5/05/2021

Online Casino Licenses

If there ever was a positive story about an industry that took it upon itself to become regulated, then iGaming would be the best example, ever. It might even be the only example in modern history when companies banded together and asked to be licensed, regulated, forced to be compliant under threat of hefty fines, loss of license, and even imprisonment. AND they would pay for this privilege!

Forget everything you think you know about online casino licenses and let me blow your mind through the back of your skull. You see, I’ve done my homework and I’m here to explain why licenses are so coveted by online casinos that they are ready to bend over backwards to get them.

Why does an online casino need a gambling license?

Any license is an official verification of the license holder’s permission to do, use, or own something within a jurisdiction. For online casinos, a license means a lot more than just that. In essence, it means that the operator meets all necessary requirements when it comes to:

  • Running a safe and secure website.
  • Offering various types of games of chance.
  • Providing several different payment methods.
  • Preventing money laundering.
  • Keeping their players from becoming addicts.
  • Paying out winnings in a timely manner.
  • Adhering to marketing rules.

And a whole lot more. Those are just the highlights.

An online gambling license can only be issued by the local gambling authority. The authority stipulates what is required from the operator to obtain a license, and as long as the operator remains compliant with the rules and pays the application fee(s) and subsequent annual fee(s), a license is granted.

As with any authorities, they can be more or less stringent from country to country. This is why the rules for online gaming licenses vary quite a lot.

You may have heard many different names for these authorities, like MGA and UKGC. I will go through them and a lot more on this page, but first I would like to give you a bit of a history lesson.

A brief history of online casino licenses

Once upon a time in the early-1990s, in the sort-of early days of the Internet, a new company called Microgaming was formed. One might say that they were the pioneers of online gaming as they were the first to start developing gaming software and launched the first ever online casino in 1994. It was called Gaming Club and offered only a handful of games.

Within a few years they had competitors and there was a growing understanding that online casinos ought to be regulated just like their land-based counterparts. This was not an easy undertaking since a company could be registered in one country, have its servers in another, while offering its services to people from all over the world.

At first, some countries thought it would be enough to include online casinos under the same regulations as regular casinos, but they failed to consider that most payments between players and online casinos are international transfers of some kind. This led to all sorts of problems which put online casinos in a legal grey area, especially when it came to taxation.

The first online gaming licenses came out of Indian Reserves in the United State, but thanks to conflicts between state laws and federal laws, these licenses fell into oblivion. Meanwhile, on a small island in the middle of the Mediterranean, a plan to become the first European country to offer online casinos licenses was taking shape.

Malta Gaming Authority online casino license

Malta Gaming Authority (MGA) came into being in 2001 and is probably the first country in Europe to offer licenses to companies that wish to engage with online gambling. Their licenses are different for casinos, game providers, sports betting, lotteries, and so on.

While the annual fee for a license ranges from €10,000 to €25,000, which may sound very low, the real money is paid towards compliance contribution. This is where annual fees can go from €15,000 to €600,000 every year. It’s no wonder that iGaming is responsible for more than 10 percent of the country’s Gross Domestic Product, annually.

To this day, an MGA license is regarded as something of a gold standard and other countries that followed have used Malta as a template. Some may have gone a bit overboard and I will get to that later on.

MGA enforcement

MGA is not a law enforcement entity. It can, however, issue warnings, fines, and ultimately revoke licenses. The authority will also make sure that companies are operating within specific guidelines when it comes to offering games to minors, marketing, money transactions, encryption, and responsible gaming, among a lot of other things.

In 2019, MGA suspended or cancelled 25 licenses and handed out 23 fines because of regulatory breaches. So, it’s not some toothless tiger just sitting back and letting casinos get away with stuff just because they are paying license fees and compliance contributions.

United Kingdom Gambling Commission online casino license

Even though the Gambling Commission in the UK (UKGC) has been around since 2005, it wasn’t until 2014 that they made a serious impact on online gambling. The Gambling Act of 2014 has often been described by iGaming insiders as being an MGA license on steroids.

Rules and regulations for operating in England, Wales, and Scotland are far more stringent and go a lot deeper into player protection by targeting specific wordings online casinos can use. Take a look at any casino operating in the UK and you will see that none of them have buttons where it says “Play Now” or “Join Today” since it’s forbidden to suggest any kind of urgency.

You’re also not allowed to “give any promise you can’t keep” or “encourage gambling,” which had a serious impact on how casinos can advertise jackpots. For example, just because every jackpot slot has the capacity to pay out the grand prize on any given spin, it’s not allowed to tell players that “they could be one click away from a life-changing win.” It’s still technically true, though.

