Memorandum from CryptoLogic Inc. (DGB
60)
1. INTRODUCTION
1.1 CryptoLogic Inc. is a major gaming software
provider ("Software Provider") to the UK gaming market.
Through its licensing subsidiary, WagerLogic Limited, CryptoLogic
software powers the online gaming operations of many of the UK's
best-known operators ("Operator"), and employs approximately
40 people in its two London offices.
1.2 CryptoLogic fully supports the UK Government's
leadership in creating a world-class licensed and regulated environment
for remote gambling that affords the highest consumer protection
and social responsibility while allowing flexibility for market
growth for the benefit of all stakeholders. This mandate is consistent
with CryptoLogic's long-standing regulatory commitment and efforts.
1.3 Further to our response to the DCMS
Position Paper on Remote Gambling (which we have attached with
our hard copy submission) and our meeting with Mr Clive Hawkswood
in July 2003, we welcome this opportunity to submit CryptoLogic's
response to the Draft Gambling Bill.
2. CRYPTOLOGIC
CREDENTIALS
2.1 Leader and pioneer in the global e-gaming
industry: Established in 1995 as one of the founding software
companies in the industry. Since inception, CryptoLogic's software
has processed £9 billion in secure wagers for over 1.5 million
players in over 240 countries.
2.2 Largest public online gaming Software
Provider: Traded on the London Stock Exchange (CRP), Toronto Stock
Exchange (CRY) and Nasdaq National Market (CRYP).
2.3 Blue chip UK customer base: Operators
using our software include the UK's best-known names in land-based
and online gaming: William Hill plc (online casino and poker);
Littlewoods Gaming (online casino and poker); The Ritz Club London
(online casino); and ukbetting plc (online casino and poker).
2.4 Regulatory leadership and commitment:
CryptoLogic is uniquely qualified as one of the few Software Providers
in the world with experience and compliance in multiple highly
regulated jurisdictions such as Alderney, Isle of Man and Australia.
2.5 Comprehensive online gaming solution:
We offer a total suite of more than 80 Internet-based slot and
table casino games, multi-player bingo and person-to-person poker
games in multi-languages and multi-currencies with an integrated
e-cash management system and 24/7 customer support.
3. SUBMISSION
CryptoLogic's response focuses on the following
three important issues raised in the Draft Gambling Bill:
3.1 Software Provider Probity and Certification—"Approved
Certified Supplier"
Recommendation:
CryptoLogic supports the testing of remote gambling
equipment as written in Article 5, point 70, but would also strongly
recommend that the Software Provider must be approved as "fit
and proper". The Software Provider is a critical component
in the operations of an Operator's business and can significantly
affect the outcome of games and wagering. In most cases, a Software
Provider's interest is aligned with the Operator as the Software
Provider earns its fee through a revenue share arrangement.
As such, in order to ensure the integrity of
the company and its key personnel, the Software Provider should
be subject to rigorous probity review including transparency of
ownership and its software should be certified by an accredited
testing organization.
Rationale:
The Software Provider's role is comparable to
a land-based gaming machine manufacturer. The Software Provider
plays a material role in an online gaming operation as it ensures:
— player protection controls; and
— a secure gaming system.
The Software Provider's responsibility can cover
a comprehensive scope of software and services with ongoing and
remote access to the gaming system including:
— gaming equipment installation, support
and maintenance;
— software for the online gaming system
including player registration, ECash, RNG, games and licensee
reporting;
— support and change management for
the software and hardware;
— player call centre support;
— Ecash software, staff and holding
player funds on deposit; and
— fraud staff and procedures related
to ECash and gaming activities.
Conclusion:
"Remote Operating Licence" under Article
5, point 70 should require that the Software Provider be subject
to a "fit and proper" Probity test and Software Certification
to become an "Approved Certified Supplier".
3.2 Provision of Facilities for Gambling
Recommendation:
As written under Article 3, point 21, CryptoLogic
supports that the UK licensing jurisdiction should apply if the
pieces of "remote gambling equipment" situated in the
UK are used to i) register a person's participation in gambling
(player database server); and ii) enable the player to participate
in a virtual game or gambling (gaming server or random number
generator). As such, the Gambling Commission must have the authority
and access to these two servers that are primary requirements
to run a remote gambling system.
CryptoLogic's Internet gaming software is licensed
on a revenue share basis to many international operators throughout
the world. The concern is that the presence of any one piece of
"remote gambling equipment" located within the UK, which
may be secondary servers, would inadvertently require each operator
accessing that piece of equipment to be licensed in the UK.
Rationale:
Internet gaming is a global business, and as
such, the Operator, Software Provider, the online gaming infrastructure
and many pieces of "remote gambling equipment" that
make up the network are often located in different jurisdictions.
We agree that the Gambling Commission should have the authority
and access to primary functions such as the gaming and database
servers. Other secondary components of the online gaming operation
include equipment, facilities and people:
— electronic cash processing
— Web site hosting server
— disaster recovery systems
— multi-licensee linked progressive
jackpot systems
— player-to-player gaming such as poker
It is not clear that if one of the above pieces
of "remote gambling equipment" of the Software Provider
is situate in the UK and international operators outside of the
UK utilize that piece of equipment, then those operators must
procure a licence in the UK.
Conclusion:
An operator must be licensed if it utilises
a gaming server and database server located in the UK. "Provision
of Facilities for Gambling" under Article 3, point 21 needs
to ensure that the use of secondary pieces of equipment in the
UK does not require operators to be licensed.
3.3 Advertising
Recommendation:
CryptoLogic strongly supports the DCMS' position
favouring a free market approach. Operators should be allowed
to advertise and market their services on a global basis (into
and out of the United Kingdom). Although Article 3, point 30 on
"Advertising" has yet to be published, we believe that
an Operator operating out of an EU member state should enjoy the
freedom to advertise into the UK and that a UK-licensed Operator
should enjoy reciprocity in EU member states.
Rationale:
Free markets must be maintained, and any restrictions
would infringe on the free movement of services—the underlying
spirit of free trade in the European Union and the global nature
of the Internet and online gaming. Operators licensed in the UK
and EU member states should have the right to freely market into
each other's jurisdiction.
Evidence has shown that restrictions are often
difficult to police and undermine consumer protection for a country's
citizens (eg, the US, Australia). Recent European cases in Italy,
Netherlands and Finland highlight the need for international co-operation
that give both UK and European Operators the right to operate
and market their services worldwide.
Conclusion:
"Advertising" under Article 3, point
30 should allow Operators licensed in the UK and EU member states
the freedom to market into each other's territories.
4. IN CLOSING
We welcome ongoing discussions between the UK
government and industry, and we would be pleased to meet with
Joint Committee representatives to share information and our experiences
as you see appropriate.
December 2003
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