CONSULTATION: NETWORK GAMING and OGRA
This is a consultation paper on a proposed new Online Gambling Regulation Act
(OGRA) regulation which will introduce a further type of activity that can be
conducted under the OGRA licence.
One of the regulatory objectives of the Isle of Man Gambling Supervision
Commission (GSC) which is created by the Gambling Supervision Act 2010 is to
ensure that gambling products promoted by the industry it regulates can compete
effectively throughout the world.
The Department of Economic Development have suggested the implementation of a
policy which will introduce network gaming to the Isle of Man; networks are already
a well established and growing facet of the international online gambling sector and
the policy proposal will allow their operation on Isle of Man infrastructure for the first
time.
The policy change would require the introduction of new regulations by the
Commission to allow for the issuing of licenses to any operators who wish to operate
networks, subject to the restrictions and requirements laid out in the new
regulations.
This consultation introduces the terms that are used to describe the models for
which the Commission intends to introduce licensing; it also outlines the proposed
requirements that prospective licensees would need to observe as well as the
transitional arrangements for any licensee wishing to upgrade its current OGRA
licence.
It is anticipated that the legislation, which is currently not drafted will be circulated
separately as an adjunct to this consultation before its introduction to Tynwald in
July 2011.
The structure of network gaming
For the purposes of licensing network games, the following model and terms will be
used to describe the provisions of the proposed new regulations.
Liquidity refers to the availability of players to participate in games. As liquidity rises,
so does the variety of opponents that a player encounters as well as the overall
chances of being able to play a game against others on demand. Players value high
liquidity and the higher the liquidity of a gambling website, the more likely players
are to revisit it and so the more successful the site is likely to become.
Liquidity pooling refers to the process of combining players from different sources
and placing them in an environment where they can gamble against each other.
Liquidity pooling in this consultation means combining players that are registered
with two or more gambling operators which may or may not be licensed by the GSC.
The following diagram outlines how the Isle of Man licensee would be able to
operate a liquidity pooling network.
Isle of Man
OGRA
licensee
Existing OGRA
Licensed activity
Current licensed
products
Registration, AML, KYC
players
Proposed OGRA
Network activity
Current sublicensed software
Gamedata
IOM
sublicensee
Gamedata
IOM
sublicensee
Network games
Gamedata
Gamedata
Gamedata
Non-IOM
Operator
(partner)
Non-IOM
operator
(partner)
(poss.partner)
Registration, AML, KYC
players
Registration, AML, KYC
players
Registration, AML, KYC
players players
players
Registration, AML, KYC
players
players
players
Under the proposals, a new or existing licensee would be able to operate a network
on Isle of Man based IT hardware. Much as with the existing sub-licensing model,
the OGRA network operator would provide software and the platform and the
network’s partners (other operators) would supply players. The network allows
liquidity pooling by accepting the play from players registered with various
operators.
Player registration, AML and KYC (as well as deposits and withdrawals) is performed
by the partner operator which could in theory also be an Isle of Man based operator
switching from a local sub-licensing network to a new OGRA network. The network
partner who registers the players remains responsible at all times for handling player
complaints, queries, payments and so forth. Once player data has been acquired by
the partner, the majority of data exchanged between the partners and the network
will be the transactions between computers to facilitate the games offered on the
network’s servers. A network operator will not be in a position to determine a
player’s identity while that player remains on their network although a unique code
or some other tag will allow the network to track that person’s play and provide
transaction history to the network partner.
The proposed licence conditions
Operators who wish to include networks as part of their OGRA licence will be
required to operate their network according to the licence conditions cited in a new
schedule.
In addition to the current licence conditions that dictate how an Isle of Man
licensee’s business must be conducted – including the requirement to choose
business partner carefully in order to avoid risks to the reputation of the Isle of Man,
a number of new conditions will be included as a pre-cursor to offering network
services. These conditions will be specific to the running of network services.
The current conditions being considered are:
1) The Network operator will ensure that its business dealings are exclusively
with partners who undertake AML/CFT and KYC to the standards that would
be expected if the partner were a licensed operator in the Isle of Man.
2) The network operator will ensure that it has agreements in place with its
network partners to ensure that illicit activity such as collusion and chipdumping can be detected and reported.
3) The network operator will ensure that it has systems in place to detect
problem gambling and to make reports available to its network partners.
