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Betting: advice for remote, non-remote and betting intermediaries

Published:
17 May 2021
Updated:
6 May 2021
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Summary

This advice note explains the approach adopted by the Gambling Commission (the Commission) when deciding what operating licence(s) an operator needs to authorise its provision of facilities for betting and in determining whether the operator is complying with the requirements of those licences.

It focuses on the questions that arise regarding the use of self-service betting terminals and other intermediate arrangements in providing gambling facilities at high street venues.

Any section references in the footnotes are to sections of the Gambling Act 2005 (the Act) (opens in a new tab).

In brief the Commission’s view is that:

  • an operator which is a party to its customers’ betting contracts needs a general betting standard operating licence
  • an operator providing facilities for gambling from key equipment in Great Britain or to consumers in Britain which facilitates its customers betting with a third party, either directly or through another betting intermediary, needs a betting intermediary licence
  • in either case, those licences will need to be remote licences if the customer bets using any form of remote communication or if the operator’s activity is carried on by means of remote communication, whether or not the customer is on the operator’s premises 12
  • in circumstances where the transaction is conducted from an operator’s premises, a betting premises licence will be needed and cannot be obtained without a betting operating licence which can either be remote or non-remote
  • gaming machines can only be provided on licensed betting premises where the operator holds a non-remote general betting (standard) licence and is providing non-remote betting facilities as its primary gambling activity3
  • where an operator lays off or hedges its betting liabilities by use of a remote platform (whether betting operator or exchange) and does not already hold a remote betting licence, the necessary remote general betting (standard) (remote platform) licence is available with its non-remote licence at no additional cost.

Background to the advice

The Commission is frequently faced with questions about whether a particular type of offering involves acting as a betting intermediary or is the provision of facilities for betting (in the sense of making or accepting bets or providing other facilities for doing so which are not the services of a betting intermediary) and/or whether the gambling in question is remote gambling or non-remote gambling. The answer to those questions depends upon the interpretation of the definitions in the Act.

The interpretation of the Act is ultimately a matter for the courts. Nevertheless, the Commission hopes that it will be helpful to operators for it to set out how it approaches this issue. This advice note sets out the framework which the Commission applies when deciding whether it considers that a particular operator is offering betting or is acting as a betting intermediary and whether gambling is remote gambling or non-remote gambling.

The Commission may update this advice note from time to time to reflect developments in the market and any legal precedents.

Definitions and key concepts

Remote gambling

Remote gambling is defined in section 4 of the Act as:

(1) In this Act “remote gambling” means gambling in which persons participate by the use of remote communication.

(2) In this Act “remote communication” means communication using:

  • the internet
  • telephone
  • television
  • radio
  • any other kind of electronic or other technology for facilitating communication.

The previous list encompasses a variety of modern means of communication such as interactive television and mobile telephony, and is intended to ensure that the definition keeps pace with future developments in this field.

However, in order to ensure clarity as well as flexibility for the regulation of gambling, the Secretary of State may specify in regulations that a specified system or method of communication is, or is not, to be treated as a form of remote communication for the purpose of the definition.

Betting

Betting is defined in section 9 of the Act as:

Betting: general
(1) In this Act "betting" means making or accepting a bet on:

  • the outcome of a race, competition or other event or process
  • the likelihood of anything occurring or not occurring
  • whether anything is or is not true.

(2) A transaction that relates to the outcome of a race, competition or other event or process may be a bet within the meaning of subsection (1) despite the facts that:

  • the race, competition, event or process has already occurred or been completed
  • one party to the transaction knows the outcome.

(3) A transaction that relates to the likelihood of anything occurring or not occurring may be a bet within the meaning of subsection (1) despite the facts that:

  • the thing has already occurred or failed to occur
  • one party to the transaction knows that the thing has already occurred or failed to occur.

The Act does not provide a definition of the term ‘bet’, other than to state that, except where the context otherwise requires, ‘a reference to accepting a bet includes a reference to negotiating a bet’4.

