Major legislative changes are set to take effect in the UK — starting October 1 all online sportsbooks that cater to clients residing in the UK must be licensed by the UK Gambling Commission. This requirement is part of the UK Government's sweeping gambling reform which introduces the Gambling (Licensing and Advertising) Act of 2014 (the "GLA") and amends existing law The Gambling Act, established in 2005. What does the new law mean for online sportsbooks and what do sports bettors need to know?
Prior to the GLA, online sportsbooks have only been required to hold a UK Gambling Commission license if they had networking hardware such as servers that served online users in the UK. The betting sites were even allowed to advertise their business in the UK — provided they were subject to the laws of another EEA state (including Gibraltar) or a 'White List' jurisdiction, which includes the likes of Antigua and Barbuda, Alderney, and the Isle of Man. Many new sportsbooks catering to the UK have launched in the Isle of Man.
Under the GLA all remote gambling operators must hold a license to offer any gambling service to UK residents; sports betting, bingo, casino, lottery, or even gambling software are included. Before the operator even starts paying the tax, the license itself comes with an application fee and an annual fee payable to the UK Gambling Commission. The fee is relative to the size of the gambling business. The deadline for existing unlicensed operators to apply for a new license prior to the law taking effect on October 1 is September 15.
SBOBet and 12Bet have already announced a UK market exit, and the rumor mill suggests that at least one other high-profile sportsbook will also pull out of the UK ahead of the legislation taking effect.
5:23 am Sept 11 UPDATE: Pinnacle Sports has confirmed to SBR that they will leave the UK market.
Point of Consumption Tax: 15% of Gross Gambling Profits from UK customers
In addition to the license requirement, as of 1 December 2014, profits made by gambling operators on bets placed via the internet from players located in the UK will be subject to a 15% tax rate. There has been widespread criticism on the bill and it has been debated by lawmakers for years. SBR reported in August of last year that Remote Gambling Association CEO Clive Hawkswood: "We knew it was coming. The focus for us now is on trying to get the actual rate of the tax reduced.”
The point of consumption tax has remained 15% of revenue which comes as victory to the UK Government, but will undoubtedly have a profoundly negative effect in the online sportsbook industry as a whole as marketers, software providers, and ultimately players are likely to see their wallets tapped as companies balance their checkbooks against the exorbitant tax. Opponents of the law argue that the tax will eliminate competition to the largest bookmakers such as Bet365, who will have a majority of the business. The tax is prohibitive to new sportsbooks entering the market.
What does this mean for players?
Players who live outside of the United Kingdom are just as likely to feel the effects of the gambling tax reform as those inside. Online sportsbooks that choose to conform to the new tax and continue to service UK residents might opt to raise transaction fees associated with deposits or withdrawals, or even add a fee where there was not one before. A less competitive UK sports betting market could very well mean higher bookmaker margins. Recent examples of this economic event include airlines and in the USA, cable internet providers. Players across the United Kingdom fear they will lose access to their favorite bookmaker.
Enforcement of the UK Gambling Laws
How the UK Government and the Gambling Commission intend to police the industry remains unclear. The government could order internet service providers to block access to betting websites that refuse to pay the tax. There may be significant civil or even criminal liabilites for operators who do not conform. Sportsbook Review.com will monitor the implementation of the new UK Gambling laws and provide updates on the online sportsbooks who choose not to continue to service the UK market.