Isle of Man’s Bet on Innovation: An Analysis of Online Gambling Framework

Located in the Irish Sea, the Isle of Man, a self-governing crown territory, has earned a reputation as a global center for the online gambling industry.

The Isle of Man, known for its business-friendly environment and commitment to regulatory excellence, has established a robust gambling regulatory system.

This system is designed to ensure a gaming environment which is fair, transparent and safe, balancing the interests of both operators and consumers.

As a pioneer in online gambling, the jurisdiction is regularly updating its legal framework to meet emerging challenges and opportunities in the rapidly changing digital gaming landscape. This adaptability has attracted a wide range of international operators, contributing to the island’s vibrant and innovative gaming ecosystem.

Regulative authority and legal basis

The regulative body is the Gambling Supervision Commission (“GSC”), which was established in 1962 and comprises the Inspectorate and the Commission. 

The major principles the GSC adheres to are ensuring that gambling is crime-free, that youth and at-risk individuals are protected, and that the services offered by licensees are fair and players receive true winnings. Besides licensing and regulating land-based gambling activities (casinos, amusement and slot machines, betting offices and lotteries), the GSC also regulates all online gambling activities, which have grown significantly in the last number of years.

Thus, there is the fundamental act – the Online Gambling Regulation Act, 2001 (“OGRA”), which is one of the world’s first acts governing online gambling. According to Section 1 of OGRA, “online gambling” means:

  • any gaming, where any player enters or may enter the game, or takes or may take any step in the game, by means of a telecommunication;
  • the negotiating or receiving of any bet by means of a telecommunication; or
  • any lottery in which any participant acquires or may acquire a chance by means of a telecommunication.

In the jurisdiction of the Isle of Man, a person conducts online gambling if:

  • in the case of gaming or a lottery, he takes part in its organization, management or promotion;
  • in the case of a bet, he carries on any business involving the negotiating or receiving of the bet; or
  • he maintains, or permits to be maintained, in the Island any computer or other device on or by means of which the game or lottery is operated, or the bet is received, as the case may be.

The GSC has also issued a document which contains all the guidance that is required for the application to operate online gambling in the Isle of Man.

Licensing process

The applicant or his/her representatives must initially submit a completed application form and the application fee prescribed by law to the Inspectorate.

The application must contain the following items:

  • The application form.
  • The application fee – £5,250 (approximately EUR 5,996).
  • A personal declaration form (PDF) for some of the appointments.
  • A simplified personal declaration form (SPDF) for some of the appointments.
  • A list of key officials in the group where the application is from a publicly listed company.
  • A letter from the Isle of Man based directors, within which the directors vouch for the integrity and background of the individuals concerned, for those entities submitting a SPDF.
  • A business plan which includes specific chapters based on the type of the license.

One hard copy of the entire application package should be supplied to the Inspectorate, together with one electronic copy which has all individual documents saved as separate files. 

Once the Inspectorate is satisfied that the application is complete and has received the application fee it will typically complete the licensing process within 10-12 weeks. Officially, this period begins when the Inspectorate sends a letter stating that the application has been accepted and the process has started.

If there are no delays in the application process, then, depending on how the monthly Commission hearings go, approximately 12 weeks after formal acceptance of the application, the Commission is required to notify the applicant of its licensing decision. This hearing must be attended by the directors who serve on Manx Island’s board, the designated officers, and the operations manager (if any). Off-island directors do not have to attend the hearing but will be required to meet with the inspectorate within 6 months after the hearing.

Types of OGRA licenses

TypeCostKey Features
Full license£36,750 per annum(~ EUR 42,380)The full license runs for five years. It is issued to undertake such licensable activities as:Casino GamesCasino Games (RNG)Casino Games (Peer to Peer)Casino Games (Live Dealer)Casino Games (Other)Casino Games (Virtual Goods)Bingo GamesRandom number generatorLottery Games 1Lottery Games (RNG)Lottery Games (Reseller)Lottery Games (Live Studio)General BettingGeneral Betting (Fixed Odds)General Betting (Tele-betting)General Betting (Pari-mutuel)General Betting (Betting Exchange)General Betting (Lottery) Pool BettingPool BettingPool Betting (Virtual Goods)Betting IntermediariesBusiness to Business Software ProvisionNetwork ServicesSoftware SupplySoftware SupplySoftware Supply (Token-Based) The list is not intended to be restrictive.It allows licensees to operate business-to-consumer (B2C) activities, including registration of players, storage of their data, and exploitation of proprietary technologiesOperators with the full license can offer technology (games, software, network access to Isle of Man sub-licensees, etc.) to sub-licensees under the reduced fee sub-licence scheme.The full license extends to all parts of a business at the license-holder level and below. The license can not however operate ‘upward’ to cover the gambling activities of a parent or holding company or ‘sideways’ to cover the operations of sister companies.
Sub-license£5,250 per annum(~EUR 5,996)This license can be obtained if the applicant wishes to operate exclusively with a technology provider with the full license.The sub-licence lends itself to the smaller operator looking to establish and grow a presence and to the company that has assets to monetise (e.g. a player database) but no established gaming infrastructure.Any new operator that wants to use the games offered by a network operator can obtain the sub-license. The condition will be that the sub-licence holder is tied exclusively to the network operator for its games and products that it has developed itself.Should the sub-licence holder use the games of another network it would need to upgrade to the full license.
Network services license£52,500 per annum(~ EUR 60,543)It must be obtained if the operator wishes to allow one or more foreign registered players on to its Isle of Man server without reregistering the player details.All of the benefits of the full license are available to the holder of a network services license (for example, the network services licensee could offer games directly to the world market and offer sub-licensing opportunities for its business partners in addition to offering its networks to foreign operators).There is no additional fee for each network partner. There is the ability for existing OGRA licensees upgrading to the network services license to offset any unutilised portion of its license fee against the cost of the new license.Contracts entered into between the Isle of Man network platform and foreign operators must include an appropriate commitment to game fairness, the exclusion of crime and the protection of young and vulnerable people. The foreign operators will be expected to operate Isle of Man (i.e. international) standards of AML/CFT and KYC in respect of any players they supply to the Isle of Man based network.
Token-based software supplier license£52,500per annum(~ EUR 60,543)
It is available to entities that have created blockchain tokens that are intended to be used as the medium of transaction by those who use the gambling software. For example, players obtain the tokens in order to participate in gambling, affiliates are paid using the tokens, and so forth.Applicants will be required the demonstrate that:A credible supply of tokens has been created and the token is available to the public for purchase (i.e. there are exchanges prepared to list it).The key personnel behind the business:Understand the technologyUnderstand the risks peculiar to the technology and have credible mitigationsHave a credible, sustainable business model andHave a track record of successful business and the experience necessary to sustain the business model.Applicants will not be permitted to publicize their licensing efforts, or respond to enquiries in respect of the licensing process until they have been licensed.
Software supplier license£36,750 per annum(~ EUR 42,380)The design and/or sale of software that is used by gambling operators whether online or in the back office and whether as games or as auxiliary services (such as player accounts and registration software, random number generation and etc.) does not require the OGRA license. However, in accordance with the Online Gambling (Software Supplier Licence) Regulations 2019, operators can choose to be licensed in order to list software on the GSC’s software register.

