Compliance Guide: iGaming Regulation in 2018

The iGaming regulatory landscape is constantly evolving, and the business impact of changes in various jurisdictions can be significant. In this guide we review major changes to iGaming compliance in 2017-18, and ask what businesses and professionals need to do to achieve compliance.

by James Lephew, Senior Compliance Content Manager

Online gaming and gambling will always be an industry subject to more regulation than most. Qualities that are core to the industry’s success – its international cross-border operations; high volume transactional activity; utilisation of new technology; and innovative marketing – are the very qualities that attract the attention of regulators.

The iGaming regulatory landscape is continually evolving. Understanding which regulations are upcoming, how they are being enforced and the general regulatory ‘climate’ is an important part of business planning.

Costs of compliance are – by most accounts – increasing, as a greater volume and depth of regulation is applied to the iGaming industry. Many regulators are actively committed to minimising this burden, and to working with the industry for effective regulation. And yet, uncertainty, changes and conflicting demands on iGaming operators and suppliers can add cost and confusion to businesses which eat into profit margins.

Shifts in the regulatory landscape can create significant growth opportunities – for example in new-to-regulate markets or those reducing barriers-to-entry – but also add serious risk to existing or planned operations. Penalties, public statements of non-compliance and license withdrawals are now a very real threat, with notable high-profile examples an increasingly regular occurrence.

Some core principles remain constant. Specific requirements vary by jurisdiction and over time, but iGaming businesses operating in regulated markets will generally need to ensure:

  • Social Responsibility – Ensuring a safe and fun gambling experience for all players
  • Money Laundering and Funding of Terrorism – Security and reporting processes to prevent or identify misuse of gaming platforms
  • Advertising & Promotion – Fair and accurate marketing, targeted only towards relevant prospects
  • Responsible Data Usage – Taking accountability ensuring reasonable use of personal data
  • Gaming Conventions & Fairness – Adhering to standard conventions of gambling games with underlying technology
  • Technical Standards – Correct and safe implementations of technology, systems and hardware

As regulatory standards in most of these areas have tended to tighten – a trend that looks set to continue – any iGaming business with long-term ambition would be wise to take a comprehensive, and even proactive, position on regulatory compliance.

In this guide, we’ll review some of the most significant events and shifts in the iGaming regulatory landscape in recent months, and explore how the industry is adapting.

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Key Changes & Developments

  • UKGC Increases Enforcement And Tightens Requirements

    The regulator of the world’s largest regulated market appears to have toughened both its regulations and its approach to enforcement in recent years. Following a statement in July 2017 indicating intent towards stricter enforcement, the Gambling Commission seem to have followed through. Notable penalties include £7.8m for 888 in August of the same year, but overall cases made public have increased.
    This stricter attitude comes alongside an ever-evolving set of requirements for licensees, recently appended to include: improved age verification; improved KYC checks; restrictions on misleading marketing; and responsibility for effective customer interaction following the identification of problem behaviour.
    Those operating, or supplying to operators, within the UK market must retain an extremely diligent stance towards compliance. And with the political climate tending towards even tighter regulation, compliance strategy remains critical for UK-focussed businesses.

  • MGA Introduces Overhauled Regulation

    “Robust, innovative and able to future-proof the jurisdiction,” is how MGA Executive Chairman Joseph Cuschieri describes sweeping changes to Malta’s gaming regulation, introduced 2018. Following significant consultation with the industry, the changes were designed for clarity of use amidst what Cuschieri describes as an “unprecedented technological revolution, one that is transforming the way gaming services are supplied and consumed.”
    Notably, the MGA have shifted to a more ‘risk-based’ approach to regulation, focussing more on “outcomes rather than on a “tick box” or prescriptive approach.” The new regulations therefore increase scope for licensees to implement responses that are most appropriate – particularly important for multi-channel operators – yet shifts some responsibility for ultimate outcome away from the regulator and towards the licensee.
    The MGA’s regulatory reach could also now extend further than ever before, and the regulator has stated its intent to work more closely with operators, as well as to hold suppliers to account for services provided.

  • US Sportsbetting, Online Gaming & Gambling

    The US Supreme Court ruling in early 2018 has started a ripple effect across the States. Some states have been quick to regulate and bets are being placed across the US, but there’s still a long road for regulation to spread country-wide.
    New Jersey and Delaware are already legislated and trading has begun in these states, whilst West Virginia, Pennsylvania, Mississippi and others are preparing to go live. Talent and experience is already commanding a premium and compliance expertise will be highly valuable to those businesses seeking growth or expansion into new jurisdictions.
    Those best placed to make the most of this unprecedented opportunity include existing land-based gambling operators like those in Nevada, established sports media providers and overseas iGaming operators.

