By John Hagen of Harris Hagen.
The public perception of online gaming is, unfortunately, overwhelmingly negative, and is reflected and reinforced in almost exclusively hostile press coverage. A quick browse of newspaper and internet articles relating to online gaming reveals stories of addiction, financial ruin, marital breakdown, theft and money laundering.
A recurrent underlying theme of such articles is criticism of the British government for relaxing the gambling legislative and regulatory regime and creating an environment which allows disreputable online gaming operators to flourish and prosper. The fact that such operators are, shock horror, predominantly based offshore is, apparently, the most heinous crime and further evidence of their notoriety.
The language of politicians also highlights the negatives and is unhelpful, although, to be fair, there are no votes for politicians in gambling success stories, only crackdowns, bans, prosecutions, sanctions and protections.
I am realistic enough not to hold out any hope that this blog will stem the tide of alarmist and, frankly, misinformed press coverage or pontification by politicians, nor will it come as any news to the millions of online gaming customers enjoying their gambling responsibly in a well regulated environment. I would, however, like to bring a degree of balance to the debate and set out some inconvenient facts for the opponents of online gaming and, in particular, of its regulation in Great Britain. These are as follows:
1. The alternative to the regulation of online gaming is prohibition as practised in the United States and elsewhere. Prohibition, the favoured option of opponents of online gaming, does not work on so many levels. Most importantly, it does not stop players from gaming online; in the United States, for example, players continue to play in vast numbers on gambling sites based in jurisdictions where there is little or no regulation. The young and the vulnerable are not protected, there is greater potential for criminal infiltration and no tax revenues are generated.
2. Great Britain was the first leading jurisdiction to enact and implement a legislative and regulatory regime for online gaming. It was the first leading jurisdiction to address head-on the political and technological challenges involved in the regulation of online gaming. The Gambling Act 2005 was finally implemented in September 2007 with three clear licensing objectives pervading every aspect of the legislation, namely keeping gambling crime free, making sure that gambling is fair and open and protecting children and vulnerable adults. Social responsibility is a recurrent theme and is expressed by the Gambling Commission to be their “top priority”. The Act introduces a new regulator, the Gambling Commission, one of the most powerful statutory bodies in Great Britain, with draconian powers at its disposal. For the first time, online gaming operators must obtain operating licences authorising the provision of online gaming and the Commission is specifically required to promote socially responsible gambling through licence conditions and codes of practice. In short, Great Britain has the infrastructure in place to regulate online gaming effectively, but unfortunately the exorbitant tax rates have deterred most online gaming operators from relocating to Great Britain.
3. The decision of the British Government to impose a 15% gaming tax on the gross profits of online gaming operators appears, unfortunately, to have been made for political reasons and has undermined the new regulatory regime. This tax, which is in addition to the usual array of taxes, including corporation tax, has made Great Britain uncompetitive. It is the single most important reason why so many of the leading online gaming operators are based offshore, rather than any desire to operate in less well regulated jurisdictions. That is not to say, however, that the new regulatory regime has not had an impact upon the standard of regulation in some of the leading online gaming jurisdictions worldwide. Under the Gambling Act 2005, only operators licensed within the EEA or jurisdictions “white-listed” by the UK Government are allowed to market their products in Great Britain. The criteria which the Government will apply in considering representations from jurisdictions are lengthy, but essentially the licensing and regulatory objectives informing the jurisdiction’s gambling regulatory regime should, in practice, broadly achieve the key licensing objectives under which the British gambling regulatory regime operates. In effect, British Government is doing its best to ensure that certain regulatory standards apply in the jurisdictions whose licensees are allowed to market their products in Great Britain.
4. The advertising of gambling in Great Britain is strictly regulated and advertisers must comply with the CAP and BCAP Codes which apply to non broadcast and broadcast advertising respectively. These contain specific and highly restrictive provisions relating to gambling. The Government has the power to introduce its own regulations, but this has not proved necessary in the light of the impressive level of compliance with the existing codes. Further, the industry has formulated its own voluntary code which introduces further voluntary restrictions, for example online casino gaming cannot be advertised on television before the watershed and, again, this code has been vigorously observed by operators.
5. Contrary to popular belief, the leading online gaming operators do operate pursuant to high social responsibility standards. Many are certificated by GamCare, the leading problem gambling charity in Great Britain, and several make voluntary contributions to the funding of research, education and treatment of problem gambling in Great Britain.
In view of the above, I have to ask, is there anything else the industry can do to improve its public image?
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