Market research is only one part of the jigsaw for any online casino operator looking to enter the gaming industry. If you want players to take you seriously, you must obtain the correct licensing for the activities that you want to offer. Moreover, you should think about the other practicalities involved – such as tax obligations.
But because there isn’t a single global casino licensing authority, understanding the complexities involved can vary depending on where you’re planning to operate. To better understand why gaming regulation is important (and what you should expect when applying for a license), we’ve put together this complete guide. Besides learning about online gaming licenses, you will also find out the information you need about gray markets and their difficulties – plus more. Let’s get started.
What Is an Online Casino Licensing Jurisdiction?
An online casino licensing jurisdiction is the region where the permit you’ve obtained will allow you to offer your products and services. So, for example, a license from the UK Gambling Commission (UKGC) would allow you to offer online casino games to players in England, Scotland, Wales, and Northern Ireland. However, you must apply for a different license to operate in the Republic of Ireland – since this is not part of the UK.
It’s not only countries that can form online casino licensing jurisdictions, though. In the US, each state has different rules regarding what you can and can’t do. So, while you may be able to offer casino games in Pennsylvania, you would need a separate permit for New Jersey.
In some instances, cities can also form individual casino licensing jurisdictions. For example, Washington DC makes up its own rules for online gambling.
Do Online Casino Licensing Authorities Make Up the Rules in Their Jurisdictions?
No – licensing authorities have the job of enforcing existing regulations. However, changes in gambling laws occur on a federal level.
In essence, licensing authorities work the same way as law enforcement does on a civilian level. Although the police do not make up the rules for a particular country, they are employed to uphold whichever regulations are written in that jurisdiction’s books.
Online licensing authorities are responsible for overseeing taxation and ensuring that all operators with a permit remain compliant. On top of that, they also are required to collect payments for licensing fees and fines. Another essential job of regulatory authorities is to collect statistics for revenue and other metrics.
How Does One Licensing Jurisdiction Differ From the Next?
Online licensing jurisdictions each differ because they don’t have the same rules as one another. You will likely need to change your offerings based on each jurisdiction you enter, and it’s possible that some will not allow games that are popular in other places where your business runs.
In some cases, multiple jurisdictions can form bodies that work together for different practices – even though they have different rules. One example of this is the European Betting and Gaming Association (EBGA), which covers a number of countries in Europe.
How Do Online Casinos Obtain Licensing?
Obtaining an online gambling license is often a strenuous process for online casinos. Internet gambling operators will have to apply for a permit in the jurisdiction(s) they’d like to operate within and are responsible for showing that they are in good standing. Several factors may come into the licensing application process, such as declaring financial reports and outlining which verticals the company would like to offer online gaming services within.
Each jurisdiction has an official licensing process that online casinos must follow as closely as possible. Generally speaking, receiving a license can take quite a long time; it’s not uncommon to wait many months. When a new region has announced it will regulate online casino games, the licensing process typically opens up a long time in advance as a result.
Online casinos might have to contend with several factors out of their control. For example, some jurisdictions cap the number of commercial operators that are allowed at any given time. If an online casino meets the local regulatory requirements after a thorough assessment, they’ll normally receive a gaming license.
Prestigious Licensing Jurisdictions Usually Require High Fees
Unfortunately, not all casino licenses were created equally. The most prestigious licensing jurisdictions naturally have very high standards, and this can make it very difficult for an online casino operator to receive the permit they’re looking for. Another huge difficulty is that you often need to pay significant fees during the application and licensing processes.
New Jersey is one example of a jurisdiction that requires a substantial upfront investment. Online casino license applications cost $100,000, and you need to pay $400,000 if you’re granted a permit. Each year, you can renew your license – but at a cost of $250,000.
Pennsylvania also has high costs for receiving an online casino license. Fees can range between $4 million and $12 million, and there’s also a $250,000 price tag to renew your license. However, unlike in New Jersey, you only need to renew your license every five years instead of annually.
