Section 6: Gaming and game of chance

46.     This section defines "gaming" for the purposes of the Act as playing a game of chance for a prize, and then further defines the meaning of a "game of chance" and the concept of playing. The definitions are based on the relevant provisions in section 52 of the Gaming Act 1968, revised for the requirements of the Act. In particular, subsection (3) provides that a person can play a game of chance even if there are no other players, or the actions of a computer stand in for another player. This ensures that gaming on a machine or with virtual games is brought within the scope of the Act.

47.     Subsection (6) provides the Secretary of State with the power to prescribe whether a particular activity (or an activity carried on in specified circumstances) does or does not amount to:

• a game;

• a game of chance; or

• a sport,

for the purpose of defining gaming under this section. The purpose of subsection (6) is to cater for circumstances, which might arise in the future, where either a new product or activity is introduced and there is doubt as to its treatment under this section, or where the interpretation being given to this section means it would be prudent to put beyond doubt the proper classification of a particular activity in relation to the definition of gaming.

Section 7: Casino

48.     This section provides a statutory definition of a "casino" for the first time in British law.

49.     The definition establishes that a casino is an arrangement (whether on premises or via remote communication such as the internet) where people can participate in casino games. Subsection (2) defines "casino games" as games which are not equal chance games. This means that any games which involve playing or staking against a bank, or where the chances are not equally favourable to all the players, will be casino games.

50.     Subsection (3) enables the Secretary of State to provide in regulations for a specified activity to be, or not to be, treated as a casino game for the purposes of the definition of casino. This power is not the same as specifying what kinds of casino games (e.g. roulette or blackjack) may be played in a licensed casino. Separate powers to specify such matters are provided in Part 5 on operating licences, specifically section 90.

51.     The Act regulates casinos in different ways, depending on their size and the facilities they provide. Subsection (5) provides for four categories of casino, to be defined in regulations made by the Secretary of State; and subsection (6) specifically enables casinos to be classified by reference to a number of different matters. These include:

• the number of gaming tables at which casino games (or classes of casino games) are made available;

• the location and concentration of gaming tables; and

• the use and designation of floor areas for particular purposes.

52.     In making such regulations, the Secretary of State can include provisions for determining what is and is not to be treated as a gaming table for the purposes of the casino definition, and for calculating when a floor area is to be treated as being used or designated for a particular purpose (see subsection (7)).

53.     The three categories of casino to be licensed under the Act are: regional, large, and small. A regional casino will have the largest floor space requirements, followed by large casinos, and then small casinos. There is a fourth class of casino, which is a casino below the minimum size for a licensed casino (subsection (5)(d)). Casinos which have been licensed under the Gaming Act 1968, and which are too small to comply with the minimum requirements specified for regional, large or small casinos will fall into this fourth category. Transitional arrangements, under Part 18 of the Act, will be made to permit this fourth class of casino to continue in operation.

54.     The Regulatory Impact Assessment published alongside the Act contains full details of the proposed specifications for regional, large and small casinos.

55.     Sections 90, 166, 174, 175, 176 and Schedule 9, while not an exhaustive list, all contain particular provisions relevant to the regulation of casinos under the Act.

Section 8: Equal chance gaming

56.     Under the Gaming Act 1968, the distinction is drawn between games of equal chance and games of unequal chance (including bankers' games). The Act maintains this distinction, and offers different degrees of regulation and control depending on which types of facilities for gaming are being offered. This section provides a definition of equal chance gaming.

57.     At a number of places in the Act rights to conduct equal chance gaming are granted. See, for example, Part 12 on clubs, and the provisions of Part 14 on private and non-commercial gaming. By contrast, unequal chance gaming or bankers' games may only be made available, under the Act, in limited circumstances, the main example being that of a licensed casino.

Section 9: Betting: general

58.     This section defines "betting" for the purposes of the Act. The present law contains no statutory definition of "betting" as an activity. In broad terms it is taken to mean the staking of money or other value on the outcome of a doubtful issue. Betting can be at fixed odds, by means of a spread, or by way of pool betting.

