UK Developments: A Rush for Gaming Licenses

By Tony Coles and Nick Nocton

Readers will no doubt be familiar with recent legislative developments in the UK. In September 2007, the Gambling Act 2005 (2005 Act) will introduce a new licensing and regulatory regime for all commercial gambling.

In the terrestrial casino sector, as the draft of the act underwent pre-legislative scrutiny, operators from around the world identified the UK as an exciting market, with the potential for significantly enhanced demand, as some of the old licensing restrictions were removed and gaming advertising was significantly liberalized. However, concerns among some politicians and certain public groups that there might be a proliferation of casinos, led the government to backtrack and introduce statutory maxima on the number of new casino licenses awarded under the 2005 Act.

Thus, the 2005 Act categorizes licenses for new casino premises as regional, large and small (according to their gaming and non-gaming area sizes), and limits the number of such new casinos to one regional, eight large, and eight small. This is for the whole of Great Britain and, while there remains the possibility of adjusting these limits, for the foreseeable future, the limit is 17 new casino licenses under the 2005 Act. 

The main UK operators and those planning to target the UK market are keen to have as many licenses as they can, and are jockeying for position, waiting for the UK government (on the advice of the independent Casino Advisory Panel) to decide which municipalities may award one or more of the licenses—an assessment based on local regeneration need.

Once the relevant municipalities are selected, each must conduct an open competition and award the license(s) for its area on transparent criteria, based on investment and regeneration. Some large international operators remain interested in the regional license, and perhaps, also on one or more of the large casino licenses also. Although the statutory limits on gaming machines, for example, slots, (1,250 slots for the regional casino, 150 at a large casino, and 80 at a small casino) makes all of the new casinos less attractive than would otherwise have been the case. Nevertheless, we expect these licenses will be the subject of considerable competition.

But one of the most interesting results of the limitation on the number of new casino licenses under the 2005 Act has been a rush of applications for gaming licenses under the old law (Gaming Act 1968), which remains in force until September 2007. These licenses have traditionally been difficult to obtain, with the applicant having to demonstrate unmet, unstimulated demand for the proposed new casino, and such licenses under the 1968 law are only available within certain permitted areas.

However, they are not restricted in number. Thus, current casino operators, and new entrants to the UK market alike, are applying aggressively for them. The Government and Gambling Commission set a cut-off date in April, 2006 for applications under the 1968 Act for the certificates that an operator needs for his premises before he can make an application to the court. Well over 100 applications have been filed and are currently being considered.

Many applications remain uncompleted, and many applicants are held up in planning (zoning) appeals, seeking the necessary zoning consent for casino use, necessary before the gaming application may proceed.

All of this is despite the fact that the 2005 Act imposes restrictions on these “legacy” 1968 Act licenses which will not apply to the 17 new casinos’ licenses under the 2005 Act.  There will be no sports betting in 1968 Act premises (unlike all of the new casinos) and no bingo (unlike the regional and large casinos), and they will be limited to only 20 gaming machines (slots).

Perhaps the main advantages the legacy 1968 Act casino license will have over the 2005 Act licenses is that they will be “portable” between premises (albeit within the same municipal area); whereas, because of the need to show planning gain and the level of scrutiny in determining the 2005 Act license sites, none of the 17 new licenses will be transferable between premises. 

In the long term, the portability of the 1968 Act licenses may prove advantageous, particularly if operators are able to successfully challenge other restrictions (on sports betting, bingo, and gaming machine numbers) as restraints of trade, or if the government has a change of heart.