A Short Guide to Online Sports Betting Regulation

Just how important is sports betting regulation or an online gambling license for a sports betting site? In the past, it was essential because these platforms moved fiat money around from country to country, requiring adherence to trade laws and the participation of financial institutions. Hence, an operator had to obtain a license to open merchant accounts and legally work with credible payment providers. Recently, these companies also had to obtain AML (anti-money laundering) compliance, making user identification procedures mandatory in the last decade or so.

In the subheadings below, we do a quick dive into the subject matter of Internet sportsbook regulation, why gambling sites get licensed, and how this process works. Moreover, is regulation necessary in the crypto space these days?

A Brief History of Online Gambling Licensors

According to the history books, the World Wide Web, a universally linked information system, was invented by Tim Berners-Lee, a CERN-based computer scientist, in 1989. It went public in 1991. However, most consider that its general use began around 1993. A year later, the island nation of Antigua and Barbuda, at the conjuncture of the Atlantic Ocean and the Caribbean Sea, decided to legalize online gambling, becoming the first country to do so via its Free Trade and Processing Act. That law allowed this nation to have its registered companies offer gaming and betting services to people living outside it through the at-the-time-novel communicational technology called the Internet. Technically, Liechtenstein was the first to authorize online gambling, as it was the initial market to allow lottery sales online.

Nevertheless, let us go back to Antigua and Barbuda. After it passed its Free Trade and Processing Act, a company named – Cryptologic Limited showed up seemingly out of nowhere, now based in Dublin, Ireland. At the time, it got founded by Andrew and Mark Rivkin, two brothers from Canada. The pair created a secure financial system for online transactions through it that the first sets of gambling websites utilized.

In Antigua and Barbuda, the Financial Services Regulatory Commission’s Division of Gambling handled Interactive Gaming and Interactive Wagering license applications. In 1996, Curacao eGaming appeared on the scene as another offshore regulator, quickly joined by the Kahnawake Gaming Commission. Over the second half of the 1990s, various other so-called offshore regulators started functioning in the sphere, and online gambling licensing seemed more like a quick cash grab from economically undeveloped regions than a legitimately regulated sector.

Sports Betting Regulation – Offshore & Country-Specific Licensors

When it comes to sports betting regulation, to explain the term offshore or international regulator, we will say that this phrase refers to the mentioned regulators above that function from one country, licensing its gambling business to run their operations from within that nation’s borders while also accepting users from other territories through the Internet. Curacao is the dominant region for this right now. However, new rules implemented in this Caribbean country are likely to lower its appeal and make operators move to spots like Malawi, which now offer more favorable and laxer terms.

Some other offshore regulators worth noting are the Malta Gambling Authority, the Gibraltar Licensing Authority, the Alderney Gambling Control Commission, the Isle of Man Gambling Supervision Commission, and Panama’s Gaming Control Board (Junta de Control de Juegos). Costa Rica often gets mentioned in this batch. Yet, the truth is that this South American country allows companies to run online gambling-related businesses, but it has no regulatory body that monitors this industry. Therefore, no Internet sportsbook or casino gets licensed in Costa Rica. At least, not at the time of writing. If you read that, know that it is a lie.

Country-Specific Sports Betting Regulation

Country-specific sports betting regulation licensor is an expression we use to delineate regulators like the UK Gambling Commission (UKGC), the Swedish Gambling Authority, Kansspelautoriteit (Dutch Gaming Authority), and the Danish Gambling Authority. These bodies have been created by their respective governments through laws passed in their countries that have defined their inception, and they get funded thanks to tax money. As such, they only regulate gambling activities inside their borders and only worry about the businesses operating within them and the residents using them.

For example, the UKGC only concerns itself with British gamblers, and anyone willing to offer their gambling services from within Britain to its citizens must seek the approval of this organization. The same applies to any region that has its own gambling laws and sports betting regulation. Though, unlike in some of the smaller countries we rattled off above, such as Malta and Panama, once an operator attains a license from a country-specific regulator from a developed nation, like, let us say, a Scandinavian one, that license is only valid for accepting its residents. The company in question cannot allow gamblers from abroad to join their ranks like Curacao licenses permit. So, please remember this distinction.

Why Is a License Necessary?

In the crypto landscape, it is not, given that cryptos use decentralized ledgers that do not factor in the involvement of financial institutions and operate on the Web with no government or international oversight. Still, for gamblers to feel safe, knowing they have someone to turn to in case of a dispute, a regulator provides this sense of comfort.

Again, for a registered business, a license is mandatory for opening merchant accounts and establishing a reputation for fairness. The latter not only applies to bettors. But in the B2B section in general. It gives credibility. A license also allows companies to pair up with renowned industry entities, like software developers, and enter new markets. It protects operators from potential legal hassles in territories without defined gambling laws while offering security for gamblers.

The prime danger of not having a license is getting no cooperation from financial institutions, incurring fines, encountering legal problems, and facing user distrust.

License Considerations

It is pivotal to understand that each licensing jurisdiction has its rules. Some offer a one-model-fits-all-all license, while others require a unique permit for each gambling genre. So, operators must apply for a poker permit, then for sports betting, lottery, and gaming separately. The cost of getting these each can rack up application, approval, and renewal fees. That is why smaller nations, home to international regulators, have primarily adopted a one-type-fits-all licensing model to boost their appeal and make things easy on operators. Who also should consider the political and economic stability of the licensing nation before getting regulated there.

In general, most offshore regulators have pretty lax licensing and regulatory conditions. And they do not offer much in terms of gambler protection. Nonetheless, they have defined complaints procedures and designated departments that mediate disputes between bettors and operators.

We should also not fail to mention that some jurisdictions offer zero tax rates for income generated from foreigners, which gives operators a massive financial incentive to run their operations from these regions.

How Does the Licensing Process Work

We would say that the essential conditions for getting an online gambling license are comparable to the requirements for running activities in the banking sector. The procedure starts with an operator putting in an application with their chosen regulator. To do so, they first must have a legally registered company under whose name they will apply. That requires an application fee and accompanying documents that provide the management’s necessary financial experience and the stability to offer the services they plan on supplying. The regulator then conducts background checks on the management team and performs business reputation ones while vetting the applicant company’s liquidity. They also analyze its submitted business plan and disclose structure, partners, and employees.

Concerning offshore regulators, some bodies from this batch do all this pretty quickly, providing licenses to applicants within weeks or days. After they authorize an application, the operator must pay the licensing fee, and every year, he must fork over cash for a renewal. As a rule of thumb, the initial licensing fee in most offshore jurisdictions should cost between $10,000 to $15,000. Yet, that does not factor in various side charges.

Do Crypto Sportsbooks Need Licenses?

Technically, they do not, as they can function on a good-faith basis with their clientele. But, due to growing crypto regulation worldwide, crypto licensing may become mandatory.

If an operator likes to accept fiat payment methods and get users from as many regions as possible, then a license is more than a good idea. Most crypto operators in the past decade have attained a master license from Curacao master license holder Antillephone N.V. because it was easy and cheap to get. Now, regulators from the islands in the Union of Comoros appear to be taking over this title.

It is rare to see a credible crypto sports betting page or casino site that does not have a valid license nowadays, and in truth, it is a red flag if one has no regulator’s seal of approval. If an operator wants to appear trustworthy and profitable, there is no reason it cannot fork over a specific sum annually for a licensing fee. The benefits this will bring will result in this brand’s user pool feeling safe by having the security that they have someone to turn to if problems arise. The notion they are using a platform where the entity offering the service answers to someone and will get held accountable for wrongdoings is invaluable.

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