David Clifton: Licensing Expert – Not only changed licensing fees but also a new type of licence

In his January 3^rd posting “Gambling Commission justifies remote licence fee increases” Andy McCarron MD of SBC referred to the changes to the Commission’s annual fee structure that will come into effect from April this year.

Those changes were announced in the DCMS “Proposals for Gambling Commission fees from April 2017 – consultation response” document that was published just prior to Christmas.

In addition to the forthcoming fee changes mentioned by Andy, the following are also worthy of note:

• the fee for applying to vary an operating licence condition to increase or decrease fee category (that is presently charged at 20% of the standard licence fee) is to reduce to a fixed fee of £25,
• the existing 5% first annual fee discount when two licences are held will be removed, to be replaced by a 25% first annual fee discount for new remote operating licences, that will apply whether or not a business already holds a non-remote licence,
• where an operator holds both a non-remote and a remote operating licence, the Commission presently provides small discounts on their annual fees every year to reflect the reduced fixed costs of regulating a single operating entity as opposed to two; those annual discount arrangements are intended to become more “simplified” with a 5% annual fee discount being applied to every licence activity on both non-remote and remote operating licences (for operators who hold both),
• the fee for a change of corporate control application, where the applicant is a small family-owned limited company and the shares have been transferred to an immediate family, is to be reduced to £100, and
• applications to vary a personal licence to reflect a change in name of the licence holder, and applications to amend the name of an individual on an operating licence, will no longer incur any fee.

However, fees are not the only area of change that was announced in the DCMS document. In addition, the following new types of remote betting operating licence are to be introduced:

• betting host (general betting (standard) real events) and
• betting host (general betting (standard) virtual events).

In addition, game host (casino) and game host (bingo) licences will be introduced, although the suggestion of a lottery host licence was discounted.

This will represent a material departure from the Commission’s position as presently set out at paragraph 5.1 of its “What is gambling Software?” Advice Note published in June 2014, in which it said that “a gambling software licence only authorises the manufacture, supply, installation and adaptation of gambling software. It does not permit the provision of facilities for gambling and therefore any business that provides facilities for gambling (even if they hold a gambling software licence) will need a relevant remote operating licence: a casino, bingo, general betting, pool betting, betting intermediary or lottery licence. For example a business that holds a gambling software licence but also hosts a poker network or a games platform will also require a remote casino operating licence as it is responsible for the fairness of the gambling”.  

This new “host” licence will remove the need for gambling software licensees that also provide facilities for gambling to obtain a “full” such remote operating licence.

Specific conditions that will be imposed on the new host licences are that they:

• can only be held by the holder of a gambling software operating licence,
• only permit the licensee to provide facilities for gambling in circumstances in which it does not contract directly with any of the participants using those facilities, and
• do not authorise the licensee to provide facilities for peer-to-peer gambling networks.

 A summary of all LCCP that will apply to game host and betting host licences is provided at Appendix G to the full DCMS responses document, the link to which can be accessed via our website.

These will include a new general condition 3.1.3 that will require hosts to make arrangements to share information with the B2C operator whose customers use the host’s products, so that both the B2C and the host can discharge their obligations in respect of the prevention of money laundering and problem gambling.

The Gambling Commission’s Remote Technical Standards, Testing Strategy and security audit requirements will apply to all host licences.

The Commission’s fees for host licences will be calculated by reference to nine different scales of Gross Gambling Yield (“GGY”) ranging from:

• in the case of casino, bingo and betting on virtual events hosts, a £1,980 application fee (and £2,027 annual fee) where GGY is less than £550,000 to a £42,978 application fee where GGY is above £1billion (and annual fee of £289,652 plus £100,000 for every £500million of GGY above £1billion GGY)
• in the case of betting on real events only hosts, a £2,200 application fee (and £2,556 annual fee) where GGY is less than £550,000 to a £19,333 application fee where GGY is above £1billion (and annual fee of £371,142 plus £100,000 for every £500million of GGY above £1billion GGY).

In terms of calculating the GGY for fees purposes, where a host receives a fixed payment from the B2C, that payment would be reflected as GGY. Where revenue share arrangements apply, B2Cs will be required to record the revenue of all products subject to such arrangements and, to prevent double-counting, each party (B2C and host) will have to record the amount that it actually receives from the transactions permitted by the licence.

The Commission will be keeping under review the business models that are able to hold one of the host operating licences, to ensure that these licensees are genuinely providing facilities for gambling without contracting directly with any customer. It will also keep under review the LCCP that will apply to the host licences to ensure they remain appropriate for the gambling facilities being provided.

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David Clifton – Director – Clifton Davies Consultancy Limited