The Gambling Commission (the UK’s gambling regulator) has recently issued advice on those elements of a gambling system which amount to ‘remote gambling equipment’, as defined in the Gambling Act 2005. The advice is intended to help remote gambling operators and their business partners identify which elements of their gambling systems meet the definition. For offshore operators and their onshore affiliates, this can help to determine whether a UK operating licence is needed.
In the UK, it is a criminal offence for a person to provide gambling facilities unless he holds an operating licence or is acting in the course of a licence-holder’s business. This applies both where gambling facilities are provided remotely (e.g. via the internet) or otherwise (e.g. at a conventional casino).
However, remote gambling operators who are based offshore only require a UK operating licence if they have a piece of ‘remote gambling equipment’ located in the UK. Therefore offshore operators (and also any other related persons who may have equipment located in the UK) need to know which types of equipment will be considered as ‘remote gambling equipment’ by the UK authorities.
The definitions of ‘remote gambling equipment’ and facilities for gambling
The Gambling Act 2005 defines ‘remote gambling equipment’ as any electronic or other equipment that is used by, or on behalf of, a provider of remote gambling facilities to:
store information relating to a person’s participation in gambling;
present to gambling participants or potential gambling participants, a virtual game, virtual race or other virtual event or process by reference to which the gambling is conducted;
determine all or part of a result of the effect of a result; or
store information relating to a result.
The Gambling Commission considers that any piece of equipment used in the provision of gambling facilities that performs one of these four functions should be classified as remote gambling equipment.
However, it also considers that any equipment that is not used for these functions, but is instead used for other functions (e.g. integrity testing, money laundering compliance and monitoring, complaints handling or responsible gambling analysis) is not used in the provision of the gambling activity. This is because they are not used by customers or by gambling operators as part of the gambling activities. If any such equipment is not classified as ‘remote gambling equipment’, a UK operating licence would not be required.
The Commission’s advice lists the following specific examples:
Equipment storing marketing, bonus and incentive data – Only a core system with a principal function of offering, operating and settling the gamble is “used in” the provision of gambling facilities. Systems used to calculate bonus rewards ‘awarded or determined during the course of a single gambling transaction or session of “play”’ would be remote gambling equipment, whereas systems that only operate to calculate rewards and incentives based on a customer’s historic play may not be;
Client application download servers – The Commission would not normally regard server equipment that is used to deliver “client application” software to PCs, mobile phones and set-top boxes (for interactive digital TV) as used in the provision of facilities for gambling. The proviso is that it should only be used as a means of distributing, updating and checking applications to be installed on the end-user’s device and not used when the gambling commences;
Business continuity arrangements – These are arrangements that operators regularly put in place to reduce the risk of downtime or data loss and to provide uninterrupted service when equipment fails or is being maintained. The Commission considers that standby and disaster recovery equipment that the operator intends to use in, or as a replacement for, a ‘live’ system is remote gambling equipment. On the other hand, if equipment located in the UK is used solely to store back up data and this data is then restored onto a ‘live’ or standby system located outside the UK, this would not amount to ‘equipment used in the provision of facilities for gambling’.
Components used in remote gambling
The Gambling Commission has introduced the concept of gambling systems being made up of ‘components’, where this refers to software or data that is stored on a piece of equipment. The purpose of each component will determine whether the equipment storing it is classified as ‘remote gambling equipment’.
Any equipment storing the following types of component is likely to meet the Commission’s definition of ‘remote gambling equipment’:
Virtual event and game ‘pages’ – Any equipment serving ‘pages’ or other media that presents virtual events on which users can gamble. This includes web, mobile device and digital television pages. However, note that equipment used to download ‘client applications’ may escape (see above).
Application components – These are components that act as virtual event controllers, generate random numbers (or other data) or settle bets.
Data components – Used to store an individual’s gambling transaction record and the last known state of a virtual event that an individual participated in.
As such, anyone operating such equipment would require a UK licence or to be operating on behalf of a licence holder.
Consequences for unlicensed, offshore gambling operators and their affiliates
The Commission has interpreted ‘remote gambling equipment’ sufficiently narrowly to ensure that equipment and components that are ancillary to gambling activities do not fall within the definition. This makes sense and is consistent with the relevant parts of UK gambling legislation.
The advice is likely to help offshore gambling operators who want to identify the equipment they can safely locate in UK without need for a licence and businesses which operate UK-located equipment that is related to a gambling system run by unlicensed offshore gambling operators (e.g. “white labellers”).
Any such operators should carefully consider the function of particular pieces of equipment within an overall gambling system before concluding that they are not ‘remote gambling equipment’ and that an operating licence is not needed. Since there are potential criminal sanctions if businesses wrongly operate without a licence, specific legal advice should be taken before opting to locate any equipment in the UK.