The amount you pay for licenses can sometimes depend on your annual gross gaming revenue (GGR). If your income is lower, you won’t pay as high of a fee. The high costs are for several reasons; first and foremost, they hold operators accountable and repel would-be rogue websites. On top of that, they help cover the costs for the licensing body to carry out rigorous checks and uphold the market’s integrity.
What Are the Most Prestigious Online Casino Licensing Jurisdictions?
There are a broad number of prestigious online casino licensing jurisdictions around the globe. Below, you’ll find four highly trusted gaming authorities.
New Jersey Gaming Commission
New Jersey has one of the most developed online casino gaming landscapes in the US, and many people head to Atlantic City annually for a flutter. On top of that, you can also enjoy playing with numerous online operators. The commission performs rigorous assessments for all online gaming operators, meaning only the best pass the test.
UK Gambling Commission
The UK has Europe’s best-developed online gambling landscape, and the UK Gambling Commission is essential to the ecosystem. The UKGC oversees thousands of operators and ensures they comply with national regulations.
Malta Gaming Authority
The Malta Gaming Authority oversees the many gambling operators based on the island, and it has managed to create an appealing landscape for online casinos looking to relocate. Because Malta is in the EU, the licensing body applies the bloc’s requirements along with its own.
The Licensing Dilemma in Online Gaming Gray Markets
While there are a number of well-regulated online casino markets, the industry also has to deal with a vast number of gray areas. To put things shortly, gray markets are where the regulation isn’t always clear. These markets often have several unregulated online casinos.
Examples of gray markets include Sweden prior to its re-regulation that stopped Svenska Spel from being a monopoly. Germany has also had its difficulties with gray-market operators, and so have many parts of the US.
Gray markets often cause multiple licensing dilemmas. Many online casinos don’t obtain licenses for several reasons, but the main one is that they’re often tolerated. While reputable websites elsewhere may not have problems, it does leave the door open for potentially bad operators. On top of that, these operators often don’t contribute to the local economy in the form of tax.
Ultimately, licensing authorities and local governments are responsible for tightening regulations in these markets. If the rules aren’t clear, and operators know they can get away without obtaining a license, they have no incentive to get one. For you, however, you should still get a permit to operate – as if regulations do change, it’s likely that you’ll receive better treatment.
Are Unlicensed Online Casinos a Scam?
Unlicensed casinos aren’t always a scam, but they do pose several risks. As they don’t comply with local regulations, their services may not be of the highest possible standard. On top of that, players could have difficulties receiving their winnings and reaching customer service.
Unregulated casinos may also not comply with responsible gambling practices, which could be harmful to both players and the reputation of the industry. For these reasons, it’s highly advisable to get your permits sorted if you’re a casino – and that players avoid unregulated operators.
Conclusion: Everything You Should Know About Online Casino Licensing Authorities
There are several factors that internet gambling operators need to think about before they delve into new markets, and licensing is of the utmost importance in particular. You must ensure that you get the correct permits to start offering your products and services, and you should also be prepared for the high costs of being in prestigious jurisdictions. Moreover, it would help if you have a solid legal team to handle the paperwork’s complexities.
Online gaming regulators play an essential role in enforcing rules and protecting players, and it’s important for operators to cooperate with them as much as possible.
FAQ:
Who regulates online casinos?
Online casinos are regulated by various licensing jurisdictions and authorities depending on the region in which they operate. These regulatory bodies enforce existing regulations and ensure that online casinos comply with local laws regarding gambling activities. Examples of such regulatory authorities include the UK Gambling Commission, the New Jersey Gaming Commission, the Malta Gaming Authority, and many others.
Why are online casinos licensed?
Online casinos are licensed to comply with existing regulations and ensure player protection and fairness in gambling activities. Licensing authorities enforce these regulations and oversee taxation, compliance, and revenue collection. This process is a crucial factor as it will enforce brand reputation and the online casino will establish itself as trustworthy on the market.
How do gaming licenses work?
Gaming licenses function as official permits issued by regulatory authorities or jurisdictions, allowing operators to legally offer gambling services such as online casinos, sports betting, or poker. Therefore, this permit ensures that the online casino operator protect players and maintain integrity and fairness.
