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Emily D. Swoboda

Isle of Man Updates Its Regulatory System

27 January 2006

The government of the Isle of Man has announced significant changes in its regulatory framework interactive gambling in order to ease the application process for prospective operators and improve the business of existing ones in the jurisdiction.

The announcement came Tuesday morning at the London Stock Exchange when Bill Mummery, head of e-gaming development for the Department of Trade and Industry on the Isle of Man, revealed that the licensing process in the Isle of Man would be much simpler--effective immediately.

The changes were prompted by the recognition that I-gaming is a rapidly changing industry, Mummery said.

More than 20 I-gaming companies are listed on the AIM, with a significant amount of them floating in the last year.

"There has been a tremendous increase in activity over the last 12 months," he said. "We’re responding to the needs of the industry. We wanted to ease the application process for new operators."

The Isle of Man established itself as a licensing jurisdiction in 2001, licensing five operators almost immediately. But that licensing came with hefty restrictions, such as a $2 million bond requirement and software pre-certification for all operators. Additionally, operators were forbidden from accepting bets from the United States. The jurisdiction, however, could not keep up with the rate at which the I-gaming industry was growing and by 2003, because of the strict regulations, housed no operators.

Recently, the jurisdiction has undergone major changes and has begun to reposition itself in the industry, first by replacing the $2 million bond with a negotiable bond amount.

In early 2005 the Isle of Man Council of Ministers agreed to drop restrictions on accepting bets from the United States, opening the doors to more operators to make a home on the Isle. Since then, major operators like Paddy Power and Party Poker have moved from Gibraltar to the Isle. Today 20 operators exist on the Isle, plus gaming services companies like payment solutions provider Neteller, and 20 more operators are going through the application process at the moment, Mummery said.

Three areas in which changes have been made are software testing, disaster recovery and advertising and marketing.

Software testing requirements will be streamlined, requiring operators to demonstrate that the software used in their games follows game rules available to players and that the data is randomly generated and unpredictable. They must disclose the method used to generate the numbers.

"The requirements move away from static testing of source code to output / results testing of data--which has become recognized as a much more valid approach and protects the software provider's intellectual property since he is not exposing his source code," Mummery said. "Operators obtain a certificate from their auditor that confirms random number generation."

Operators must also visibly display to players the name and rules of the game, instructions, restrictions, amounts of wagers permitted, the amount of returns the player can expect and the players account balances.

Before accepting any bets from players, operators must present the government with a written certificate that demonstrates compliance with the regulations.

Disaster recovery, Mummery explained, is a way to ensure that no data is lost in the event of a computer outage, such as a natural disaster.

"Let’s say something happened in a home jurisdiction, like a major technical failure,” Mummery said. “An operator can’t afford to lose any time or business."

To prevent devastating effects from unforeseen events, duplicate servers with real time information storage are set up in other credible jurisdictions as a back up to the home server. Should the home server crash, the back up would immediately kick in to insure continuity in business and fairness for players.

Previously, off-island operators seeking disaster recovery services in the Isle of Man were required to apply for licensing. Under the new regulations, though, they are free to employ the services of an accredited disaster recovery facility provider on the Isle, of which there are six.

"(An operator) can have duplicated systems in IOM and in the event of a failure in its primary jurisdiction can immediately switch to IOM and run for 30 days without a license, while still being regulated in its home jurisdiction," Mummery said.

Advertising and marketing of I-gaming businesses that operate out of the Isle no longer require licensing either. Companies are free to globally advertise their products.

"The main aim is to allow a company to operate out of IOM offering advertising and marketing services to clients globally without the need to be licensed in IOM," Mummery said.

Mummery hopes the regulatory changes will make the Isle of Man more attractive as a jurisdiction, thus bringing in more operators and expanding the area’s stance as a major licensing jurisdiction. In fact, since Tuesday’s announcement Mummery has seen significant interest in what the jurisdiction has to offer, with hundreds of inquiries coming to him while he attended the International Casino Exhibition in London.

Click here to view The Online Gambling (Systems Verification Amendment) Regulations 2006.

Click here to view The Online Gambling (Advertising) Regulations 2006.

Click here to view The Online Gambling (Technical Support and Disaster Recovery) Regulations 2006.

Isle of Man Updates Its Regulatory System is republished from
Emily D. Swoboda
Emily D. Swoboda