The price of admission, so to speak, varies depending on the casino’s turnover. If you’re a small fish you have to pay an annual application fee of £5,711 plus a fee of £3,748 to keep the license. Casinos with a yearly turnover of more than £30 million must pay £14,647 and £49,219 respectively every year for the pleasure of offering online casino games.

UKGC enforcement

There’s a specific page on UKGC’s website I like to call the “wall of shame” where the gaming authority regularly updates with actions that it’s taken against its license-holders. They are not afraid to namedrop companies and reveal exactly what they have done to them.

UKGC is not exactly satisfied with giving online casinos a slap on the wrist, they are on a crusade to eradicate any and every transgression imaginable, which has led to several companies leaving the market altogether.

Here are some of the more notable actions that come to mind:

  • December 2016 – Camelot Group was fined £3 million for not verifying a National Lottery ticket in 2009. As it turns out, an employee in Camelot Group had helped a friend win a £2.5 million jackpot with a fake ticket.
  • February 2018 – William Hill had to pay £6.2 million for not protecting players enough after it was revealed that the company had failed to detect and prevent money laundering through one or more of their brands.
  • May 2018 – Swedish operator LeoVegas was slapped with a £600,000 penalty for misleading adverts and several self-exclusion failings.
  • June 2018 – A player at 32Red managed to deposit £758,000 despite only having a monthly income of £2,150. The UKGC ruled that the casino had been far too lax with its due diligence and awarded the company with a £2 million fine.
  • July 2019 – Ladbrokes Coral was forced to pay £5.9 million in fines for not having proper safeguards in place to stop players from becoming gambling addicts between November 2014 and October 2017. There was also something about money laundering.

The UKGC have often been criticised for its draconian actions where the punishment often doesn’t seem to fit the crime. Fun facts: there is no cap on the fines that the authority can levy, and in worst case scenarios, breaching UKGC regulations can lead to imprisonment up to two years.

Swedish Gambling Authority (Spelinspektionen) online casino license

Just when online casinos thought regulations couldn’t be more stringent, along came the Swedish Gambling Authority (Spelinspektionen) and proved them all wrong. Not only did they take UKGC’s rules and regulations, they amped them up like 1,000. As a result, operators have either lost their licenses or left the market on their own volition.

The biggest change implemented by Spelinspektionen was that casinos were no longer allowed to offer more than ONE bonus per player, household, IP address, etc, which meant that after the welcome bonus, as a player you won’t receive any other bonus offer; no reload bonus, free spins, cash back, loyalty program, nothing. AND the welcome bonus can only be offered on the very first deposit a player makes.

Casinos have to fork out close to €40,000 yearly, and roughly €69,500 per year if they also want to have a sportsbook. Needless to say. It led to a decrease in the market in terms of casinos which has consolidated the market. There aren’t that many companies who can afford to fight for market shares in Sweden.

Those on the market are those who applied for licenses early on. As of January 2021, there were 69 companies licensed to offer casino games and sports betting, while 11 companies have revoked their licenses and 1 company had its license taken for not being compliant.

Spelinspektionen enforcement

The most prominent case was when SafeEnt lost its license effective immediately in June, 2019. This meant that Ninja Casino, one of the most successful brands on the scene, was tossed out like a used condom behind a dumpster. As a result, the company had to sack half of its employees. To this day it says on the Swedish site that it’s temporarily closed and that players have been paid.

But this bombshell was only the tip of the iceberg. Spelinspektionen seem to be on a Spanish Inquisition and it looks like they are doing their best to take virtually all license holders to task. In December 2020, they called for all licensed operators to review their terms and conditions towards their players since their protection is the number one priority.

The authority said that they will follow up on this matter and revoke any license if a company is deemed to provide insufficient player protection. Too bad they aren’t very specific when it comes to what this means precisely.

Even the government got involved in 2020 with numerous proposals to reduce the risks of gambling addiction in the wake of the coronavirus. Deposit limits to player accounts was to be lowered to roughly €500 per week and welcome bonuses to €10.

When asked why people aren’t allowed to do whatever they want with their money, the Minister for Social Security Ardalan Shekarabi had this to say:

“Because we know that the gambling market is one of the riskier markets in our society. A lot of people are exposed to great risks, this is about addiction.”

Thank God Sweden has a government minister who knows what’s best for its people.