59.     By virtue of this section (which is subject to the qualification in Section 10) betting covers making, accepting or negotiating a bet in relation to:

• the outcome of any race, competition or event,

• the likelihood of anything occurring or not occurring, or

• whether something is true or not.

60.     Subsections (2) and (3) extend the meaning of the term to include bets on races, competitions, or events that have occurred in the past.

Section 10: Spread bets &c.

61.     Spread bets or other bets, which are subject to regulation under section 22 of the Financial Services and Markets Act 2000, are excluded from the definition of betting in this Part. Section 22 of the 2000 Act provides for regulated activities under that Act to be specified in an order. The relevant order is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544). Article 85 of that Order specifies as a regulated activity investments in rights under:

• a contract for differences, or

• any other contracts the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the price or value of property, or fluctuations in an index or other factor specified in the contract,

and spread bets are accepted as falling within this description.

62.     If a class of bet ceases to be subject to such regulation as a result of an order under section 22 of that Act, it automatically becomes subject to regulation under the Act. Subsection (2) enables transitional provisions to be included in any such order under section 22 to ensure that the switch to regulation under the Act happens in an orderly way.

Section 11: Betting: prize competitions

63.     Schemes purporting to be prize competitions will fall within the definition of betting in this Part, even though they may not involve the deposit of a stake in the way normal to betting, if they satisfy specified conditions. One of the conditions is a requirement to pay to enter; and Schedule 1 defines what amounts to "payment to enter".

64.     The effect of making such schemes subject to regulation as betting is to ensure that all the relevant protections provided by the Act in respect of betting apply. Therefore, schemes such as "fantasy football" competitions or the Racing Post's "Ten to Follow" competition will be regulated in the same way as bets placed on single events. However, the definition is intended to exclude prize competitions (such as prize crosswords) where the elements of prediction and wagering are not both present.

Section 12: Pool betting

65.     This section defines "pool betting". It is based on the definition in section 10 of the Betting and Gaming Duties Act 1981 (c.63), and has been amended to remove those various elements which are no longer relevant to the definition for the purposes of the Act.

Section 13: Betting intermediary

66.     A person who provides a service for others to make or accept bets is called a "betting intermediary" in the Act. Such a person does not, himself, partake in the bet. The definition includes betting exchanges. There is a separate class of operating licence for betting intermediaries.

Section 14: Lottery

67.      This section provides a definition of a lottery. It is intended to give statutory effect to the broad definition which the courts have evolved over recent years, while making specific additional provision in relation to arrangements whose status under the current law has proved problematic or uncertain.

68.     The definition of lottery recognises that a lottery may involve more than one process for determining who the prize winners are. Where an arrangement involves more than one process then it fulfils the definition of a lottery if the first of those processes relies wholly on chance; and this is so even if subsequent processes require the lottery entrant to exercise skill or judgment. Conversely, where the first of these processes does not rely wholly on chance, the arrangement will not be a lottery, even if subsequent processes do not require any skill or judgment to be exercised whatsoever.

69.     An arrangement will only be a lottery if the participants are required to pay to enter. Schedule 2 gives further detail on what amounts to "payment to enter" for the purposes of this section.

70.     The definition of lottery also contains provisions which replace section 14 of the Lotteries and Amusements Act 1976. Section 14 of that Act made provision about the level of skill required for a legal prize competition. There is no direct equivalent of section 14 in this Act. Instead, competitions that do not require a minimum level of skill (according to the test in subsection (5)) are treated as relying wholly on chance, and therefore fall within the definition of a lottery (provided the other elements of the definition are satisfied).

71.     Genuine prize competitions are not prohibited. So, under subsection (5), a process is not to be treated as relying wholly on chance if it contains a requirement to exercise skill and judgement, or knowledge that is reasonably likely to:

a)     prevent a significant proportion of people who wish to participate from doing so; or

b)     prevent a significant proportion of people who participate from receiving a prize.

