a group manufacture or develop software. When it comes to licensing, the Commission is ultimately trying to identify the entity that retains ultimate control of the development and tells the other entities what to do.

In circumstances where a business is purchasing a product and the overall control, design and development of the product sits with the third party (the “Development Company”) then the Development Company needs a gambling software operating licence. This is in contrast to circumstances where a business (“Company Y”) is purchasing time and/or skills and that Company Y retains ultimate control over the design and content of the product and the contracted third party is working to specific parameters; in such a scenario, Company Y requires the gambling software operating licence and the contracted third party does not.

The challenge for the industry will be how to categorise relationships that sit between the two. The Commissions provide some general guidance around this and focuses on “control”. Questions that should be answered include:

  • Which company is responsible for the design and functionality of the software?
  • Which company is responsible for approving design changes?
  • Which company is responsible for the functionality and acceptance testing?
  • Which company is responsible for the quality assurance/regulatory compliance testing of the product?
  • Which company retains the IP for the product?
  • What the contract says in terms of responsibilities and liabilities?