UK
The Gambling (Licensing and Advertising) Bill, which will implement the UK government’s plan to change the regulation of online gambling from a point of supply to a point of consumption basis, has been approved by the House of
Commons. However, the parliamentary Christmas break means the Bill is unlikely to receive Royal Assent in time for licences to be issued by 1 April 2014, as the Government had planned.
The Bill had its second reading in the House of Commons on
5 November 2013 and its third on 26 November 2013. The Bill has now moved to the House of Lords, where the first reading took place on 27 November 2013 and the second is expected on
17 December 2013. If any amendments are made by the Lords, the bill would have to be resubmitted to the Commons for the amendments to be considered.
During its second reading in the Commons, the Bill, or more accurately, the Bill’s publicly stated aim (enhanced consumer protection), was given almost unanimous support by MPs.
However, the current form of the Bill was criticised by many
MPs for not doing enough to protect consumers. Despite this, all 15 suggested amendments were rejected by the Commons.
As with previous discussions on the Bill (in both the
Commons and the Select Committee hearings), much of the debate in the second reading was focussed on the tax consequences. Many MPs remained sceptical of the
Government’s stated aims of ‘increasing protection for UK consumers, supporting action against illegal activity and establishing fairer competition for British-based operators.’
Instead, some MPs reiterated the belief that the Government’s real aim is only to bring online operators within the scope of
UK taxation, although, despite this scepticism, they were largely not opposed to this effect of the Bill. One minister stated that
“although that might not be the purpose behind the Bill, if the consequence is that [online gambling operators] come within the tax net, that would benefit the Exchequer and create a level playing field, which it is important we should have.”
However, MPs did express concern about the rate of tax to be introduced by the Treasury and the effect on consumer protection if it is too high. One minister reported that the
Treasury has received estimates of the amounts it expects to receive from the new tax and that “if the tax is imposed at a
15% rate, 20% of the UK market will be unlicensed, unregulated and not paying tax. That will mean a higher proportion of people will be playing on unregulated sites.”
Another argued that the new tax would likely have the most detrimental effect on the smaller operators that have historically driven much of the innovation in the industry. He expressed concern that the Bill’s new licensing system and the Treasury’s proposed taxation rates would price smaller companies out of the market before they can reach a scale that would enable them to be successful, wiping out innovation in the industry.
Whether the Treasury will heed any of this advice remains to be seen, but appears extremely unlikely. Perhaps a better prospect for the industry is the hope of convincing the Treasury that bonuses and free bets should not be taxed, although this also feels like rather a long shot at this stage.
MPs also questioned whether the Bill has adequate enforcement measures to take action against unlicensed operators providing services to UK customers. The Bill was criticised for not including detailed enforcement methods or providing further powers to the Gambling Commission.
Specifically, MPs queried why the Bill did not include specific powers of enforcement such as financial blocking. Although the
Government has previously stated that most of these enforcement measures are already available, MPs remained sceptical that the Gambling Commission would, in fact, be able to request ISPs to block IP addresses of infringing operators.
One minister questioned why the Government would pass up this opportunity to grant the Gambling Commission the full range of powers available. Helen Grant (the Parliamentary
Under-Secretary of State for Culture, Media and Sport) stated only that there has been mixed evidence on the effectiveness of
IP blocking, but that the Government has not ruled anything out. However, she had earlier stated that the Government and the Gambling Commission are confident that action against illegal operators attempting to target British-based consumers can be taken through existing enforcement mechanisms to disrupt and stop unlawful gambling. No amendment to the Bill has been made at this stage.
Another issue raised by MPs during the debate was the different treatment of spread betting (which is regulated by the
Financial Conduct Authority (‘FCA’)) compared to other forms of gambling. There was some concern that the failure to bring spread betting within the scope of the Gambling Commission’s regulatory powers creates an anomaly, including that spread betting operators will not be subject to the Gambling
Commission’s licence conditions and codes of practice, and will not be required to report suspicious betting activities. The
Government is not prepared, however, to consider an amendment to the Bill regarding this. However, Grant has said that the FCA will issue guidance about reporting suspicious activities to the firms it has licensed for sports spread betting.
Although it is not yet clear whether any legal challenges will be made by operators, the Government has stated that it does not expect any ‘hold ups’ even if challenges are made. As such, it seems likely that we will have a functioning point of consumption regime in Britain in 2014, possibly by early summer.
Andrew Danson Senior Associate
Elizabeth Dunn Associate
K&L Gates andrew.danson@klgates.com
elizabeth.dunn@klgates.com
World Online Gambling Law Report - December 2013
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