72.     If either one of these barriers to entry or success can be shown, the process will not be deemed to rely wholly on chance, and the arrangement will not be a lottery.

73.     The test in subsection (5) is intended to be a practical one. So, for example, the level of skill or judgement required to win or go forward to the next round in a children's competition should be set at an appropriate level for the age of the children at which the competition is aimed. Equally, a competition in a specialist magazine needs to be suitably challenging for the specialists likely to read the magazine and enter the competition. The requirements of subsection (5) are not, therefore, necessarily satisfied by requiring a level of skill or judgment that could be expected to challenge the public at large.

74.     Subsection (7) gives the Secretary of State power to provide in regulations whether a particular arrangement or a particular kind of arrangement is, or is not, to be treated as a lottery. The purpose of subsection (7) is to cater for circumstances which might arise in the future, such as where a new product or activity is introduced and there is doubt as to its treatment under this section. This enables the matter to be put beyond doubt.

Section 15: National Lottery

75.     This section ensures that participating in lotteries forming part of the National Lottery is not regulated as gambling under the Act. This is subject to two exceptions: section 42, which creates the offence of cheating; and section 335, which concerns the enforceability of gambling contracts.

Section 16: Betting and gaming

76.     Gambling transactions where there is an overlap between betting and gaming will be treated as gaming for the purposes of the Act, unless the betting in question constitutes pool betting. This ensures, amongst other things, that activities which are available in licensed gaming premises are not also available on licensed betting premises because, like roulette, they involve placing bets.

Section 17: Lotteries and gaming

77.     Where gambling transactions satisfy the definitions of both games of chance and lotteries, then the arrangements fall under the controls on gaming unless they constitute a lawful lottery. The exception to this rule is transactions that require a person to participate, or be successful, in more than three processes. In that case, regardless of whether the transaction satisfies the definition of a lottery, it is always gaming. This broadly maintains the position in the current law (section 52 of the Gaming Act 1968).

Section 18: Lotteries and betting

78.     Transactions that satisfy both:

• the definition of pool betting or a betting prize competition, and

• the definition of entering a lottery,

are to be treated as betting unless they form part of a lawful lottery. This section does not apply to lotteries forming part of the National Lottery which are excluded from being betting for the purposes of the Act by section 15(4).

Section 19: Non-commercial society

79.     This section defines the circumstances in which a society is to be treated as non-commercial for the purposes of Part 11 and Schedule 11. It also contains the definition of "private gain" for the purpose of Part 14.

80.     Societies that are established for cultural or sporting purposes are deemed to be non-commercial societies under subsection (1). This is so, even if they provide benefits to individuals (subsection (3)).

81.     Societies other than those with charitable or sporting purposes will only be non-commercial if their purposes are for something other than private gain. Therefore, these societies will be considered commercial, if their purpose is to provide benefit to a particular individual or individuals.

82.     To illustrate, genuine societies that are set up to provide a child with medical care or sports sponsorship are likely to be non-commercial societies under this section. However, a society set up for political purposes would need to be set up to promote the party or group as a whole, rather than to have as its purpose the payment of sums to the benefit of particular individuals, for their own benefit.

Schedule 1: Betting: prize competitions: definition of payment to enter

83.     Schedule 1 defines the circumstances in which someone is to be treated as having to pay to participate for the purposes of the "betting: prize competitions" definition in section 11. The definition covers cases where a participant has to send money (or its equivalent), and also transferring money's worth and paying for goods and services at a price or rate which reflects the opportunity to participate in the prize competition.

84.     Entry by standard rate telephone call, ordinary post (such as ordinary first class post) or by the use of another comparable service at its standard price to submit an entry, or to claim a prize, is not to be regarded as payment for entry.