German online casino license

Hold on to your lederhosen and Tyrolean hat! If you thought countries were making it hard for casinos to operate, Germany has taken draconian measures to a whole new level reminiscent of the Reichstag Fire Decree of 1933.

Germany’s federal states agreed (finally) in January 2020 to a new federal gambling law which will authorise the licensing of online casinos and poker services from July 1, 2021. So far so good.

There could be some last-minute changes to these rules, but here’s what I’ve found so far:

  • Operators are expected to pay a security deposit based on their monthly turnover, starting from a minimum of €5 million up to a maximum of €50 million.
  • Cross-advertising products will be prohibited. This means that if you have a casino and a sportsbook, you won’t be allowed to advertise casino offers to sports bettors and vice versa.
  • Switching from one product to another (going from casino to sports book) will have a “cooldown” period of 1 hour.
  • Operators must limit player deposits to €1,000 per month across all their brands.
  • A spin on a slot must last for at least 5 seconds while maximum stake has been capped at €1 per spin.

Germany already has a history of trying to limit gambling by banning payment methods. So far they managed to cut off PayPal from processing deposits to casino sites. Who knows who’s next on the chopping block?

German online gambling enforcement

Since the new regulations haven’t come into force as of this writing (expect an update when I know more) I don’t even dare to speculate when it comes to what could happen to operators that step out of line. But from history we know that people who didn’t have all their papers in order didn’t fare too well in Germany.

Dutch online gambling licenses

The Netherlands’ Kansspelautoriteit (KSA) is the regulatory body that will eventually deal with online casinos on the Dutch market. Truth is that the KSA and the government have been struggling for years to get an Online Gambling Act together. As a result, the Netherlands have kept delaying companies from even applying for a license.

Very little is known about what they final wording for the Remote Gambling Act will be, but one thing that we do know is that companies that want to apply need to have been on good behaviour for at least 32 months to even qualify for a license. What they mean by this is that casinos that have been offering their products to Dutch players within this time frame need not apply.

And with a non-refundable fee of €45,000 just for the application, operators better be damned sure that they are meeting all expectations. It’s expected that the Dutch licenses for foreign operators will follow in the same vein as those offered by the UKGC.

Still, it’s not illegal for Dutch residents to gamble online as long as the website is hosted in the Netherlands. It’s allowing for sites hosted abroad to engage on the Dutch market that’s proved to be so difficult.

KSA enforcement

Again, since very little is known about the Dutch online gambling licenses at this point, it’s impossible to say with any certainty what it will mean to be compliant and what the possible retributions could be.

The only two things that are absolutely for sure is that companies that break the rules will be fined and eventually stripped of their licenses.

Curacao online casino license

Curacao is a Dutch Caribbean island off the coast of Venezuela, mostly famous for the drink that bears the same name. It’s also famous for handing out online gambling licenses since the mid-1990s. Yeah, this is probably the oldest license and by far the most lenient.

Unlike other authorities, you only need a single license to offer casino games, sports betting, exchanges, lottery, games of skill and chance. As long as you have all the required documents, it may take as little as six weeks to get your license.

A Curacao license is often looked down on by the big operators in Europe. The reason for this is that many of the big markets are not accessible. For example, you can’t offer your services to players in France, The Netherlands, Singapore, the United States, the UK, Norway, Russia, Australia, Canada, Bulgaria, Poland, Cyprus, Hungary, Slovakia, and there are plenty of countries that will block payments going through.

This leaves mainly African and Asian countries that allow players to gamble online. Still, European players who are fed up with local authorities telling them what they can play, when they can play, and for how much they can play are more and more frequently seeking out Curacao licensed online casinos where they don’t feel like Big Brother is watching them.

The obvious question is: “Is it safe to play at casinos with a Curacao license?” We have been told for a long time that it isn’t safe to play at these casinos, but who are the ones saying this. Curacao has been taking a bad rep for years but I don’t know a single player that had any problems with depositing or withdrawing money.

The four main reasons for obtaining a Curacao license is that it’s easier (only one license required), faster (six weeks tops), it’s cheaper (up to €35,000 on your first year and then an annual fee of up to €12,500 per year), and there is a 0% tax on foreign transactions.

Curacao online gambling enforcement

While European gambling authorities are quick to name and shame operators that have been fined and/or lost their licenses, Curacao is very discreet. They do publish notices for everyone to read but they don’t go into media friendly details regarding suspension of licenses.

Here’s an actual notice that I found from December 8, 2020: “The License of 24 Media N.V., operating under the domain www.action24.com has been suspended.” That’s all!