The dictionary definition of a ‘bet’ is:

  • an agreement between two parties that a sum of money or other stake will be paid by the losing party to the party who correctly predicts the outcome of an event.

Pool betting

Pool betting is defined in section 12 of the Act as:

(1) For the purposes of this Act betting is pool betting if made on terms that all or part of winnings:

  • shall be determined by reference to the aggregate of stakes paid or agreed to be paid by the persons betting
  • shall be divided among the winners
  • shall or may be something other than money.

(2) For the purposes of this Act pool betting is horse-race pool betting if it relates to horseracing in Great Britain.5

Betting intermediary:

Betting intermediary is defined in section 13 of the Act as:

(1) In this Act 'betting intermediary' means a person who provides a service designed to facilitate the making or acceptance of bets between others.

(2) For the purposes of this Act acting as a betting intermediary is providing facilities for betting.

A betting intermediary is a person who provides a service to enable others to make or accept bets. Such a person does not, himself, partake in the bet. The definition includes betting exchanges.

It is important to note that there is a separate class of operating licence for betting intermediaries, and that the entitlement to make gaming machines available for use does not attach to such licences.

The Commission has adopted a common sense approach to the question of what constitutes ‘facilitating’ the making or acceptance of bets between others. For example, the Commission does not consider that merely placing advertisements about where to place bets or providing tips in a newspaper is sufficient to fall within the definition. In contrast, the offer of tipster services, whereby the tipster places bets on behalf of third parties in return for payment or commission would, in the Commission’s view, fall within the definition in section 13 of the Act (opens in a new tab).

Likewise, making dedicated rooms available at race tracks, for example by equipping them with computer terminals and live racing feeds and marketing them as being available for people to use for betting would be likely, in the Commission’s view, to amount to facilitating the making or accepting of bets between others.

Remote operating licence

Section 67 of the Act defines the term ‘remote operating licence’ as:

(1) An operating licence is a "remote operating licence" if it authorises activity to be carried on:

  • in respect of remote gambling
  • by means of remote communication.

(2) A remote operating licence may not also authorise activity which is neither:

  • in respect of remote gambling
  • carried on by means of remote communication.

(3) An operating licence must state whether it is a remote operating licence or not.

It is important to note that a remote operating licence covers two distinct situations:

  • where the licensed activity is carried on ‘in respect of’ remote gambling
  • where the licensed activity is carried on ‘by means of’ remote communication.

'In respect of’ covers the situation where the player uses remote communication to participate in the gambling, whether or not the player and the operator are in different physical locations; for example use of the telephone to place a bet, the use of self-service betting terminals (SSBTs) to place a bet in a betting shop, or a player’s use of an electronic bingo terminal to play bingo in a bingo premises6.

‘By means of’ covers the situation where the operator uses remote communication to provide facilities for gambling or to carry out other licensed activities; for example the operator of the National Bingo Game uses remote communication to technically deliver the game although the game itself is not remote gambling because the players do not themselves use remote communication. Another example is a gaming machine supplier who supplies machine software by email.

Licence conditions

There are different types of licence condition that may be attached to operating licences under the Act:

  • statutory conditions imposed by the Act
  • general conditions and individual conditions (both of which are attached by the Commission)
  • conditions imposed by the Secretary of State.

Statutory conditions

Section 92 of the Act imposes a statutory condition on general betting operating licences as:

(1) A general betting operating licence shall, by virtue of this section, be subject to the condition that bets may be accepted on behalf of the licensee only by:

  • the licensee
  • a person employed by the licensee under a written contract of employment
  • the holder of another general betting operating licence.

(2) A general betting operating licence shall, by virtue of this subsection, contain an implied term permitting the use of postal services for the making of bets.

(3) The effect of the term implied by subsection (2) may not be disapplied or restricted by a condition attached under section 75, 77 or 78.

The Explanatory Notes to the Act explain that a general betting operating licence will be required by anyone wishing to accept or make bets by way of business (this includes negotiation of bets). If someone wishes to provide facilities merely for other people to accept and make bets, then the appropriate operating licence will be a betting intermediary operating licence, not a general betting operating licence; the latter is relevant for people who are themselves making or accepting bets in the course of a business7.

Section 92 (1) of the Act sets out who is empowered to accept bets under the terms of a general betting operating licenc, this will be:

  • the licence holder
  • an employee of the licence holder
  • any other holder of a general betting operating licence. No other person may accept or make bets under the authorisation of a general betting operating licence.

Section 93 imposes a statutory condition on pool betting operating licences as:

(1) A pool betting operating licence shall, by virtue of this section, be subject to the condition that bets may be accepted on behalf of the licensee only by the licensee, by a person employed by the licensee under a written contract of employment, by the holder of another pool betting operating licence, or in accordance with subsections (2) or (3).

(2) 8

(3) The holder of a pool betting operating licence that authorises (whether expressly or impliedly) the provision of facilities for football pools may in writing authorise an adult or young person:

  • to make documents or other facilities available in connection with the licensed activities
  • to receive entries on behalf of the licensee
  • to receive payments on behalf of the licensee
  • to make payments of winnings on behalf of the licensee.

(4) An authorisation under subsection (3):

  • shall be treated for the purposes of section 33 as if it were a pool betting operating licence
  • shall have no effect in relation to any activity, entry or payment that relates partly to a football pool and partly to another form of gambling.

Thus, football pools betting may be offered in betting premises without the need for a betting intermediary, or any other licence. However the authority to do so (issued by a pool betting licensee) must be to an individual not to a company, partnership or other corporate entity.

In similar, though not identical terms, section 94 (2) and (3) of the Act provides that:

  • (2) The holder of a licence to which this section applies9 may in writing authorise a person to provide facilities for horse-race pool betting.
  • (3) An authorisation under subsection (2) shall be treated for the purposes of section 33 as if it were a pool betting operating licence authorising the provision of facilities for horse-race pool betting.

As a consequence, pool betting on horse races may be offered in licensed betting offices without the need for either a pool betting or a betting intermediary licence where a written authorisation from Tote (Successor Company) Limited is held. However, there are no similar authorisations available for other forms of pool betting.

General conditions imposed by the Commission

Sections 75 and 76 of the Act concern general conditions, which the Commission may specify for an operating licence or a class of operating licence and have general application. In addition to the general conditions that apply to all operators, the Commission has made general conditions that apply to non-remote betting operators and remote betting operators in the Licence Conditions and Codes of Practice (LCCP).

Of particular relevance to the issues covered in this note is condition 16 in LCCP. Under this condition an operator must offer a sufficient provision of the gambling activity named on the licence, in this case betting, in order to benefit from the ancillary machine entitlement10.

Importantly, ‘sufficient’ facilities for betting would be expected to generate the core level of betting to constitute a business, which is, in fact, a betting business and not an arcade.

Contract

Section 335(1) of the Act (opens in a new tab) makes it clear that the fact a contract relates to gambling shall not prevent its enforcement.

Applying the normal principles of contract law, it follows that to create a binding contract the parties to the bet must have an intention to create legal relations and there must be:

  • an offer
  • acceptance of that offer
  • consideration for entering into the contract.

Both betting exchanges and other betting operators have contracts with their customers, but there are different sorts of contracts in play; the former may provide for the exchange to hold each party’s money and to owe other obligations to the customer, for example in relation to data security or other matters, but the exchange is not a party to the bets between its customers.

In the Commission’s view, it is important to identify who is partaking in the bet, as that will determine the nature of the licence that is required.

The Commission has also imposed a licence condition on operating licences that requires licensees to satisfy themselves that the terms on which gambling is offered are not unfair under the provisions of the Unfair Terms in Consumer Contracts Regulations 1999 and, where applicable, the Unfair Contract Terms Act 1977. It is also a Social Responsibility Code provision that licensees must be able to provide evidence to the Commission, if required, showing how they satisfied themselves that their terms are not unfair.

Is the betting remote or non-remote gambling?

