Gambling

Written evidence submitted by Manx eGaming Association (MeGA) (GA 67)

Introduction

This submission is being made by the Manx E-gaming Association (MeGA), a trade association of the major online gaming operators and service providers located on the Isle of Man (IOM) following the Committee’s call for evidence in relation to the CMS Select Committee inquiry into the implementation and operation of the Gambling Act 2005.

The members of MeGA have substantial experience in engaging with regulators and other stakeholders to ensure remote gambling is conducted in a fair, safe, and crime-free environment. This experience is based on operating in a fully regulated jurisdiction where it is possible for private sector operators to obtain licences on a non-discriminatory basis.

How effective the Act has been in its core objectives to:

- ensure that gambling is maintained crime-free and conducted in an open and fair manner,

- protect children and vulnerable people from the adverse effects of gambling,

- update the legislative framework with regards to online gambling;

It appears from the understanding and experience of MeGA’s members that the Act has been reasonably effective in achieving its core objectives. The results of the recent prevalence studies would indicate no statistically significant increase in problem gambling since the introduction of the Act. The regulatory requirements placed in the Isle of Man as a result of the White List requirements and the IOM Regulator’s determination to be a well-regulated location, have ensured a rigorous licensing regime.

MeGA believes that outright prohibition of online gaming is not effective in either protecting children and the vulnerable, or ensuring that gambling is crime-free and conducted fairly. Whether it is the route that France and Belgium have taken (legal threats) or Norway (blocking payment processing) the result is an environment in which reputable operators, regulated in jurisdictions requiring high standards of operations and probity are unable to operate but where illegal operators prosper. For example, despite online sports betting being clearly illegal in the USA, the National Gambling Impact Study Commission Final Report (1999) estimated that between USD81bn and USD380bn per year is wagered on sports in the USA. It is not known how much of this would be online, but for certain it is a large figure. This suggests that rather than having a goal of enforcing a ban (of whatever nature), it would be more effective to create an environment where the benefits of being licensed outweigh the costs.

We strongly encourage any review of regulation or legislation to bear in mind the current experiences in other countries and to take the long term view that the principles enshrined in the original regulatory intention should be preserved i.e. that successful regulation controls gambling for society’s benefit, and that prohibition does not prevent activities; it merely drives them underground where customers become the victims of illegal suppliers. The analogy with the prohibition of the sale in the USA of alcohol is worth considering in this regard.

The financial impact of the Act on the UK gambling industry;

No comment

The effectiveness of the Gambling Commission since its establishment, and whether it represents good value for money;

No comment

The impact of the proliferation of off-shore online gambling operators on the UK gambling sector and what effect the Act has had on this;

We consider the Act and the ‘White List’ operated under it, has had the effect of reducing the number of off-shore online gambling operators targeting the UK. In addition many of the off-shore operators that had proliferated during the infancy of internet gambling and have not previously been under the scrutiny of the UK, or are not meeting UK consumer protection standards, can now be appropriately dealt with.

The approval of the Isle of Man as a White Listed jurisdiction in 2007 effectively extended the UK consumer protection standards to UK consumers playing on sites located off-shore. Furthermore, operators in non-white listed jurisdictions continue to migrate their operations into the White Listed jurisdictions therefore extending the UK consumer protection influence. UK consumers now enjoy high standards of consumer protection as a result of playing with operators established on the Island.

The Isle of Man has specific legislation and robust supervisory requirements for its online gambling sector and this framework provides a number of unique protections for all consumers, including those from the UK, over and above what are considered regulatory norms. This means that UK consumers, who may have previously given their custom to unregulated entities on the internet and who now give their custom to Isle of Man operators enjoy significantly higher levels of consumer protection than before the Act was introduced.

Amongst the protections that are offered to all players on Isle of Man licensed sites are:

- Mandatory segregation and protection of player deposits and winnings;

- Mandatory annual problem-gambling levy on all operators, half of which has traditionally been remitted to RIGT/GREAT to assist with research and treatment of gambling addiction;

- Mandatory problem gambling functionality requirements to allow players to limit stakes or losses as well as to self-exclude and seek help with any emerging problems;

- Mandatory evaluation of every game by an independent software testing company to ensure compliance with regulations on fairness and data integrity;

- Procedures for the intervention and resolution of disputes between players and operators;

Why the Act has not resulted in any new licences for casinos or "super" casinos;

No comment.

The effectiveness of the classification and regulation of gaming machines under the Act;

No comment.

What impact the Act has had on levels of problem gambling.

No comment. MeGA believes that the requirement for players to be able to limit stakes or losses as well as to self-exclude and seek help with any emerging problems, means that the Act, through allowing licensed operators that meet appropriate regulatory standards in their sites, has assisted in holding down levels of problem gambling.

Other Relevant Comments

Whilst the UK sought to recognise the advantages of free trade and expanding the market in gaming services, this was not initially embraced by other EU jurisdictions. However, these attitudes appear to be changing, so the UK may wish to consider what opportunities there are to harmonise any change in regulations with international developments.

The regulators of France and Italy are at an advanced stage in finalising a bilateral agreement framework but it is not clear what are the exact terms will be. It has been speculated that it will allow, at least initially, for the cross-border sharing of player liquidity in poker. Such arrangements will be essential for smaller economies, particularly where liquidity is important (poker, bingo and progressive games) and where a closed market will mean an inability to compete with the cross-border operators which have the benefit of pooling players from a number of countries.

Such a pooling of player liquidity can only occur if there are similar regulatory standards between countries. The IOM has established rigorous standards, which should stand it in good stead when the inevitable cross border/mutual recognition is more broadly implemented.

Once there is a degree of harmonisation of regulations between countries, the next stage will likely be the collection of gaming tax revenues on behalf of other countries. In this regard there is a clear precedent in the Euromillions, where funds collected across nine participating countries are awarded to players and donated to good causes across the same countries. Viking Lotto also collects contributions across eight Northern European countries and distributes them in a similar, but not identical manner.

It is because MeGA’s view is that such developments are probable that we believe that through establishing a means of mutual recognition of IOM and UK licences, the UK can lead the way in indicating how EU countries can achieve cross-border regulation. This would open up the EU market while still allowing countries to collect gaming tax from their own citizens.

Many of the major players in the online gaming sphere have their roots in the UK (Ladbrokes, Betfair, Party Gaming, William Hill, Playtech, bet365 to list a few) either being listed in the UK or having large marketing and administrative arms in the UK. Their dominance of the industry is being eroded by the protectionist measures being implemented across Europe, the objective of which is to protect the incumbent (largely home grown, sometimes government monopolies) operators. Should the UK have the vision to show how cross-border mutual recognition can work, these UK companies could reassert themselves in a market where a more level playing field would have been created.

July 2011

Prepared 1st August 2011