Gambling Commission clears up grey market anxiety
15th April 2014 8:01 am GMT
The angst among operators about the forthcoming overhaul of the UK tax and regulatory regime was made crystal clear by 888 chief executive Bryan Mattingley in a conference call following publication of the company’s first quarter results last Thursday.Mattingley is not normally one to mince his words but dealing with regulators is a delicate business. So when he said that he found it “quite difficult” dealing with the UK Gambling Commission (in comparison to regulators in Nevada, New Jersey and elsewhere), it can probably be taken as read that he was delivering his words with a healthy dose of understatement.
Questions about the incoming Point of Consumption tax were high on the agenda of City analysts throughout the annual results reporting period. Paddy Power said it will cut marketing costs and renegotiate lower revenue share deals with affiliates as it looks to mitigate the impact of the change. William Hill said it would cut £15-20m in costs while increasing market share due to all the smaller operators fleeing the market. Both were common sense responses aimed at pleasing worried investors but cutting costs while increasing market share would be a tricky stunt to pull off.
Betfair was more circumspect. CEO Breon Corcoran refused to set out a plan to mitigate the tax, explaining that he preferred to react to the challenges as they arose rather than attempting to second-guess what would happen. In the meantime, Corcoran’s already done his cost-cutting. He’s going on a massive marketing binge.
Corcoran, the cover star of the forthcoming issue of GIQ magazine (released later this week), is proving to be a shrewd operator. His response, taken in conjunction with Mattingley’s, is probably the most telling.
The change of regime is not due until the end of the year and there are a lot of moving parts that need to fall into place before we can even begin to predict its effects.
The Gambling Commission is also in the process of figuring out what the new regime will look like and - for what it’s worth - we have always found them to be very helpful.
One lawyer we spoke to noted that the Commission tends to over-elaborate with its written communications, which might come at the expense of the personal touch. It was not really meant as a criticism, more as a difference in approach to say Gibraltar, which tends to leave huge gaps in its literature, which regulatory chief Phil Brear will cheerfully fill in when you give him a call.
So the Commission’s latest E-Bulletin, which gave the answers to some of our frequently-asked questions inevitably posed some more questions, which the Commission was happy to answer when we gave them a call. Perhaps the most tricky questions for some applicants will revolve around the question: How does the Commission assess the integrity of licence applicants?
Here, the regulator will demand any information on any involvement with civil procedures and regulatory investigations. So does involvement in these situations bar an operator from obtaining a licence?
A Commission spokesperson tells us: “It depends on the nature of those proceedings, the outcome, time passed - but in isolation probably not. The information does however help us build a picture of the applicant or relevant person and how they conduct their business/themselves. Depending on the nature of the proceedings there could, for example, be implications for financial robustness such as a claim for substantial damages.”
I will highlight the words “in isolation probably not” there. That will come as some relief to executives at bwin.party, PokerStars and elsewhere.
Providing the Commission with evidence from past investigations is about providing an evidence base for making an assessment of suitability. It should also save time for all concerned if applicants share any findings directly rather than waiting for the Commission to request intelligence material directly itself.
“Don’t forget that it is for the applicant to satisfy the Commission that they are suitable to hold a licence, not for the Commission to go seeking that evidence,” continues the spokesperson. “There are other regulators that may have investigated the applicant/relevant person not just gambling regulators. Where we can, we will liaise with the other gambling regulators to provide us with detail and any other information they consider is relevant to the applicant’s suitability. We also expect applicants to be open and honest with us.”
Our final query concerned Section 13.4 of the FAQs, which states: "We will also look at the manner by which the applicant has conducted any previous business with specific regard to the provision of gambling in other jurisdictions and in particular any operations in black or grey markets."
How does the Commission intend to define grey or black? Surely a grey market is indefinable by definition? Can the Commission really judge an applicant based on its business in grey markets when the law is, er, grey?
“Again it is about providing an evidence base for making an assessment of suitability rather than making judgments about individual jurisdictions at a snapshot in time. In principle it is very much the same set of points we are making about the current position in section 14 of the document [see below], only this looks back in time. So it is not about defining grey or black as such, but much more about understanding the operator’s approach to operating in grey and black markets and what action they took to avoid acting illegally. If an operator has a history of flouting laws then it will raise questions about their suitability to hold a licence in the future if the same key people are still involved. Our view is that most operators of scale will be able to demonstrate their suitability in this regard.”
Section 14 states that the Commission will not issue a list of jurisdictions in which an operator must cease its business. It is up to the operator to present its rationale for working in any market, which accounts for more than 3 per cent of revenues or 10 per cent of revenues if your turnover is less than £5m or any jurisdiction you are actively targeting, ie. operating in a local language and currency.
The question on lawyers’ lips is: “How will the Commission interpret the information provided?”
Well unfortunately that question is unanswerable until the information has landed in the Commission’s inbox. However, operators should take heart from the spokesperson’s final sentence: “Our view is that most operators of scale will be able to demonstrate their suitability in this regard.”
If you have had a lawyer look at the law of each significant jurisdiction you work in, (which surely must be a given in this day and age), then you should be okay. For smaller operators that have taken a more gung ho approach to regulation? Well, perhaps William Hill will be stealing your customers as you head for the hills.sah@gamingintelligence.com
One lawyer we spoke to noted that the Commission tends to over-elaborate with its written communications, which might come at the expense of the personal touch. It was not really meant as a criticism, more as a difference in approach to say Gibraltar, which tends to leave huge gaps in its literature, which regulatory chief Phil Brear will cheerfully fill in when you give him a call.
So the Commission’s latest E-Bulletin, which gave the answers to some of our frequently-asked questions inevitably posed some more questions, which the Commission was happy to answer when we gave them a call. Perhaps the most tricky questions for some applicants will revolve around the question: How does the Commission assess the integrity of licence applicants?
Here, the regulator will demand any information on any involvement with civil procedures and regulatory investigations. So does involvement in these situations bar an operator from obtaining a licence?
A Commission spokesperson tells us: “It depends on the nature of those proceedings, the outcome, time passed - but in isolation probably not. The information does however help us build a picture of the applicant or relevant person and how they conduct their business/themselves. Depending on the nature of the proceedings there could, for example, be implications for financial robustness such as a claim for substantial damages.”
I will highlight the words “in isolation probably not” there. That will come as some relief to executives at bwin.party, PokerStars and elsewhere.
Providing the Commission with evidence from past investigations is about providing an evidence base for making an assessment of suitability. It should also save time for all concerned if applicants share any findings directly rather than waiting for the Commission to request intelligence material directly itself.
“Don’t forget that it is for the applicant to satisfy the Commission that they are suitable to hold a licence, not for the Commission to go seeking that evidence,” continues the spokesperson. “There are other regulators that may have investigated the applicant/relevant person not just gambling regulators. Where we can, we will liaise with the other gambling regulators to provide us with detail and any other information they consider is relevant to the applicant’s suitability. We also expect applicants to be open and honest with us.”
Our final query concerned Section 13.4 of the FAQs, which states: "We will also look at the manner by which the applicant has conducted any previous business with specific regard to the provision of gambling in other jurisdictions and in particular any operations in black or grey markets."
How does the Commission intend to define grey or black? Surely a grey market is indefinable by definition? Can the Commission really judge an applicant based on its business in grey markets when the law is, er, grey?
“Again it is about providing an evidence base for making an assessment of suitability rather than making judgments about individual jurisdictions at a snapshot in time. In principle it is very much the same set of points we are making about the current position in section 14 of the document [see below], only this looks back in time. So it is not about defining grey or black as such, but much more about understanding the operator’s approach to operating in grey and black markets and what action they took to avoid acting illegally. If an operator has a history of flouting laws then it will raise questions about their suitability to hold a licence in the future if the same key people are still involved. Our view is that most operators of scale will be able to demonstrate their suitability in this regard.”
Section 14 states that the Commission will not issue a list of jurisdictions in which an operator must cease its business. It is up to the operator to present its rationale for working in any market, which accounts for more than 3 per cent of revenues or 10 per cent of revenues if your turnover is less than £5m or any jurisdiction you are actively targeting, ie. operating in a local language and currency.
The question on lawyers’ lips is: “How will the Commission interpret the information provided?”
Well unfortunately that question is unanswerable until the information has landed in the Commission’s inbox. However, operators should take heart from the spokesperson’s final sentence: “Our view is that most operators of scale will be able to demonstrate their suitability in this regard.”
If you have had a lawyer look at the law of each significant jurisdiction you work in, (which surely must be a given in this day and age), then you should be okay. For smaller operators that have taken a more gung ho approach to regulation? Well, perhaps William Hill will be stealing your customers as you head for the hills.sah@gamingintelligence.com 