The list of current license holders is available here.

Requirements for online gambling operator

The operator intending to establish in the Isle of Man must meet the following specific requirements:

  1. it must establish a Manx company (limited by shares);
  2. it must have at least 2 local directors, who must be individuals and not corporate entities;
  3. it must appoint at least 1 resident designated official (it is a person appointed by an applicant or license holder from amongst its directors to represent that company’s interests in the Isle of Man), or where that designated official can not reside in the Isle of Man, the operations manager;
  4. it must either register players on Isle of Man servers or it must operate under a network services license which obliges it to establish the network services in the Isle of Man (except in the case of software supply only licenses where no play must take place on Manx servers)
  5. gambling and trading accounts should be located in a bank in the Isle of Man unless otherwise agreed.

It should be noted that changes to regulation in 2017 made it possible to open an account with Isle of Man gambling operators using any funds that have a monetary value. This includes convertible and non-convertible virtual currencies (CVC and VC respectively).

In this case, сonvertible virtual currencies include cryptocurrencies (e.g. bitcoins) that can be bought and sold on independent exchanges for fiat currency. And non-convertible virtual currencies include virtual goods such as digital “skins” for avatars and weapons in video games and other digital objects that perform functions in video games, as well as in-game currency that can be used to purchase such objects.

AML regime regarding online gambling

What is key to remember is that most gambling licenses are governed by AML/CFT legislation. Thus, the GSC monitors the Isle of Man gambling industry’s compliance with the Gambling Act, 2018 and the Code, 2019. The GSC also created such a document as AML-CFT Guidance for Gambling Operators 2020 that contains all of the guidance necessary to operate a framework for compliance with the Gambling Code, 2019.

The operator must not enter into or carry on an ongoing customer relationship or with or for a customer unless the operator institutes, operates and complies with the systems, procedures, record-keeping, controls and training required in order to comply with the provisions of Code as  Risk-based Approach, Customer Due Diligence, Record-keeping and Reporting, Staffing, Training and Monitoring Compliance, and Miscellaneous.

It is vital for operators to have policies, procedures and controls in place prior to commencement of activity. The Code requires AML/CFT procedures and controls to be approved by senior management. The GSC expects approval from the following:

  1. the AML/CFT Compliance Officer;
  2. the Money Laundering Reporting Officer (“MLRO”) (for those relating to suspicious activity reporting); and
  3. at least one director.

The operator also must register on the designated reporting platform “Themis” as provided by the Financial Intelligence Unit. Every operator must have at least 1 employee (MLRO) who is permanently registered with Themis. This is required to avoid delays in reporting due to the need to create an account. Furthermore, Themis is used by the FIU as a messaging system and a repository for instructions and other useful information.

Please also note that in the field of online gambling, there is a term called “qualifying transaction” which means deposits or withdrawals and is an important term as customers that exceed the qualifying transaction threshold of EUR 3,000 (or equivalent) in 30 days must have their identity verified. For clarity, the threshold is EUR3,000 in deposits or EUR3,000 in withdrawals.

Taxes in online gambling activity

Currently no levy is charged on operators (such as corporation tax or capital gains tax), but operators are required to make a proportionate contribution towards advancing education and research into, as well as support for, problem gambling.

In addition, online gambling which registers players attracts online gambling duty:

  • For gross gaming yield not exceeding £20 million per annum – 1.5%
  • For gross gaming yield more than £20 million, but not exceeding £40 million per annum – 0.5%
  • For gross gaming yield exceeding £40 million per annum – 0.1%
  • For gross gaming yield from Pool Betting – 15%.

The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.

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