UKGC Paves The Way For Skin Betting By Permitting Digital Currencies Such As Bitcoin

Posted By Joss Wood on August 10, 2016 - Last Updated on January 22, 2018

[toc]The United Kingdom Gambling Commission (UKGC) released an update to its License Conditions and Codes of Practice (LCCP) at the end of July.

New wording in the regulations, which come into force on October 31, 2016, formally acknowledges that licensees may accept “digital currencies.”

The critical text states:

“Licensees, as part of their internal controls and financial accounting systems, must implement appropriate policies and procedures concerning the usage of cash and cash equivalents (eg bankers drafts, cheques and debit cards and digital currencies) by customers, designed to minimise the risk of crimes such as money laundering, to avoid the giving of illicit credit to customers and to provide assurance that gambling activities are being conducted in a manner which promotes the licensing objectives.”

Esports skins are cash equivalents

The key words are “cash equivalents,” a phrase that not only opens the doors to Bitcoin and other so-called cryptocurrencies, but which could easily extend to other items with a recognized value such as CS:GO skins.

In its annual report, published on July 19, the UKGC made specific reference to esports for the first time. Gambling on esports was identified as an “area for continuing future focus,” and the issues of interest to the UKGC included “trading in-game items which blur the lines between gambling and social gaming.”

UK regulation is light touch but still demanding

The UKGC is recognized as having a flexible attitude to new gambling products (paywall), operating on a philosophy that allows operators to introduce new products quickly.

However, because operators also bear the burden for compliance, they must take the risk that a new product will not transgress the spirit of the UK gambling laws and regulations or the regulator’s “Best Practices” framework.

Any esports skin gambling sites that decide to seek a UK license will need to understand their responsibilities thoroughly if they are not to fall foul of apparently liberal regulations.

In the UK regulatory system, the operator is presented with a series of standards which it must uphold, and not given exact guidance as to how that should be achieved. There is almost no box-ticking to provide the superficial appearance of compliance.

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Anti-money laundering controls will be stringent

When the UKGC demands that operators “Know Your Customer” (KYC), they mean it. There are extensive notes to help operators understand their responsibilities, and how the process should be developed to present an effective barrier to money laundering.

Esports gambling operators with no experience of this type of regulation should not think that their existing model can be applied under the UK regulatory system with just a surface nod to compliance.

Accepting the responsibilities of a UK license will mean significant changes in business models and attitudes.

CS:GO skin betting could be revived by regulation

Valve’s decision to reject skin betting and deny access to skin betting sites has thrown the market into turmoil.

CSGOLounge responded to the decision by announcing that it would seek an online gambling license and withdraw from a large number of regulated gambling markets.

CEO Robert Borewik explained the decision:

“The situation is highly confusing – we are not offering games of luck, we are not offering any transactions with real money or equivalents. Despite those facts, in order to avoid or reduce the confusion, we have decided to acquire a license to legally operate in most of the countries and be able to accept the esports bets by our community, as if it would be real money.”

The changes to the LCCP announced by the UKGC must now be a strong inducement for CSGOLounge and its peers to consider a UK gambling license.

Long-feared regulation may instead become the sine qua non of a successful esports skin betting industry.

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Joss Wood

Joss Wood holds an English degree from the University of Birmingham and also earned a master’s degree in organizational development from the University of Manchester. Joss has a special focus on the international online gambling market, though he also writes extensively on US regulated markets, sports betting, and esports betting.

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