Venturing Online – The exciting road ahead (Part One)

Choosing a jurisdiction to apply for an iGaming license

There are many factors that must be considered, and each can be thought of as an ingredient in what operators hope will be the perfect recipe. 

It's been shared with us that the primary decisions for small- to medium-sized companies are based upon factors that come down to dollars and cents, or in other words, where these companies can initially afford to operate from in the short to medium term Some of the questions these types of companies might consider may include:

• What type(s) of games or services can be offered? (i.e.: is it Poker alone, Slots alone, Sports Betting alone, or all forms of gaming)
• What are the application and license fees in each jurisdiction?
• Are the policies and tax structure favorable?
• What are the up-front costs going to be for independent compliance testing and auditing?
• How dependable are the Internet Service Providers (ISP)s and the overall network connectivity?
• What funding options are available -  how will players get money in, and how will they receive payouts / wins (i.e.: Cheques, Pre-paid Cards, Bitcoin or other virtual currencies, Credit and Debit Cards, Bank or Automatic Clearing House (ACH) transfers, or some other forms of electronic wallet based solution)?
• Does the jurisdiction require the technical infrastructure (i.e. servers and other hardware) to be located within its borders?

For larger-sized companies the affordability factor remains important; however, increased capital backing often shifts the focus to long term factors based on sustainability, such as:

• What are the requirements for local hiring and/or representation within the jurisdiction?
• If there is no requirement for servers to be within the jurisdiction's borders, where will they locate their primary servers?  Where will they locate redundant back-up servers for disaster recovery?
• Besides the corporation, which key personnel will need to go through registration and due diligence investigations?
• Which responsible gaming controls are mandated in the jurisdiction?
• What are the requirements for age & identity verification?
• What are the requirements to be able to pinpoint where their patrons are playing from? (i.e.: do they need to verify a player's location before allowing game play sessions)
• What are the jurisdiction's plans to further strengthen their technical infrastructure?

Main benefits that Alderney, Gibraltar, Isle of Man, and Malta offer to online gaming operators

These jurisdictions are among the more established online gaming jurisdictions.  With each having been in place for more than a decade, they offer a number of benefits to potential operators which include (but are not limited to):

• Well-established and publicly-documented processes for licensing with experienced regulators managing the process.
• A wide variety of available gaming licenses allowing for closer alignment with existing and newly emerging business models.
• Generally low corporate and gaming tax regimes.
• Established technical environments – having resilient and secure world-class data centers each with experience in housing gaming applications.
• Established financial centers well-versed in the requirements of online gaming businesses.

Increased regulatory ties and established inter-jurisdictional agreements stemming from years of operation which can smooth the path of operators wishing to expand to other jurisdictions in a cost-effective manner.

Difficulties of each jurisdiction

It’s not as easy to pinpoint what might be considered a “difficulty” with each jurisdiction, especially because there may be contrasting views on what can be defined as a “difficulty.”  Each jurisdiction has its own unique culture of facilitating operations of their licensees.  Each remains mindful of the capabilities and processes of other competing jurisdictions. Each strives to stay competitive as a destination for capable operators with good repute. Consequently, they try to minimize any “difficulties” potential operators may have in becoming licensed in their jurisdictions.

When considering establishing an online gaming site, it’s essential that potential operators perform THEIR OWN due diligence on the jurisdictions of interest to find a best fit for their particular gaming offering. Likewise, it’s necessary for operators to have a well-planned medium- to long-term strategy in place.  Having this in advance will facilitate growth beyond the initial deployment. New products and/or the need for re-deployment into additional jurisdictions due to rapid success can quickly tie up resources unless an efficient strategy is in place.

For example, if you are planning to enter other European jurisdictions in the future, would it be more cost effective to establish your initial deployment in a European Union (EU) member jurisdiction such as Gibraltar or Malta?

Similarly for example, it may be more strategically advantageous and cost effective to request the independent lab to include multiple jurisdictions in your initial product testing, perhaps with a focus on the jurisdiction(s) having the more stringent technical requirements first, such as Alderney or the Isle of Man?  This way other jurisdictions where you wish to deploy going forward will more likely fall under the high bar for certification that you have already set. 

Main differences among jurisdictions

Each jurisdiction is of course unique in its own number of ways, however a few obvious differences that stand out are as follows:

• There are small differences in the licensing fees applied to different gaming activities and this should be taken into account when developing the long term business plan.
• Gibraltar and Malta are both full members of the EU, whereas Alderney and the Isle of Man are neither full members nor associate members of the EU.
• There are differences between the jurisdictions in the amount of technical assessment performed by the regulator themselves vs. what is required to be tested by an independent third party test lab, although ultimately most of the same areas are covered one way or another.