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British Government Releases Report on Online Gaming
A report commissioned by the British government on remote gambling was released in October 2006. The British Gambling Act (2005) (the “Act”) defines “remote gambling” as gambling via remote communication including Internet, telephone, television, radio, or any other electronic means.
When the Act comes into effect in 2007, online gambling website operators will be able to legally base their operations in Britain, under the supervision of the new Gambling Commission. Britain will then become the first major jurisdiction to have a “regulated free market” approach to remote gambling. In comparison, most major jurisdictions, notably the United States, favour prohibition.
The Act and the report are part of the British government’s response to the explosive growth in the online gaming sector. The market has more than doubled in the last five years and is growing worldwide; the Asia-Pacific market in particular is expected to experience phenomenal growth in the next decade.
Despite such growth, the majority of online gaming website operators are registered in just a few mostly offshore jurisdictions. However, one of the notable exceptions is the Kahnawake Mohawk Nation (“Kahnawake”) reserve in Canada. In fact, Kahnawake is the third most popular jurisdiction after Antigua and Costa Rica for those setting up online gaming operations. These jurisdictions are favoured by operators because of their free market approach to remote gambling.
However, the report points out that a jurisdiction with a robust regulatory structure is not necessarily a deterrent for operators; indeed, it could be an attraction. One reason is that being licenced in a jurisdiction with high standards of integrity enhances an operator’s reputation to its existing and potential customers. Yet the report concedes that despite the new legislation, operators are unlikely to move to Britain en masse; while Britain is attractive to operators in terms of reputation and integrity, other factors such as low tax regimes will likely continue to attract operators to jurisdictions such as Antigua and Costa Rica.
The report also addressed a major concern of the British government, namely the impact of remote gambling on society. The report concludes that remote gambling is not likely to create new problem gamblers, but it is likely to exacerbate existing problem gambling. On the other hand, remote gambling is likely to lead to problems of youth gambling.
The other major concern of the British government is the potential for criminal activities in remote gaming including hacking, fraud by operators, and money laundering. In 2001, one of Canada’s largest organized crime family’s high tech illegal gambling operations was raided and exposed. However, despite such high profile cases, the true extent of criminal activities linked to remote gambling is not known. Part of the reason for this is the lack of effective monitoring and measures to address the problem in the major jurisdictions.
The report recommends cooperation with other governments to curb problem and youth gambling by harmonizing monitoring and age verification systems standards. Greater cooperation with the remote gaming industry itself is also recommended in order to ensure fair play, and to better understand the true extent of criminal activities in the industry. The report also called for more studies of this new and evolving market.
For a copy of the report, visit: