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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 real events’ 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 exchanger 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.

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Footnotes

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Last updated: 27 July 2023

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