The answer to this question will depend on whether either of the parties to the bet uses the internet, telephone, television, radio, or any other kind of electronic or other technology for facilitating communication in order to make or accept bets.

If the answer is yes, the activity is remote betting, and a remote operating licence is required. If no, it is non-remote.11

A remote licence will be required if the operator carries on activity (eg providing a service to facilitate the making or accepting of bets by others) in which persons participate in the activity by means of any form of remote communication.

Where details of the betting transaction are transmitted internally by the operator by remote means, for example between the staff of an operator following acceptance a remote licence is not required.

A betting premises which relies on a remote operating licence alone to provide facilities for gambling, does not have any entitlement to make gaming machines available for use.

Is the operator offering betting or acting as a betting intermediary?

The answer to this question depends on who takes part in the bet.

If the operator is a party to the bet, then a general (or, as the case may be, pool) non-remote general betting standard operating licence will be required. A non-remote general (or pool) betting standard operating licence brings with it the entitlement to make gaming machines available for use12, but in order to comply with the conditions of the licence sufficient facilities for betting must be made available on the premises.

If the operator is not a party to the bet (and is not operating under an authorisation in respect of football pool or hose race pool betting referred to earlier in this note), but is providing a service to allow two other parties to make and accept a bet, then the operator is acting as a betting intermediary and the appropriate licence is a betting intermediary operating licence13.

In order to assess whether an operator is acting as a genuine and compliant betting operator, the Commission will wish to understand the nature of the relationship that exists between the parties to the betting. In doing so, the Commission will look at14:

  • who are the parties to the betting contract and the rights and liabilities of third parties under the contract
  • whether the operator is simply facilitating access to the customer’s own account with another operator.

The Commission is aware, however, that some operators have devised arrangements whereby the operator is involved in the making and accepting of bets, but immediately thereafter lays off all the bets in question to a third party. These arrangements appear to be designed to enable the operator to make gaming machines available for use, in reliance on their general betting operating licence, but without carrying the normal risks associated with operating a licensed betting office. Such arrangements are likely to raise questions as to whether the operator is in fact providing sufficient facilities for betting in order to meet its licence requirements.

In deciding whether the contractual arrangements reflect the provision of betting as a primarygambling activity rather than an artificial device to enable machines to be sited, the Commission will consider:

  • the operator’s liability under the contract and more generally the greater the degree of liability assumed by the operator, the more likely we are to consider the business is, in fact, a betting business and not an arcade
  • the degree of control that the operator has over the terms and conditions of the betting contract
  • the role the operator plays in deciding which markets are offered, negotiating bets, setting odds and determining terms and conditions (the Commission may also consider other factors)
  • the business model of the operator; for example, whether profits or losses arise directly from the betting or the operator receives commission based on the volume of bets placed with another operator
  • the extent to which the operator is responsible for settling bets and making payouts
  • the extent to which the operator is protected from loss; for example, through indemnification by a third party
  • the operator’s ability to manage money laundering and betting integrity risk and to meet the social responsibility code provisions for a general betting operator.

Applying the previous principles to some examples of the types of arrangements the Commission has encountered

Model 1: The operator provides SSBTs linked to their own betting markets

The SSBT automates the service available at the counter in the premises. Cash is inserted in the terminal, bets are selected and a receipt is printed out. The customer must retrieve any winnings from the counter. The odds and markets offered mirror those available for customers betting over the counter.

Assessment of Model 1

The markets, odds and terms and conditions are set by the operator. The betting contract is with the operator. If there is a dispute, the operator’s dispute resolution procedures are invoked. The operator is responsible for any profits or losses arising from bets placed. The operator settles all bets and makes payouts. Whilst the operator may, to an extent, protect themselves from loss by hedging, this directly impacts on their potential profitability.

A non-remote general betting (standard) licence (or, as the case may be, a non-remote pool betting licence) will be required to permit the taking of bets over the counter.

An ancillary remote general betting (standard) (or, as the case may be, ancillary remote pool betting) licence will also be required for the SSBT. We consider this to be general betting on the grounds that the operator is a party to the bet and remote because, even though the betting takes place on the operator’s premises, the customer is participating by means of remote communication – namely the SSBT.

