Rules of the game

Alderney remains at the forefront of innovation and execution for e-gaming. Mark Dunster and Richard Field examine the industry’s rapidly evolving international appeal

E-gaming is a global industry and offshore jurisdictions such as Alderney have led the way in terms of developing and promoting it. As the liberalisation of the world’s online gambling ­marketplaces grows rapidly, those ­jurisdictions that have been at the cutting edge since inception have had to adapt to maintain their place in the new order.

The development of technology, the ­global economic downturn and the ­increasing focus on regulation have all played their parts in shaping an industry that is generating billions of pounds in ­revenue for those that have developed a niche in
e-gaming and recognised the changing habits of ­consumers.

The search for new revenue streams and a high media ­profile has led to increased ­governmental interest in the industry in recent years.

Governments have become aware of the potential to bolster their treasuries’ coffers through operating or licensing e-gaming businesses. In some cases they have taken aggressive action against those ­seeking to market into their jurisdictions without ­following local licensing laws.

While this is often dressed up as a desire to protect local players, the ­significant lure of the tax revenue generated by e-gaming must also be recognised as a ­driver. Indeed, it is rumoured that more than e2.3bn (£1.9bn) has been staked in online poker games in France alone since the inception of its licensing regime in June 2010.

The liberalisation of marketplaces has led to jurisdictions previously opposed to online gaming becoming keen to develop their own licensing regimes. Those that were slow to see the benefits of the industry are now struggling to match established jurisdictions such as Alderney in terms of reputation and technical expertise.

US state New Jersey recently passed ­legislation enabling the licensing of intrastate casinos and poker rooms, and it is anticipated that other states will follow suit. Italy is scheduled to grant further licences in the next few months, while Greece, ­Denmark and Spain are all advanced in their plans to ­legislate for online gaming.

Marketing time

Being licensed in a regulated marketplace is now a key marketing tool for a growing number of e-gaming businesses. Policing infringers who seek to circumvent local ­legislation is a recognised and growing issue, particularly when internet service providers decline to exercise their ability to block offending traffic.

This increase in activity has generated a burgeoning workload for legal advisers who have expertise in the industry. As the pace of regulation continues to increase and ­consolidation becomes a reality, those legal advisers with a proven record in this area will find they are relied on even more.

The liberalisation of the global marketplace is widely seen as a positive step. ­However, there is already concern over the differing approaches adopted by countries in terms of their regulatory frameworks, taxation regimes and technical standards. Unless national regulators work together, there is a clear danger of what might be termed a regulatory ’patchwork quilt’­ ­developing.

The larger operators in the field that wish to establish themselves in a number of ­jurisdictions are already being forced to meet differing technical and regulatory standards.

Add this to the variation in taxation levels and the cultural differences between markets, and it is clear that there are some real barriers to expansion.

There is a growing call for the harmonisation of technical standards and increased legal cert-ainty to help prevent wide ­variations in best practice.

The green paper being prepared by EU ­Commissioner for Internal Markets and Services Michael Barnier is understood to be ­considering how such a system might work.

Alderney, as the mother of e-gaming ­regulation and hosting, has one of the most pragmatic and popular regimes in the industry, and constantly evolves this to anticipate changes. As a consequence, it is seen as the regulatory template to follow and has been working with regulators around the globe to share its technical knowledge and best practice information.

Within the last month the Alderney ­Gambling Control Commission (AGCC) has signed a memorandum of understanding with the Nevada Gaming Control Board, showing that Alderney’s influence extends far beyond the shores of Europe.

Further agreements with other jurisdictions are in the pipeline for Alderney and it is anticipated that a number of jurisdictions will sign agreements with the island, allowing Alderney licensees to take ­advantage of a fast-track application process when their individual licensing regimes come into force. This will give significant advantages to operators that wish to ­establish a presence in a number of ­jurisdictions but are concerned about ­variations in technical ­standards and other such issues.

The next few years will be crucial for the industry. ­Consolidation is inevitable, but of greater importance is the approach ­regulators take to licensing. The holy grail of universal technical standards is vital to ensuring the industry maintains its ­integrity. The small island of Alderney could become a ’kingmaker’ jurisdiction as ­European and global markets develop.

Mark Dunster is a partner and Richard Field is a senior associate at Carey Olsen