  • Stricter UK Advertising Standards on Free Bets & Bonuses

    In the UK, operators are subject not only to regulation by the UKGC but also many others, including the increasingly stringent ASA Advertising Standards Agency. Announcing tougher standards on gambling advertising this year, the ASA said it would focus on ads’ appeal “appeal to problem gamblers and on free bets and bonuses.”
    Restrictions could yet be increased, with discussion of curbing gambling advertising never far from the political conversation. The Labour party, for example, has stated its intent to ban football shirt advertising.

  • EU-Wide Data Protection Regulation: The GDPR

    All businesses who handle any kind of personally-identifiable data across the EU are, since May 2018, subject to significant new responsibilities brought in by the GDPR. iGaming businesses, perhaps more than most, are subject to these increased responsibilities, though many of GDPR’s requirements – such as data security and responsible usage – were already covered by other regulations.
    GDPR has, though, brought data privacy to the forefront of the regulatory agenda and into the public sphere. Operators and suppliers will have to ensure continued commitment to responsible data usage to avoid potentially significant fallout.

  • AML & CFT Renewed Focus on Execution

    The EU-wide fourth Anti-Money Laundering Directive, introduced 2017, had significant implications for online and land-based casinos and gaming operators and required increased due-diligence, security measures and reporting to be undertaken. European Parliament further adapted the fifth directive in April 2018, providing uniformity on the definition of ‘virtual currencies’, while imposing obligations on virtual currency platforms and wallet providers to carry out adequate due diligence procedures on their users.
    In July 2018 the Financial Intelligence Analysis Unit (FIAU) Malta published a new set of Implementing Procedures on AML and CFT for the remote gaming sector.

  • Change, Confusion and Confliction: European Regulators

    Operators conducting business in multiple European markets are often subject to unclear, changeable or even contradictory regulation. Whilst efforts are being made by many jurisdiction to resolve these issues, the landscape can be a challenging one for businesses seeking to achieve compliance.
    In Germany and the Netherlands, for example “confusion reigns” says advisory firm Wiggin’s Jason Fisher. “Although their existing gambling laws are widely considered to be defunct or unworkable, the local regulators are still trying to exert some control.”
    Meanwhile, discrepancies between EU and local law – for example in Hungary and Slovakia – can result in confusion and regulatory grey areas for the industry.

  • Updates To Regulation: Poland, Sweden, Italy

    Notable recent changes to regulation within other European jurisdictions include: Poland, where regulation now allows for diversification from sportsbetting to online slots and poker; Sweden, where a new Gambling Act has re-regulated the market and strengthened protection of players; and Italy where political shifts are seeing increased focus on iGaming regulation including a recent outright ban on gambling advertising.

  • Increased Regulatory Attention on Affiliates

    Until recently, affiliates have largely avoided the regulatory spotlight. Compliance responsibilities have landed largely with operators, who in turn have been responsible for the conduct of their affiliates. This may be changing, though, as there have been calls for UK affiliates to be licensed and the MGA’s new regulatory framework’s structure ensures that “affiliates may be held directly responsible for breaches of advertising rules.”

Outlook 2019 & Beyond

Regulation of the iGaming industry will inevitably adapt and change, but in an increasingly turbulent global political climate, the potential for disruption is increased. Changes in leadership direction and global political shifts such as Brexit add uncertainty to the market.

Promisingly, though, the sector’s most prominent regulatory authorities are showing growing commitment to overseeing clear, implementable regulations which allow the industry to continue and to grow its business operations. Greater collaboration, more open conversations between regulators and operators, and clearer guidelines are all welcome in an industry where compliance is increasingly critical.

New technology – of which the iGaming sector is often among the earliest adopters – looks set to add yet further regulatory burden in the coming years. Innovative and radical changes to technical products, delivery methods and infrastructure, such as Blockchain and its distributed ledger technology, and new payments and financial technology, will likely bring even greater scrutiny onto the iGaming industry.

As the iGaming industry matures, evolves and consolidates, its high profile and wide market reach will ensure that compliance remains an issue of utmost importance. Whilst changing regulations and variance between jurisdictions requires careful monitoring, fundamental commitment to best practice and investment in compliance activity will be ever-more important.

Compliance: Good For Growth

Well-considered regulation is good for business, providing a clear pathway to transactional practices that have positive outcomes for all.

Organisations do have a responsibility to understand, interpret and act upon their regulatory responsibilities. Increasingly, these responsibilities will need to be distributed throughout organisations rather than falling on a small handful of individuals.

Such is the scale of regulation in iGaming that the culture of compliance must be embedded into all aspects of regulated operations, and even relayed further out to suppliers. Properly and promptly implemented responses to regulation are the best way to avoid both penalties, wasted resources and reputational damage.

Ultimately, strong compliance management is the best way to ensure stability and enable confidence in business growth.

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James Lephew
Senior Compliance Content Manager at iGaming Academy

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