The operator must also take care to ensure that the SSBTs only allow betting on ‘future realevents’ otherwise the terminals will fall within the definition of a ‘gaming machine’15 and will count towards the four gaming machines that the holder of a general (or pool) betting operating licence and betting premises licence may make available for use16.

A betting premises licence will also be required.

The use of SSBTs is a form of remote communication, therefore a betting premises which relies wholly on the use of SSBTs for the making and accepting of bets would require a remote operating licence only, which would not confer any entitlement to make gaming machines available for use. Where an operator chooses to use SSBTs as part of their operating model alongside non-remote facilities, they will require the relevant ancillary remote operating licence in addition to their non-remote general betting standard licence.

Model 217: Customers are able to place bets directly with a betting exchange or remote betting operator18, via terminals available to them in the premises and are required to open their own account as a means of accessing the betting facilities on the exchangeor with the remote betting operator19

In this scenario the operator of the premises may receive a commission payment from the betting exchange or remote betting operator, but the operator of the premises is not a party to the bet, nor do they make either a profit or loss directly from the outcome of any bet, nor settle bets or make payouts. The operator has no role in deciding the markets being offered, setting odds or in determining terms and conditions. The betting contract is not with the operator, it is between the customer and the betting exchange or remote operator.

Assessment of Model 2

The operator is offering remote equipment by which customers can place bets via a betting exchange or remote betting operator. The operator is providing a service for others to make or accept bets. The operator does not, himself, take part in the bet. Therefore a remote betting intermediary licence is appropriate. A betting premises licence will also be required. The operating licence could be a ‘betting intermediary (trading room only) licence’, available at a lower fee than the licence required for providing full intermediary services.

In either circumstance under Model 2 there would be no entitlement to make gaming machines available.

The operator must also ensure that the terminals only allow betting on ‘future real events’ otherwise the terminals will fall within the definition of a ‘gaming machine’, and making gaming machines available for use is not authorised by a betting intermediary licence20.

The third party betting provider must hold an appropriate remote betting operating licence issued by the Commission.

Model 3: Bets are first accepted from customers by the operator of the premises. All bets are then automatically placed on a betting exchange or other remote betting platform through the operator’s account with that third party platform

Under this model, it is possible for the operator to make a profit (or loss)21 through differences between the prices offered in the premises and the prices available with the third party –although in practice, once commission due to the third party is accounted for, any profits are likely to be minimal.

The betting contract is with the operator of the premises (depending on the express terms of the contract). However, the third party betting platform effectively sets the odds (subject to the opportunity for the operator to arbitrage any differences) and the third party effectively settles the bets, by instructing the operator how much should be paid. Although ultimately it is the operator who is responsible for settling bets and making payouts, the operator is almost entirely reliant on the liquidity and activity (on the exchange) or, with other third parties, the range of betting opportunities they offer. If there is no market available from the third party for an event, the operator will not accept a bet from a customer on the premises. The operator’s terms and conditions therefore need to closely reflect those of the third party.

Assessment of Model 3

As the operator is a party to the bet with the customer, a non-remote general betting (standard) licence will be required. A general betting (standard) (remote platform) operating licence will be required assuming the operator uses remote communication to access his account on the third party platform. If customers participate by means of remote communication – namely a betting terminal, an ancillary remote general betting (standard) licence will also be required. Once again the operator must take care to ensure that any terminals only allow betting on ‘future real events’ otherwise the terminals will fall within the definition of a ‘gaming machine’22.

A betting premises licence will also be required.

What is being offered here clearly falls within the scope of a general betting licence but the Commission has concerns about aspects of the operator’s reliance on its relationship with the third party platform and the limited nature of the offer to customers. For example:

  • whilst the operator is party to the betting contract with the customer and therefore liable to pay the customer any winnings even if the third party does not pay him first, the operator will in practice never accept a bet unless there is a more favourable matching bet available with the third party
  • the operator has almost no control over the markets that are offered or the odds upon which the bet will be accepted.

