Why does an online casino have to be licensed to operate? Is that really so important?
The vast majority of online casinos hold at least one license from a government agency. However, the exact nature of these licenses are often misunderstood by players. This article addresses why online casinos seek licensing, including both legal and economic motivators.
To avoid legal problems
Although online casinos are remote by nature, they must all be stationed somewhere. The technology needed to run the casino (i.e. the servers) constitute remote gambling equipment. Virtually all governments require gambling activities, both within the jurisdiction and offshore, to be regulated and taxed.
Without a valid license from the jurisdiction in which the casino operates, the owners of the casino can face severe penalties, may have their casino shut down, and could potentially be prosecuted. This is the primary motivator for online casinos to obtain licensing before they begin operating.
To allow players from a particular market
Online gambling regulations vary among countries and territories throughout the world. Owners of online casinos must keep this in mind when deciding which jurisdiction(s) they wish to seek licensing from. For instance, some governments prohibit their citizens from playing at any online casino that does not have a license from their gambling agency. Others are less strict and allow players to join almost any casino.
Ultimately, this is why casino managers must consider their marketing strategy when deciding where they want to be licensed. Failure to obtain the necessary licenses can result in a casino not being able to reach players in a particular jurisdiction.
To make the casino more attractive to players
Not all licensing jurisdictions are created equal. The best, and often most expensive, licensing bodies make sure player funds are safe, that the games are fair, and that casino management are responsible and act in good faith at all times. On the other end of the spectrum are governments that treat online casinos the same as any offshore business and simply require license holders to pay their fees on time to retain their license, offering no protection to players.
Responsible casino portals and well-informed players will consider the effectiveness of a casino’s licensing jurisdiction in deciding which sites to recommend or play at, in conjunction with the other features that casino offers. Casinos looking to reach as many players as possible will consider this factor before obtaining a license.
The actual supporting departments (such as finance and customer service) of an online casino do not typically have to be located in the same jurisdiction as a regulated server. However, there are benefits to having everything in one location: server maintenance can be handled on the spot, and the different departments within the casino can work together more effectively. Casino managers may find that the cost savings of this outweigh the higher licensing fees in their local jurisdiction.
This is also an important factor for managers who already own a land-based casino within a particular jurisdiction. Choosing to get licensed within that same jurisdiction will likely be less resource-intensive than seeking an offshore license since the company will already have a relationship with the local gambling regulators.