House rules: understanding the GC's latest licensee requirement

In one of its latest updates, the Gambling Commission has reminded operators that it is a licence condition to submit regulatory returns on time.

The update goes on to note that the Commission is aware that some regulatory returns have been overdue since 1 April 2023, and advises operators to bring these up to date “immediately”.

“Operators who fail to submit returns on time will be escalated to our enforcement team to consider regulatory action and may result in a financial penalty under section 121 of the Gambling Act 2005.”

This is an important reminder from the Commission, which should not be taken lightly, and it is clear a tougher approach is now being taken.

Gambling licence holders in Great Britain are required to submit a regulatory return for each type of activity for which they hold a licence. The Commission uses the information to publish bi-annual industry statistics and to inform its understanding of its licensees and the wider gambling industry. The information also helps the Commission ensure licensees are within the correct fee category for their licensed activities.

An imperfect system

The Commission publishes information on when and how to submit regulatory returns in its Regulatory Returns Guidance, which is split by licence type.

However, the guidance is simple and a repetition of what is asked within the regulatory return forms. The lack of clarity, in our experience, has sometimes resulted in incorrect data being provided, or being provided under the wrong licensable activity.

In our experience, licensees often require assistance with the following:

• Non-GB revenue – they should only be reported if taking place in reliance on the Commission operating licence;

• B2B online casino revenue that are not revenue shares – the form only allows for GGY (revenue share) to be reported, and not fixed-fee revenue, although the Commission is now aware of this issue from us.

In order to address some of the issues with the regulatory returns system, the Commission has established a working group and is seeking feedback from licensees on the questions currently posed in regulatory returns.

Beware exceeding your fee category

Regulatory returns go hand in hand with ensuring a licensee is in the correct fee category and, recently, we have noticed an increase in the Commission using regulatory returns to identify and contact licensees that it believes have exceeded the upper threshold of their fee categories.

Fee categories are a licence condition, included on the face of an operating licence. Therefore, an application to vary the fee category must be submitted before the upper threshold has been exceeded.

The process for submitting an application to vary is relatively simple:

• fee category increases by one level do not require any supporting documentation;
• fee category increases by two levels or more must be supported by:
  • new or updated financial projections;
  • new or updated business plan;
  • evidence of how the expansion of the business is funded,
• decreases in fee categories must be supported by a full explanation.

Next steps

We strongly recommend licensees use the Commission’s online contact form to tell the Commission about their concerns with the regulatory returns process, forms and guidance as soon as possible, so they can be improved. We hope that the working group will use this, as well as our recent feedback on the Commission’s guidance, to improve the current system.

In the meantime, licensees should also:

• submit any outstanding regulatory returns as soon as possible;

• endeavour to submit complete and accurate regulatory returns within the timeframes set by the Commission. The Commission is taking a much tougher approach and late and/or inaccurate regulatory returns will be referred to the enforcement team; and

• routinely review whether they are in the correct fee category and, if necessary, submit an application to vary before exceeding the upper threshold of a fee category.

Jessica Wilson joined Harris Hagan in March 2019 after training at another law firm in the City of London. Specialising in all aspects of online and land-based gambling law, Wilson advises land-based and online gambling businesses (B2C and B2B), as well as many startups. She advises on legal classification, non-remote and remote licence applications, premises licensing, personal applications, change of corporate control applications, transaction due diligence, general compliance and reporting requirements, compliance assessments, regulatory investigations, corporate evaluations, operating and personal licence reviews and developing associated remedial compliance programmes and action plans.

Before joining Harris Hagan in August 2022, Gemma Boore worked in the gambling team of a large London law firm, where she specialised in advising on corporate, commercial and regulatory matters as they impact the gambling sector. She has almost a decade of experience and was recognised as an associate to watch in Chambers UK 2022.