WHY LICENSING MATTER
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The internet is packed with exciting bonus offers and promotions. From time to time you come across fantastic bonus offers from unlicensed online casinos and you wouldn’t be the first one to be tempted by them.
So why shouldn’t you take them up on their offer? In this article, we will explain why licensing matter in online gambling. Some of you already know the importance while others may get a surprise.
Our casino guide about why licensing matter is part of two larger article series here at AllGambling. One of them is our series on how online casinos work. By digging deeper into this topic, you will learn more about bonuses, games providers and how it all comes together.
The other article series is about how online betting works. In this series we focus on how odds are calculated, betting margins and bonuses.
If you keep reading this article, we guarantee you that you will be left with the skills and knowledge needed to become a safe and responsible gambler.
WHAT A GAMBLING LICENSE IS
Before we get into the details on why licensing is important, we want to spend some time explaining what a gambling license is.
In essence, a gambling license is documentation that you offer your services legally in one or more markets. They are handed out by gambling authorities run by governments and comes with certain restrictions and regulations.
The two most important gambling authorities you should know about are the Malta Gaming Authority and the Curacao Gaming Authority.
If an online gambling site holds a license from either of these, it can operate legally.
HOW TO GET A GAMBLING LICENSE
If you are a player, the following information is purely for the curious. You don’t need a gambling license to play. However, if you are considering opening up a legal online gambling site, you should pay attention.
The following information can be found on MGA’s pages and explains the process of getting an MGA license. Even though it is somewhat easier to get a Curacao license, it will be a good move to comply with the MGA regulations, no matter what license you apply for.
Applicants submit all the required information at the application stage and the MGA binds itself to evaluate all information through multiple internal process streams.
At the application stage, the MGA assesses whether an applicant:
- Is fit and proper to conduct gaming business;
- Is correctly prepared from a business strategy perspective;
- Has the operational and statutory requirements to meet the obligations prescribed by law and policy; and
- Has correctly implemented and tested, in a technical environment, what has been applied for, before going live.
1. Fit and Proper
The MGA conducts a fit and proper exercise on the applicant by assessing all information related to persons involved in financing and management and on the business viability of the operation. As part of this process, the MGA conducts probity investigations with other national and international regulatory bodies and law enforcement agencies.
2. Business Planning
The MGA conducts an in-depth financial analysis of the applicant’s business plan. The applicant’s business plan is expected to have a detailed financial forecast of the operation inclusive of Cash Flow, Profit & Loss, Balance Sheet, marketing and distribution strategies, HR plan, growth targets.
3. Operational & Statutory Requirements
The applicant is examined on the instruments required to conduct the business. This process includes examining incorporation documents, the games, the business processes related to conducting the games, the rules, terms, conditions, policies, procedures and technical documentation of the gaming and control system.
Furthermore, a licensee is subject to minimum issued and paid-up share capital requirements:
Gaming Service Licence:
- Type 1 – Minimum €100,000
- Type 2 – Minimum €100,000
- Type 3 – Minimum €40,000
- Type 4 – Minimum €40,000
Critical Gaming Supply Licence
- Minimum €40,000
Companies with multiple types of approvals are required to meet the above share capital requirements cumulatively up to a maximum required capping of €240,000.
The above-mentioned components constitute the desk-based audit of the application requirements. Inconsistent and low-quality applications are dropped and the respective applicant will have to re-apply.
4. System Review
Once all three previous stages are successfully completed, the MGA will inform the applicant that the application was successful and will invite the applicant to implement the operation onto a technical environment in preparation to go live.
The applicant will be allowed 60 days to complete this technical roll-out, after which the application will be considered cancelled and subject to re-application. At any stage within those 60 days, the applicant may appoint a Service Provider approved by the MGA to carry out a system audit.
The systems audit will verify the live environment against the proposed application.
At this stage, the MGA expects minimal deviation from the application. If there are significant changes to the gaming system, the applicant will have to re-apply by filing a new application.
On successful completion of the certification process, the Authority issues a ten-year licence.
5. Compliance Review
The MGA mandates that after going live, a Licensee must undergo a number of compliance audits of its operations performed by an approved Service Provider appointed by the Licensee. Such audits need to be completed by the Service Provider within 90 days from the MGA’s notice.
The MGA will require the audit to adhere to the following schedule:
- After the first year of operation after being licensed by the MGA; and
- Any other audit depending on the compliance plan set by the MGA.
Failure of a compliance audit could lead to suspension or termination of a licence.
AVOID BECOMING A PROBLEM GAMBLER
Problem gambling is a well-known phenomenon within the gambling society. It is real and everyone with a gambling license is required to avoid marketing techniques proven to contribute to the development of such behaviour.
In addition to restrictions on marketing, a licensed gambling site have to offer information, help and protection to people at risk of becoming a problem gambler.
In addition to visible support tools to fight problem gambling, their algorithms pick up unhealthy playing patterns making it easier for them to react before gambling becomes a problem.
With an unlicensed online gambling site, there are no regulations or restrictions in play, making it unsafe for anyone with or without known issues with problem gambling.
PROTECT YOUR MONEY
When you gamble online, you deposit money to do so. When depositing money online, most of us are concerned with the security of that money.
When you deposit money with a licensed operator, you are under the protection of the authority. They require trustworthy payment providers, bank solutions and money transfer services before they grant anyone a license.
They also require that the operator complies with EU financial laws & regulations. That includes preventing criminal acts such as fraud and terror funding.
If you decide to play with a gambling site without a license, these guarantees don’t exist. That means you could be funding terror or other criminal organisations without knowing.
It could also mean that you will never be able to withdraw money from that gambling site.
FAIR GAMEPLAY WITH LICENSED GAMBLING SITES
When an online gambling site applies for a license, they are only allowed to provide games that are under the same, strict license regulations as themselves.
Gambling authorities not only secure the gambling site, but they also secure fair gameplay through the regulation of casino games and odds markets.
As a result, the online casino has to provide players with easy access to information about games and bonuses. This includes terms & conditions, return to player, ways to win and how to play.
An unlicensed online gambling site doesn’t have these kinds of regulations. If they actually do provide this information, there is no way to verify whether or not that information is truthful.
An example can be that you play a slot machine where the game should have 96% RTP, while in reality, it only has 50%.
Playing in a regulated online casino or with a regulated betting site ensures fair gameplay.
KEEP PRIVATE INFORMATION SAFE
We have already learned that unlicensed online gambling sites aren’t required to protect you or your money in any way. The owners of these sites are often secret, which makes them difficult or impossible to track down.
If they don’t comply with gambling regulations or laws governing financial institutions, what’s to stop them from sharing your private information? Nothing.
Without saying that all illegal online gambling sites earn money from your personal data, we can’t say for sure that they don’t.
However, if they are regulated, they will lose their license unless they comply with the privacy regulations from both the license provider and the EU.