Regulator's approach risks future of British sport sponsorship deals with offshore gambling providers, say experts

Out-Law News | 04 Nov 2014 | 5:21 pm | 5 min. read

New guidance issued by the Gambling Commission could make it impractical for football clubs and other sports teams in England or Scotland to agree shirt sponsorship deals with many offshore gambling providers, an expert has said

Gambling law specialist Susan Biddle of Pinsent Masons, the law firm behind Out-Law.com, questioned the legal basis for some of the Commission's guidance which relates to how new rules on remote gambling advertising apply to sports sponsorship deals.

In a recent letter to sports governing bodies (2-page / 73KB PDF), Nick Tofiluk, director of regulatory operations at the Commission, said that sports clubs and bodies must not only ensure that unlicensed offshore betting companies that they partner with block British consumers from accessing their websites but must also make clear to consumers that the remote gambling services offered by those companies are not available to British consumers.

"We are aware that in some cases commercial partnership arrangements (which include sponsorship) are in place between sports clubs or bodies and remote gambling operators who do not hold a Commission licence (i.e. those who purport not to be making services available to consumers in Great Britain)," Tofiluk said. "Those operators cannot in our view advertise their betting services without both making it clear in the product as advertised and in reality that betting is not available to those in Britain."

Biddle said she could "foresee practical problems if the requirement that the prohibition on play by British consumers has to be made ‘clear in the product as advertised’ means the prohibition has to be made clear as part of the advertisement or sponsorship itself".

"For example, would players’ shirts, replica shirts and stadium boards which carry a sponsor’s logo each have to include an asterisk to a disclaimer somewhere else on the shirt or board? – such a requirement would seem in practice to mean that sponsorship or other advertising by unlicensed offshore remote gambling operators will not be possible even if as a matter of practice they can achieve 100% successful blocking of British consumers," Biddle said.

The letter set out the Commission's position on gambling advertising in sport sponsorships in Britain in light of new rules set out in the Gambling (Licensing and Advertising) Act. Those rules came into force on 1 November.

It is now an offence to provide or advertise facilities for remote gambling without first holding a remote gambling licence issued by the Gambling Commission if you know or should know that the facilities are used, or are likely to be used, in Great Britain, regardless of where the remote gambling provider or advertiser is based.

Many offshore gambling operators have applied for a licence to provide remote gambling services to British consumers, but the new rules and the Commission's approach would apply equally to other operators that do not target their services at British consumers but instead hope to use sponsorship deals with British sports clubs, particularly Premier League football clubs in England, to advertise their services to other international markets where matches are broadcast.

In his letter, Tofiluk said sports clubs and bodies may be held liable for "the offence of unlawful advertising if they do not ensure the remote gambling activity is actually blocked to consumers in Great Britain and that this is clear to consumers".

He said that "significant technical challenges" are associated with website blocking which may present a compliance risk to clubs should the blocking measures deployed by unlicensed operators they partner with prove not to be effective.

The best way for sports bodies to protect themselves against this risk, Tofiluk advised, is to ensure that they "only promote gambling operators that hold operating licences issued by the Gambling Commission". The Commission has previously said it would be unlikely to issue 'advertising-only' licences to offshore gambling operators.

In separate guidance issued by the Commission, the regulator warned that it could prosecute businesses that advertise remote gambling services unlawfully (2-page / 55KB PDF) under the new regime.

Sports law expert James Earl of Pinsent Masons said the Commission's position would have an impact on the international growth strategies of English Premier League football clubs in particular, but could also affect potential commercial arrangements in darts, snooker, cricket and other sports with a strong international betting market.

"There is a huge international TV audience for the English Premier League and, in Asia particularly, some clubs have invested a lot of time, effort and money in growing their brand and exploiting the interest there is there in the Premier League," Earl said. This has helped them to forge commercial partnerships with businesses based in Asia, including betting companies which are not necessarily targeting their services at the British market."

"The Commission's guidance and letter do not offer sports clubs sufficient clarity on the issue of displaying information about the prohibition on play by British consumers," Earl said. "Clubs need to know whether the Commission will accept adverts for unlicensed offshore gambling operators on shirts or advertising hoardings, for example, if disclaimers are included in associated collateral, such as match-day programmes or on club websites. Further guidance with examples of what the Commission considers appropriate is required."

Earl said that British sports clubs or bodies would be "heavily reliant on the technical capabilities" of the unlicensed operators they wish to partner with so as to meet their obligations on website blocking.

The clubs could be disincentivised from entering into arrangements which could create a compliance risk and lead to negative publicity in the event of a Commission investigation into any suspected breach, particularly if this would put at risk other existing or prospective commercial contracts, Earl said. Equally, a challenging regulatory environment may put off unlicensed offshore gambling providers from engaging in British sports sponsorships, he said.

"The spectre of risk of non-compliance is increased because of what some may perceive as a culture of fear the Commission is driving with its communications and its interpretation of what the legal position is, and not what the law itself says," Earl said. "There is a risk that the Commission’s position puts up so many practical barriers to commercial partnerships between unlicensed offshore gambling operator services and British sports clubs and bodies that they could be deemed too unattractive to proceed with in future."

"It would, of course, make the Commission’s life easier if its monitoring and enforcement activities did not have to extend beyond businesses that hold a licence with it, but query if that is the intention of the new legislative regime," he said.

In a further advice note on sponsorship of British sporting clubs by gambling operators (1-page / 37KB PDF), the Gambling Commission confirmed that sports clubs should not carry gambling adverts on replica shirts or other products or services aimed at children.

"Sports sponsorship … deals must comply with the gambling industry code for socially responsible advertising including with regard to the branding of children’s replica kits," the Commission said.

According to the code, "the advertising of adult-only gambling products or product suppliers should never be targeted at children. This applies equally to sponsorship and this code requires that gambling operators will not allow their logos or other promotional material to appear on any commercial merchandising which is designed for use by children. A clear example of this would be the use of logos on children’s sports shirts which in future would not be permitted under the terms of this code. Children’s shirts and other merchandise will be defined as those that do not attract VAT."