85.     Where an operator or any third party earns income from the prize competition because an entrant has to pay to discover whether a prize has been won or to take possession of the prize (for example, by means of a premium rate telephone line), then this is to be treated as payment to participate.

86.     A prize competition is not to be regarded as requiring payment for entry, provided that a free entry route is offered for the competition (for example, a letter sent by ordinary post or another method of communication which is neither more expensive or less convenient than participating by paying). However, to qualify, the free entry route must be displayed with equal prominence as the other means of paid entry, and entries which are not paid for must be no less likely to win all or any of the prizes than entries which are paid for.

87.     The Schedule confers a power on the Secretary of State to make regulations which determine whether or not a specified arrangement is to count as requiring payment to participate. New schemes and kinds of competition are always being devised; and this power will enable any uncertainty which might arise about payment to be resolved in the regulations.

Schedule 2: Lotteries: definition of payment to enter

88.     Part 1 contains the definition of a lottery for the purposes of the Act. The definition consists of three elements, one of which is that people are required to pay to enter the lottery. Schedule 2 sets out what is meant by payment to enter for the purposes of a lottery. The provisions of this Schedule closely follow those in Schedule 1 for prize competitions.

89.     It will not be possible for an operator to circumvent the provisions on payment to enter, explained above in relation to Schedule 1, by providing two methods of entry, both of which are communication at a premium rate, or one of which is a payment and the other is communication at a premium rate. This is because any method of communication that is charged at above the normal rate (i.e. at a rate that reflects the opportunity to enter the lottery) is deemed to be "payment" under paragraph 2(c). So, where there is a choice between payment to enter, and entry through, say, a premium rate telephone line, there is no choice of free entry under paragraph 8, and both methods constitute payment. The arrangement will therefore be a lottery.

Schedule 3: Amendment of the National Lottery etc. Act 1993 (c.39)

90.     Schedule 3 amends the National Lottery etc. Act 1993. It inserts a new provision in the 1993 Act which will allow the Secretary of State to make regulations providing for the holders of licences under Part 1 of that Act to pay an annual levy to the Gambling Commission. The provision is based on that for operating licence holders under section 123 of the Act, and is subject to the condition that a levy will only be imposed where regulations have also been made under that section for a levy on operating licence holders. Schedule 3 also amends the 1993 Act to require the National Lottery Commission to consult the Gambling Commission where it becomes aware of any matter about which the Commission is likely to have an opinion, or where directed to do so by the Secretary of State.

PART 2: THE GAMBLING COMMISSION

91.     The Act creates a new, unified regulator for betting, gaming and lotteries in Great Britain called the Gambling Commission ("the Commission").

Section 20: Establishment of the Commission

92.     This section establishes the Commission, which will be the central regulatory body for gambling in Great Britain. Schedule 4, explained below, sets out the constitution of the Commission and its proceedings, the appointment of Commissioners and staff, as well as its financial and reporting arrangements.

Section 21: Gaming Board: transfer to Commission

93.     The Commission will take over from the Gaming Board of Great Britain, which was established under the Gaming Act 1968 and currently regulates gaming and certain types of lotteries. When commenced, this section, and Schedule 5, will transfer the Gaming Board's functions, rights and liabilities (including property) to the Commission. This section also provides for the chairman and members of the Gaming Board in post immediately before the establishment of the Commission to become chairman and commissioners in the new organisation.

Section 22: Duty to promote the licensing objectives

94.     In carrying out its functions under the Act, the Commission must aim to pursue, and, wherever appropriate, have regard to the licensing objectives (as defined in section 1) and must aim to permit gambling in so far as it thinks such permission is reasonably consistent with pursuit of those objectives. Therefore, in carrying out its licensing functions under Parts 5 and 6 of the Act, or in issuing guidance and codes of practice or advising the Secretary of State in accordance with Part 2, the Commission will have regard to the licensing objectives.

