|In September 2001, the Isle of Man opened for business as a flagship licensing jurisdiction for online casinos. With strict regulations guaranteeing protection to the punters and a solid reputation forged through its financial industry, the Island attracted mainstream gambling brands such as Littlewoods, MGM Mirage and SunOnline (whose Casino Atlantis online was bought by Kerzner international). |
At the end of June 2003, MGM Mirage closed and Rank Interactive’s Hard Rock Casino online jumped ship to rival jurisdiction Alderney. Casino Atlantis closed in March, and Actiononline’s Club Fiore followed suit – reopening in Kahnawake, Canada as Actiononline.com. This left just Littlewoodscasino.com from five casino licensees. So is the Isle of Man a busted flush, or is this just an unlucky streak?
According to online monitoring company Datamonitor, US and European revenues from online gaming will reach £12 billion by 2005. But the industry has an image problem – the lack of effective regulation. Online gambling is technically illegal in the US, and proposed UK reforms to regulate the industry have yet to become law. Licensing jurisdictions in Caribbean tax havens have flourished, with low taxes and little regulatory clout. So step forward the Isle of Man, with its ‘Tier one’ regulatory status.
The Isle of Man’s Gambling Control Commission stipulates a ban on wagers from the US, procedures to combat money laundering and a £2 million bond to protect players in the event of casino closure. The lack of access to the US market was cited by MGM Mirage and Kerzner Interactive as one reason for exiting the sector.
But other reasons for the exodus are coming to light. Tobin Prior, CEO of Casino Atlantis operator Kerzner Interactive told OCN: 'The Isle of Man pioneered well-regulated online gambling, and there were always going to be some growing pains associated with a new industry. But they could have made it easier for some of their licensees to do business.'
Some regulations have proved too rigid. Prior says the Isle of Man’s interpretation of rules designed to counter money laundering meant limited withdrawal methods for customers: “Customers could only withdraw to the initial deposit method, so they couldn't make larger withdrawals via alternative methods such as wire transfer if they had initially deposited by credit card, even though both methods were acceptable in the jurisdiction.” Another problem was that recertification of the full software suite was required for even relatively minor modifications or updates.
Prior says frustrations over the way of doing business was another factor: “Decisions were taking a long time, and procedures that had been put in place changed - there was too much of a straightjacket put around business decisions.” Prior cites lengthy delays in getting approval for a proposed partnership deal with a “well known UK brand”.
Rank Interactive manager Andy Harris says the decision to move the Hard Rock Casino to Alderney was purely a commercial one, although The Isle of Man’s Gaming Inspector Derek Cannon said that the reasons for Rank’s decision “may well become apparent in the course of time”. Actiononline declined to comment on their move to Kahnawake.
Cannon acknowledges that setting up a licensing regime has proved to be “a very sharp learning curve – although we’ve had licensed gambling for 40 years in the IOM, we were the first to put our heads above the parapet as regards online gaming”.
Cannon says the Isle of Man will appoint an ambassador to woo more online casino operators. Also, some relaxation of licensing procedures could be on the cards. “At present, some of the lower tier jurisdictions are moving towards more stringent regulation, and the Isle of Man has the option of moving closer to the lower tiers in terms of becoming less restrictive”. The ban on wagers from the US will remain however, primarily to protect the Isle of Man financial industry’s reputation in the US.
Two new online gambling licensees are in the pipeline - Chronicle and Paddy Power. But both are bookmakers rather than casinos. “We’ve been through a dark tunnel” Cannon says.
The Isle of Man’s recent troubles are disappointing to all involved, coming at a time when the online casino industry so sorely needs credible regulation. But with competition from mainland UK licensing on the horizon, it remains to be seen if the Isle of Man can reassert itself as a top jurisdiction.