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Offshore Regulation Consultation - June 2010

With the end of DCMS’s consultation period on the Regulatory Future of Remote Gambling in Great Britain due to end later this month (18th June), a number of very big questions need answering, not just for the new Minister, John Penrose MP, but for the majority of the companies in the British gambling industry.

The first question is how did we get here? Was the ‘White List’ system really broke from the start or did the Gambling Commission break it through negligence; not giving Parliamentarians enough confidence that White Listed jurisdictions were enforcing their regulations or by allowing Antigua to join the White List, without allegedly doing any proactive investigation?

Secondly, is this consultation going to turn into law? The Programme for Government, a manifesto set out by the Cameron-Clegg coalition on the 20th May, doesn’t mention it at all but this doesn’t mean it’s not happening. The Coalition document does quite categorically state though that they would be introducing a ‘one-in one-out’ rule whereby no new regulation is brought in without other regulations being cut by a greater amount[i]. Does this mean we should see less regulation of offshore operators?

Thirdly, how will it work? Even DCMS admit that it will be impossible to enforce this law as offshore jurisdictions are by their very nature, offshore. Thus only those with a UK bricks and mortar presence will feel truly compelled to comply and so be further encumbered.

And lastly, is this just about raising revenue? This was the general agreement at GTECH G2 Thought Leadership Seminar on April 27th attended by the head of gambling policy at DCMS, Paul Bolt.

The timetable of events seems to have been kicked off with Antigua’s inclusion on the White List in November 2008. Antigua had initially been rejected in the first round of applications, when the Isle of Man and Alderney were accepted in August 2007. Fifteen months later, DCMS added Antigua to its list of approved jurisdictions after “a reconsideration of Antigua’s application following further representations made to the Secretary of State.”[ii] Considering Antigua’s reputation for less than stringent online gambling regulation, rumours abounded that the inclusion of Antigua had been done only after the most cursory of investigations by the Gambling Commission and I can reveal that no visit was made by the Commission to corroborate claims by the Caribbean island state that it could fulfil the requirements of being on the White List[iii].

We then move to February 2009, in Westminster, where Parliament’s Third Delegated Legislation Committee[iv] was considering the Statutory Issue which added Antigua, Tasmania and Alderney to the White List[v]. Both the Lib Dem and Conservative Spokesmen on Gambling argued that the present system for checking if White Listed jurisdictions maintained strict enough controls on their licensees weren’t good enough. The only online mystery shopper tests had been undertaken in 2007, showing that 1/3rd of gambling websites were allowing under aged gamblers. The Gambling Commission wouldn’t say what jurisdictions they were in or if they were on the White List citing commercial sensitivity. Parliamentarians were understandably enraged and many began to campaign for stricter controls.

Tobias Elwood MP (Con, Bournemouth East) pointed out that Antigua’s legislation on underage gambling was more lapse than the UK’s, prompting him to question ‘who will police the companies that choose to operate from Antigua?’[vi] and later state ‘The Gambling Commission is failing to police the companies that it covers now, without it having to police an increased number of companies that can advertise in the UK’.[vii] Both opposition parties demanded that changes were needed to keep a ‘level playing field’ of regulation and that offshore operators advertising into the UK should pay for research into problem gambling in the same way UK licence holders do.

The next event would appear to be a vote in the European Parliament on the 10th March, where a report by Danish MEP, Christabel Shchaldemose, calling for "a potential political solution" to the problems of online and traditional gambling and betting was overwhelmingly voted for[viii]. This was a watered down version of an attempt to get a pan-European Code of Conduct for online gambling. This would appear to have been based on some rather over-zealous reasoning that online gambling was a major cause of problem gambling and criminality. The suggestion is that those supporting state monopolies for gambling and certain sporting bodies wanting to get more money from operators may have instigated this and stirred up the MEPs.

We then have a debate in Westminster Hall about Online Gambling on March 18th 2009, where more opposition MPs focussed on offshore operators not paying their share of funding for research and the Schaldemose inspired idea that internet gambling was destroying the very integrity of sport[ix]. A Labour MP, the now retired John Grogan MP (Selby), started a line of argument that the government was not forcibly defending British offshore operators who were fighting protectionist and monopolistic states through the European Courts which could lead to a more level playing field of regulation. This point was picked up by many opposition MPs who felt that after the mauling the government had got over the 2005 Act, they were afraid to ‘go in to bat’ on gambling. Don Foster MP (LD, Bath), the key protagonist in both these debates made the main speech, asking of the Minister, ‘can he tell us whether mystery shopping in white-listed jurisdictions has now begun? If not, when does he expect it to begin?’[x]

The Gambling Commission would finally undertake a mystery shopper test of White Listed jurisdictions in 2009 which showed that “95% of active customers were registered with operators that had no identified weaknesses”[xi]. But the damage had been done. The Gambling Commission’s lack of action in showing Parliamentarian’s that the White List could work, combined with the folly of accepting Antigua gave the opposition parties the ammunition they needed and convinced the Minister to look at new ways of regulating offshore gambling.

The Gambling Commission closed all new applications to the White List in April 2009 and DCMS, with the help of the Commission, started looking at news ways of fixing the ‘White List’ system. It seems a shame that the new Liberal Conservative coalition have promised to ‘end the culture of ‘tick-box’ regulation, and instead target inspections on high-risk organisations through co-regulation and improving professional standards.[xii]’ If this had happened with the Gambling Commission, just three years earlier we may not now be in the mess that we’re in.
If the proposed licensing is really about ensuring offshore operators are properly regulated, then overhaul the Gambling Commission. If this is about getting operators to pay their fair share of for problem gambling research, then make voluntary contributions part of the White Listing criteria. Unfortunately, I believe that by dropping the ball, the Commission has opened the online industry to the grasping clutches of HM Treasury and any new legislation will just be a Trojan horse for taxation.

References

  1. The Coalition: Our programme for government,  p.9 http://programmeforgovernment.hmg.gov.uk/files/2010/05/coalition-programme.pdf
  2. Gambling Compliance 5th November 2008 http://www.gamblingcompliance.com/node/21365
  3. Response to FOI request has been sent on 20th May 2010 to Gambling Commission to check this, ref: GC_FoI_10/046
  4. Hansard 4th February 2009 http://www.publications.parliament.uk/pa/cm200809/cmgeneral/deleg3/090204/90204s01.htm
  5. SI 2008 No. 2829, http://www.opsi.gov.uk/si/si2008/uksi_20082829_en_1
  6. Hansard, 4th February 2009 , Column 8 http://www.publications.parliament.uk/pa/cm200809/cmgeneral/deleg3/090204/90204s01.htm
  7. Ibid
  8. http://www.europarl.europa.eu/sides/getDoc.do?language=EN&type=IM-PRESS&reference=20090310IPR51382
  9. Hansard, 18th March 2009, Column 237WH, http://www.publications.parliament.uk/pa/cm200809/cmhansrd/cm090318/halltext/90318h0001.htm
  10. Hansard, 18th March 2009, Column 250WH, http://www.publications.parliament.uk/pa/cm200809/cmhansrd/cm090318/halltext/90318h0001.htm
  11. Gambling Commission Annual Report 2008 – 2009, p.18
  12. The Coalition: Our programme for government,  p.9 http://programmeforgovernment.hmg.gov.uk/files/2010/05/coalition-programme.pdf