Acquiring an Online Gambling License
Obtaining a casino/gambling license is an important step when entering the world of online casinos; a license avoids any problems with the law and gains the confidence of your players.
There are certain regions in the world that have specific legislation in place that allows them to license and regulate companies that operate online gambling sites or provide industry services, such as the supply of gaming software. These regions are referred to as online gambling jurisdictions or licensing jurisdictions. Within these jurisdictions, there’s usually an organization that’s responsible for issuing licenses and regulating the licensees. These organizations are typically known as licensing authorities.
For an online gambling site to offer its services to customers legally, it should hold a betting or gaming license issued by an appropriate licensing authority. A site will usually have to base at least part of its operations within the jurisdiction where it wishes to be licensed, meaning that many gambling sites choose their location almost entirely on the basis of the legislation and regulatory practices that they’ll have to adhere to.
The easiest way to obtain a license is to contact a lawyer from the country in which you are located or wish to operate from, and he/she will provide guidance on how to obtain this.
What is a Gambling License?
A gambling license is a certificate of authority issued by a licensing authority and is typically required by organizations that offer any type of games of chance or those that involve wagering, such as roulette, poker and slots. The requirements for the issuance of a gambling license vary from jurisdiction to jurisdiction.
Issuing Rules and Regulations
The gambling control board must create a set of rules and regulations to govern the way in which a corporation or other organization licensed in the jurisdiction can conduct business. These rules and regulations cover a broad range of activity including operations, accounting and audit, and the conduct of games offered within the establishment, and apply to the conduct of all individuals involved in the gambling enterprise, from employees, companies doing business with the gambling establishment and its owners and/or partners.
Requirements for Licensing
It is one of the primarily roles of a gambling control board to issue a license. The issuance of a license is based on those standards that are broadly described in the controlling act that grants authority to the licensing authority. Some of the requirements that may be imposed on organizations that desire to conduct a gambling business within a state or other jurisdiction include:
- Meeting certain standards of good character, honesty and integrity
- Disclosing detailed financial and organizational information about the gambling establishment, its owners, partners and other associated persons, and
- Providing employment and criminal information on certain individuals within the organization.
The requirements and standards that must be met to obtain a license to conduct a gambling business are comparable to those standards that financial institutions such as banks and insurance companies must achieve. The purpose of these stringent requirements is to discourage application by certain persons who may be engaged in organized criminal enterprises or may lack the required experience or financial stability to properly engage in the operation of a gambling enterprise. Many gambling control boards have undertaken a process of allowing for multi-jurisdictional application as a way to ease and streamline the process of registration for establishments doing business across several state lines.
Online Gambling License Fees
Costs associated with obtaining an online gambling license are associated with the Application Process, the License, and Operational Compliance.
Cost 1 — Application Process
- Legal/Advisory Bill
- Legal Disclosures
Development of a Business Plan to address:
- Social Responsibility
- Anti-Money Laundering
- Safe Custody of Customer Funds
- Due Diligence Costs (on directors and shareholders)
- Technology & Hosting Provider Certification Costs
Cost 2 — The License
Licenses tend to reflect the fiscal attitude of the government rather than the nature of the regulatory regime e.g.
United Kingdom — Charges a low license fee, but 15% on tax revenues
Aldernay — Flat fee that depends on the size of th business and don’t charge gambling tax on revenues — $75k annually
Gibraltar — Minimum annual fee (£85k) on 1% of revenues up to a maximum fee per year of £420k
Italy — Charges €300k for a 10 year license plus €70k annually and 20% tax on revenues
Cost 3 — Compliance
- Reporting (sometimes monthly)
- Inspection Costs
- On-going Certification (new games)
- Random number generator must be reseeded and re-certified regularly
Alternatives, such as sub-licensing, means the right to operate under someone else’s license to avoid upfront costs, and to share partner costs. Some jurisdictions allow sub-licensing, for example Malta,
Gambling using Cryptocurrency
An online casino is required to apply for a gambling license in order to be legally allowed to process payments and to use the gaming content of the biggest software providers. When payments are made using a cryptocurrency, the involvement of a third party (bank institution) becomes obsolete; deposits and withdrawals are immediately transferred between the player and the casino wallet. There is therefore an argument for not obtaining a gambling license since the processing of payments does not require the use of a centralized bank.
However, casino players who decide to use cryptocurrency as a deposit/withdrawal method have to make sure the online casino they have an account with is a reputable one and that it has undergone an audit from an independent testing agency. From this perspective, a casino that holds a license from a respected jurisdiction becomes a powerful marketing tool and players are more confident when it comes to creating an account and depositing funds.
Since there is not a legislative framework outlining the rules and regulations related to cryptocurrencies such as Bitcoin, it should be assumed that wagering with cryptocurrency is the same as wagering with any other government- accepted currency.
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