You can rest assured that if this would have happened in the UK or Sweden, there would be plenty of details for local media to pick up on. It’s one thing to lose your license, but it’s another to have your company’s reputation dragger through the court of public opinion in the news.

Unlicensed online casinos

There was a time when all online casinos were unlicensed and if you read the terms and conditions carefully, one of the last items in that document would say something along the lines that in case of a dispute, management decision is final. This basically meant that if you disagreed with anything the casino did, you had zero chance of winning the argument.

Another fun item on that list used to say that the terms and conditions can be changed at any time without any prior notification to you. That clause ensured that if you were somehow right in your claim (fat chance), the casino would simply change its terms to put you in the wrong again.

Ah, those were the days. And those are still the days if you choose to play at a casino without a license. You have no protection what-so-ever. All you can do is cross your fingers and hope that the casino will pay out your winnings.

So why do players still seek these casinos out? For one, being unregulated, they can pretty much offer you whatever they want in terms of bonuses. They can word their advertising however they want. They can email you whatever and whenever they want. There will most likely not be any responsible gaming options to limit your account in anyway.

There will for sure be limits to how much you can bet and the games you can play will be very limited. All the big game providers that you know will be far out of sight because they are licensed and won’t let some Russian or Chinese online casino carry their titles. There’s simply too much at stake. Also, there’s a big chance that you will never know what kind of Return to Player (RTP) games are offering.

In other words, you’re completely at the mercy of the casino. But here’s the thing. Even unlicensed casinos know that they will go out of business if they keep screwing their players over. Players take to forums and file their grievances all the time and with enough bad publicity, no one will sign up to play at these casinos.

Think of it as a double gamble. Not only are you gambling with your money on their sites, but you also have to take a gamble that you will get paid. And the terms and conditions will never be in your favour.

Expected enforcement

This one is super easy. You shouldn’t expect any enforcement. There is no third party to monitor unlicensed casinos. You play at your own risk. Buyer beware, as they say.

Do licensed casinos follow the rules?

For most part they do. Even when they don’t there are a few things you should take into consideration. I’ll give you a simple example. Imagine that a licensing authority decides that they don’t like a particular wording of a specific offer. They announce on their site that this is no longer allowed and offer no guidelines or suggestions when it comes to making proper changes.

Casinos are normally given a deadline to make the appropriate changes. No one wants to risk not being compliant as they could lose their license and face exorbitant fines. So they scramble to review every single page where the specific offer is mentioned to re-word what they are saying, without knowing if that will be compliant.

The deadline expires and the licensing authority starts checking what the casinos have done to meet the new rule. They may find that some casinos have made changes that they disagree with. Those casinos are now considered in breach of what is permitted to hold a license.

The first thing that happens now is that each casino in breach of the terms is issued a warning and given a new deadline, after which they will be fined and/or have their licenses suspended.

As you can see, there are times when casinos “break” the rules to no fault of their own. They are sometimes forced to act fast without any guidelines. It’s not exactly fair but it is what it is.

Is it safe to play at licensed casinos?

By now you should know a lot more than you did a few minutes ago about licensed online casinos and have figured out that it’s perfectly safe. You have plenty of protection and you can count on casinos paying out winnings. There’s just too much at stake for the casinos to mess around with its players. And with new casinos popping up all the time, competition is fierce.

Think of a license as an investment to prove that you meet a ton of requirements to conduct business. You wouldn’t want to throw that away so easily since you risk missing out on operating on a very lucrative market where you spend millions in advertising every year.

Do game developers need a license?

Of course they do. These licenses are obviously different from the ones obtained by the casinos, even though they are issued by the same authorities. This is because the requirements for getting the license is very different.

Game providers have to show that their software is encrypted and safe to avoid any outside tampering. They have to prove that games are fair and that the outcome of every game round is random. Games will even require different settings depending on the market where they are offered. Some settings like quickspin and autospin are banned in the UK. This means that the game provider must be able to turn these off before the game can be released there.

Games also have to be tested rigorously before they can be offered. Undoubtedly you have heard of Return to Player (RTP). This is always presented as a percentage in the mid- to high-90s. To get to this percentage, the Random Number Generator algorithm is put to a test where the game is played over billions of rounds before it’s presented to the local gambling authority.

They in turn test the game again to make sure that they reach a result deemed close enough to be accurate. If the RTP is off by more than a couple of fractions of a percentage point, the game won’t be permitted for release to casinos.