Section 23: Policy for licensing and regulation

95.     Once established, the Commission will be responsible for licensing gambling operators and personnel working in the gambling industry under the provisions of Part 5 (operating licences) and Part 6 (personal licences) of the Act. This will be the primary licensing activity of the Commission, although the Act also provides it with other regulatory and advisory functions concerned with the proper conduct and control of gambling in Great Britain. The Commission will have investigation, enforcement and prosecution powers.

96.     This section requires the Commission to prepare, publish, and keep under review, a statement that sets out the principles which will govern the exercise of its functions, and, in particular, explain how such principles will assist the Commission in its pursuit of the licensing objectives. This statement will underpin the work of the Commission.

97.     Examples of specific matters for inclusion in the statement are: the principles, practice and procedure which the Commission will apply in considering applications for operating and personal licences under Parts 5 and 6.

98.     Before issuing or revising a statement, subsection (5) provides that the Commission must consult the following:

• The Secretary of State;

• Representatives of local authorities (including, in Scotland, licensing boards);

• Representatives of Chief Constables of police forces;

• Representatives of gambling businesses;

• Commissioners of Customs and Excise;

• People with knowledge of social problems that may be associated with gambling; and

• The public, to such and extent, and in such a way as it thinks appropriate.

99.     The statement and any revisions to the statement must be published.

Section 24: Codes of practice

100.     This section requires the Commission, as part of its regulatory functions, to publish codes of practice about the manner in which facilities for gambling are provided. These may be directed at the holders of operating or personal licences, or any other person involved in providing facilities for gambling. In particular, the Commission is required to publish a social responsibility code, which should describe the arrangements which a person providing facilities for gambling is to make for:

• ensuring that gambling is conducted in a fair and open way,

• protecting children and other vulnerable persons from harm or exploitation, and

• making help available to those who are, or may be, affected by problems related to gambling.

101.     The Commission is required to publish its codes of practice, and all revisions, in a way that will ensure that those to whom they are addressed are made aware of them. A code, and any revision thereto, must state clearly when it is to come into effect. The Commission has the ability to revoke codes at any time.

102.     Under Part 5, an operating licence is subject to the condition that the licensee complies with any relevant provision of a social responsibility code. Furthermore, it is open to the Commission to attach general or individual conditions to a licence requiring compliance with a provision of any other code (as further provided under Part 5). The same applies in relation to the Secretary of State's power to attach conditions to an operating licence.

103.     A failure to comply with a code will not, of itself, render a person liable to prosecution or civil action. However, the codes can be used as evidence for criminal or civil proceedings; are to be taken into account by a court or tribunal in any case where it appears relevant; and are to be taken into account by the Commission in exercising any of its functions. For example, where a licence holder has his operating licence reviewed by the Commission for potential breach of a licence condition, under the powers provided in Part 5, the Commission will refer to a code of practice, where it is relevant.

104.     Before issuing a code of practice, subsection (10) requires the Commission to consult:

• The Secretary of State;

• People with knowledge of social problems that may be associated with gambling;

• Commissioners of Customs and Excise;

• People who appear to the Commission to represent gambling businesses, which are likely to be affected by the code or revision; and

• Where a provision in a code is about the advertising of facilities for gambling, people who appear to the Commission to have a relevant responsibility for regulating the advertising industry.

105.     Subsection (11) requires the Commission to consult the following people as well, but only to the extent that it thinks it appropriate depending on the context and subject matter of the code:

• Representatives of local authorities (including, in Scotland, licensing boards);

• Representatives of Chief Constables of police forces;

• Representatives of gambling businesses other than mandatory consultees under subsection (10) (such as, those persons who are unlikely to be directly affected by the code); and

• The public (in such a manner as the Commission thinks fit).

106.     The references to consultation of local authorities in sections 23 and 24 are to be read in the wider context, and includes parts of a local authority other than that responsible for licensing matters. This is to ensure that relevant parts of local government (in England, Scotland, and Wales) are consulted, where appropriate, in respect of the Commission's policy statement and codes of practice.