How Online Casino Licensing Works

Online gambling is a lucrative economy; you can expect to reap six or seven figure returns over the course of 18 months, depending on your business model. One of the most crucial (and expensive) considerations for any would-be casino or sportsbook provider is licensing – the primary indication of a reputable company regulated in accordance with modern legislation. Choosing the right jurisdiction can have as much impact upon reputation as the software you use, hence why even smaller providers are prone to shelling out big money, just for accreditation with a well-established gaming commission.

The Mohawk Territory of Kahnawake Canada and offshore Iberian territory of Gibraltar currently rank among the top five trusted jurisdictions for licensing, closely followed by Malta, the Isle of Man and UK. Gibraltar and Malta constitute two of the best for low tax liability – something many companies seek above and beyond a jurisdiction's global reputation. Costa Rica, Antigua and Barbuda fair well for nil to three percent tax thresholds, yet do not rank so highly for their regulatory and auditing efforts. Industry watchdogs suggest jurisdictions such as Antigua and Barbuda, Belize and the Seychelles are prone to handing out licenses in the interests of boosting touristic economy, although Antigua has taken measures to improve its global standing.

As a rule, every online gaming service provider is required to obtain a license for operation within a jurisdiction. This requirement extends to both native and offshore providers across Europe, American and Asian continents. Most will need a secondary license, should they opt to locate servers within a different country, to that where services are offered. Countries of the EEA (European Economic Area), North America and most of Southern Asia require operatives to obtain two formats of licensing – the largely mandatory eGaming License, issued by a government-appointed regulator, coupled with a software license, issued by software providers for use of their platform within one or more offshore territories. Licensing fees vary in accordance with jurisdiction, however one can expect to pay in the region of $80,000 to $250,000 for accreditation by one of the top five. Online gaming licenses are renewable annually – usually at a discounted 50% rate.

Microgaming Software is one of the most popular platforms for casino operators, since it may be used for multiple jurisdictions - with the exception of the USA. Providers such as IGS, CyberArts and Cake Network rank highly for graphics capability, whereas WagerGuys and Mercedes Software are better equipped for handling sportsbook transactions. Microgaming and Cake Network offer software solutions for both formats of online betting. Software licensing costs are independently influenced, therefore you can expect fees ranging anywhere from $5,000 to $50,000 per annum. In the interests of reputation, you'll need to source an external auditing and testing company for software reports and performance, though many jurisdictions now carry out software auditing as part of the annual/ quarterly review process.

Kahnawake has proven a popular jurisdiction for the migration of gaming servers, following the roll-out of UIGEA in the US. In Kahnawake, operators may house servers within the jurisdiction without restriction, meaning they do not have to offer gaming services to natives of the Mohawk Territory. They also provide complete hardware solutions with sister company Cloud 8 Technologies. By contrast, you'll need both an eGaming License and a software license, should one or more of your servers be hosted from the UK.

Native incorporation constitutes one of the most common prerequisites of any dedicated online gaming commission. Both Kahnawake and Malta are renownedly stricter in their review of applicants than smaller licensing bodies, however, all specify a need for a business proposal, financial audit reports and details of other licenses held. Gibraltar Regulatory Authority does not accept applications from independent gaming providers, due in part to its popularity among blue chip brands. If rumors are to be believed, a pocket of companies are set to leave the jurisdiction once their licenses expire, due to recent tax hikes by the government.

Since 2006, a series of international government crackdowns have resulted in the closure of, or exposure of fraudulent operations among corporate gaming providers. For this reason alone, all companies should seek appropriate licensing for the jurisdiction within which/ from they operate. Tax regulations have also evolved in places such as Costa Rica, requiring eGaming providers to be both registered and financially established within the jurisdiction. If you're seeking out a tax haven from which to operate any online gaming service, licensing is compulsory!