The Commission has concerns that such arrangements may increase the risk of non-compliance with other important licence conditions and code of practice provisions such as those relating to protecting betting integrity and the prevention of money laundering.

Model 4: Betting is provided by a third party sports book, the content of which is available either via SSBTs or over the counter. In either case bets are routed directly to the sport book.

The operator is paid a commission which is normally based on profits generated. The bets are effectively settled by the sport book and the operator is instructed how much to payout. The operator cannot make a loss from betting.

The operator’s business model is based on making a small profit from commission on betting, whilst the majority of their profits arise from making gaming machines available for use.

Assessment of Model 4

As the operator is not a party to the bet with the customer, a remote betting intermediary licence will be required23. A non-remote betting intermediary licence will also be required if the operator accepts bets from customers over the counter, and places those bets with the third party himself via a betting terminal behind the counter.

A betting premises licence will also be required but gaming machines are not allowed. The use of SSBTs is a form of remote communication, therefore a betting premises which relies wholly on the use of SSBTs for the making and accepting of bets would require a remote operating licence only, which would not confer any entitlement to make gaming machines available for use.

Once again the operator must take care to ensure that any terminals only allow betting on ‘future real events’24. The sports book must also hold an appropriate remote betting operating licence issued by the Commission.

Footnotes

1Subject to the presence in Great Britain of at least one piece of remote gambling equipment used in the provision of the relevant facilities: section 36(3)(a), or circumstances where gambling facilities are used by consumers in Britain: section 36(3)(b).

2This may be a remote betting intermediary (trading room only) operating licence depending on the range of facilities provided.

3This requirement is set out in licence condition 16.

4Section 353(2)(a).

5 Note that section 40 creates an exemption from committing an offence under section 37 (use of premises for gambling) for anything done in relation to football pools in accordance with an authorisation under section 93 (3), as to which see under “conditions”.

6With the exception of the restricted circumstances, which are covered by low or no cost ancillary remote licences, a full price remote licence will be required. Further details of this are provided in The Gambling (Fees) Regulations 2006. As indicated above, the Commission recognised when the Act’s licensing regime first came into force that requiring bookmakers to incur the full cost of a remote operating licence simply in relation to the occasional telephone betting services which they already offered, would represent an unnecessary regulatory burden. Consequently, in addition to full remote operating licences, it is possible to obtain permissions for remote gambling which are ancillary to a non-remote operating licence; namely an ‘ancillary remote operating licence’ to cover a bookmaker receiving bets by telephone, SMS messaging or email provided bets are manually processed by the licensed bookmaker.

7 See also sections 353(2)(a) and 296(3).

8 Subsection (2) relates to acceptance of bets on a track in reliance on an occasional use notice and is omitted as not relevant for the purposes of this note.

9 At present the only licence to which the section applies is the pool betting licence held by Tote (Successor Company) Limited alongside its exclusive licence under the Horserace Betting and Olympic Lottery Act 2004.

10 The Commission will keep this condition under review in the light, among other things, of experience of developments in the betting industry following publication of this advice note.

11The use of EPOS terminals by an operator’s staff members to transmit information from one part of the licensed entity to another are not caught by this requirement.

12 Section 68(5)(c).

13 This may be a remote betting intermediary (trading room only) operating licence depending on the range of facilities provided.

14 This list is not intended to be exhaustive.

15 Section 235(2)(c).

16 Sections 68(5) & 172(8).

17 For the purposes of this Note it is assumed that the betting offered in Models 2,3 and 4 is not pool betting.

18 A third party betting provider that is either a betting intermediary/exchange, holds a remote general betting (standard) operating licence.

19 This model is commonly referred to as a trading room.

20 Section 68(5)&(6).

21 Sometimes called arbitraging by exploiting price differences between different betting markets for financial gain or to mitigate losses.

22 5 Section 235(2) (c).

23 This may be a remote betting intermediary (trading room only) operating licence depending on the range of facilities provided.

24 Section 235(2) (c).

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