4) The network operator will notify the GSC whenever it adds a network partner
to its network although, with the exception of connected companies (see 5
below), prior permission is not required.
5) All software offered by the network must be periodically certified by a GSC
approved test house to confirm its conformity with the prevailing technical
regulations.
6) All hardware relating to the network platform must be on the Isle of Man
unless otherwise agreed with the Commission.
In addition to these specific licence conditions, an up-rated annual fee of £50,000
per annum will apply to any operator wishing to offer network services. An annual
fee of £5000 will apply for every network partner on the network.
The £5000 per partner would be payable upon the annual fee renewal and would be
derived from the following formula:
Each network partner added to the network in the previous year x £5000
Existing licensees wishing to upgrade to from a sub-licence or full licence to a
network-capable licence would similarly be required to cease their old licence and
commence a new one.
The primary law from which the regulations draw their authority does not allow
licence fees to be imposed between renewal dates, so no concessions can be made
for fees which are paid for a fraction of a year. This has been taken into account
when determining the overall values of the proposed annual fees. It is expected that
a more flexible regime can be introduced to coincide with the anticipated re-framing
of the Isle of Man’s gambling legislation in the coming year.
Examples of acquiring, using and ceasing the network capability
Case 1
A company applies for an OGRA licence and is granted a licence by the GSC. The
company has made it clear from the beginning that it wishes to operate network
services. It pays the £50,000 fee and commences operations. Its OGRA licence
contains provisions to operate NETWORK SERVICES; an attached schedule specifies
the conditions for operating the network.
The company adds two network partners initially – one from the Far East and one
from the UK and informs the GSC. Eight months after the licence is granted, it adds
two more, another partner from the UK and an existing Isle of Man licensed operator
and again informs the GSC. A month later, the UK company subsequently ceases to
use the network. The GSC is informed.
On the anniversary of its licence, it pays £70,000 to renew.
Case 2
An Isle of Man operator licensed to operate RNG games and a sports book and with
a licence renewal date four months in the future wishes to upgrade its license in
order to operate a network.
Once the GSC has examined its proposed network operations and has approved the
licence change, the operator sets up its new infrastructure and software and
commences testing. Meanwhile its sales personnel identify two prospective partners.
Two months before renewal date, the operator requests the revised licence in order
to commence network operations.
The GSC cancel the previous OGRA licence and issue a new OGRA licence. The new
OGRA licence contains provisions to operate RNG GAMES, SPORTS BETTING and
NETWORK SERVICES; an attached schedule specifies the conditions for operating
the network.
The company adds five network partners and informs the GSC.
On the anniversary of its new licence, it pays £75,000 to renew.
Case 3
An Isle of Man operator has been operating a network for a year with seven network
partners and now wishes to revert to a standard OGRA licence. It’s renewal fee is
£70,000 and it may no longer operate a network. Its OGRA licence is re-issued to
reflect this.
One year later, the licensee’s renewal fee is £35,000.
Case 4
An Isle of Man sub-licensee switches its software supply from one operator to
another, which happens to operate network services under the new regulations.
It informs the GSC.
No further action is required.
Case 5
An Isle of Man sub-licensee wishes to join an Isle of Man network operator in
addition to using the services of its current platform provider.
It informs the GSC. The sub-licence is cancelled and a full license is issued for
£35,000. The operator may now use both platforms.
Case 6
A prospective licensee wishes to join an Isle of Man network and advertise into the
UK.
The licensee must be licensed in the Isle of Man to obtain the advertising privilege
under the white-list agreement but may proceed with a sub-licence provided its
software platform is provided by one Isle of Man licensee only.
Case 7
An Isle of Man licensee operating network services has three network partners, one
of which is proving to be unsuitable and which is beginning to bring the Isle of Man’s
reputation into question. The GSC asks the network to cease operations with the
network partner in question.
The renewal fee after the year is £50,000.
The renewal fee the following year is £45,000.
Next steps
This informal consultation period will end once the proposed regulations have been
released and all stakeholders have had a number of weeks to consider them. It is
anticipated that the regulations will be ready for consideration by the end of May
2011 or some time shortly thereafter.
All feedback on this consultation should be passed to Mark Rutherford whose contact
information is :
[email protected]
Policy and Legislation Officer
Isle of Man Gambling Supervision Commission
4th Floor, St. Andrews House, Douglas, Isle of Man, IM1 2PX