Depending on who you listen to, the ‘black market’ is either one of the biggest threats to gamblers or the inevitable consequence of bookmakers refusing to take bets from punters who show an ability to turn a profit in their betting. In fact, it is quite possibly both.
But while the term ‘black market’ increasingly appears in various of the areas of debate surrounding gambling, there appears some uncertainty as to precisely what an ‘illegal bookmaker’ actually is.
The starting point relates terminology. Technically speaking a bookmaker is someone who ‘makes a book’ in relation to an uncertain outcome such as a sporting event. In its most basic form making a book essentially means offering odds on every possible outcome of the relevant event – so, for example, offering to take bets at certain odds on all 8 runners in an 8-runner horse race.
It is important to understand that you do not need to be a ‘bookmaker’ in this sense of the term in order to commit the offence which is colloquially described as ‘illegal bookmaking’.
The offence under the Gambling Act 2005
This is because the offence under section 33 of the Gambling Act 2005 is committed by ‘providing facilities for gambling’ where none of the exceptions set out at section 33(1)(b) of the Act apply.
The term ‘facilities for gambling’ is defined at paragraph 5 of the Act. The definition is broad – it includes (1) ‘inviting others to gamble in accordance with arrangements made by [the person taking the bet]’, (2) ‘providing, operating or administering arrangements for gambling by others’ and (3) ‘participating in the operation or administration of gambling by others’.
Terms such as ‘administering arrangements for gambling’ are perhaps not enormously helpful but the general aim of the statute appears clear enough – providing ‘facilities for gambling’ probably encompasses most, if not all, betting and certainly does not require a layer to be ‘making a book’ before the offence can be found to have been committed.
The obvious exception to the general prohibition against ‘providing facilities for gambling’ is where the person ‘providing facilities for gambling’ holds an operating licence allowing them to do so. Obviously this means that a Costa Rican outfit with no licence from the Gambling Commission but which targets and takes bets from punters based in this jurisdiction is an illegal bookmaker – i.e. they have committed the offence under section 33 of the Act (stopping them from continuing to do so may of course be another matter).
The ’private gaming and betting’ exemption
A more opaque exemption to the prohibition against providing facilities for gambling appears at section 33(1)(b)(v) of the Act however. This deals with ‘private gaming and betting’.
Private gaming and betting is covered in greater detail by section 296 and Schedule 15 of the Act. The interaction between sections 33, 296 and Schedule 15 has arguably fallen victim to inelegant drafting and is (mercifully) beyond the scope of this article. But essentially it appears that the intention behind the statute is to make an exception to the prohibition against providing facilities for gambling where the relevant person makes or accepts a bet “otherwise than in the course of a business”.
On the face of things, this exemption would appear entirely sensible – by way of a very obvious example, it cannot be the intention of the Act to criminalise the actions of either of two friends having bets with one another on the outcome of a football match they are watching. But what if only one of those friends was taking the bets and what if they did so quite regularly and for quite large sums of money? What if that individual was in fact regularly taking significant bets from quite a few of his friends and what if those bets contributed significantly to his income or expected income? What if he had a dedicated WhatsApp Group which only related to the taking of bets and what if he started to take bets from friends of friends and what if some of those individuals made their living from gambling? What if he took bets and then habitually laid them, or part of them, on the exchanges? When one begins to consider the various circumstances which might apply, the question of whether this individual is “acting in the course of a business” can become somewhat murky.
The Act provides no assistance in establishing what factors might be taken into account when assessing whether or not someone ‘facilitating betting’ is doing so “in the course of a business”. There is some limited case law on whether gamblers habitually placing bets and habitually making profits from those bets were engaged in what could be described as a trade for tax purposes, but these relate to the individuals placing bets rather than someone taking bets.
Probably the most likely guidance as to when someone taking bets might be said to be doing so in the course of a business appears not in any gambling legislation or case law but in that piece of legislation beloved by law students, the Financial Services and Markets Act 2000 (“FSMA”).
FSMA sets out at section 19 a ‘general prohibition’ which provides that no person can carry out a ‘regulated activity’ unless authorised to do so or otherwise exempt. There is an obvious parallel here with what might be called the ‘general prohibition against unlicensed bookmaking’ under section 33(1)(b) of the Gambling Act.
Section 22 FSMA provides that for an ‘activity’ to be ‘regulated’ for the purposes of section 19 it must be “carried on by way of a business”. Again there is an obvious parallel with the Gambling Act which as we have seen provides that there is no prohibition against providing facilities for gambling unless it is done “in the course of a business”. Like the Gambling Act, FSMA does not go on to define what is in fact meant by the term “carried on by way of business”. However the Financial Conduct Authority has provided some general guidance on this question at Chapter 2.3.3 of its Perimeter Guidance manual.
In essence, the key factors for establishing whether a person is carrying out a regulated activity ‘by way of a business’ for the purposes of FSMA will likely be these:
The degree of continuity to the relevant activity;
The existence of a commercial element to the activity;
The scale of the activity and the proportion which the activity bears to other activities carried out by the relevant individual which are not regulated;
These factors are of course intentionally somewhat vague and none is to be considered conclusive. Rather an assessment needs to be made with reference to these key factors and a balancing exercise carried out. Nonetheless these questions will likely be central to establishing whether someone who provides facilities for gambling does so in the course of a business. So, how might they be applied?
This suggests that someone taking many small bets over a period of time might be more likely to fall foul of the legislation than someone taking only one or two large bets. There is perhaps some inherent logic behind the suggestion that someone spending a great deal of time engaged in the taking of bets is, all other things being equal, more likely to be seen as someone engaged in the course of a business than someone who takes the same level of risk but does so only in respect of a handful of bets.
The existence of a commercial element to the activity
One way in which this might apply in the context of gambling relates to the relationship between the layer and the person or persons placing the bets. Again it seems fair to assume as a starting point that bets placed between established friends are less likely to be seen as being taken by the layer in the course of a business than, for example, bets taken from someone introduced to the layer solely for the purposes of placing bets.
The scale of the activity and the proportion which the activity bears to other activities carried out… which are not regulated
Unsurprisingly the size of the bets being taken will likely play a part in the assessment of whether the layer is taking bets in the course of a business – but much may also rest on the identity of the layer. The more the laying of bets contributes to the layer’s general activity, the more likely he or she is to be found to be operating in the course of a business. One way of interpreting this is that it means bets placed with an extremely wealthy person who has other major business or financial interests are less likely to be placed in the course of a business than bets to the same value which are placed with an individual with few sources of income outside of betting.
The Act is far from straightforward on the subject of illegal bookmaking. However the question of whether an unlicensed person taking bets from others might be an ‘illegal bookmaker’ (or, more accurately, in breach of section 33(1) of the Gambling Act) is going to come down to the nature of their activities. The likely relevant factors provided by the FCA in the context of FSMA set out above may well provide important guidance as to what factors would be taken into account and it seems likely that scale, regularity and the identity and circumstances of the person taking the bets are likely to be the central issues.
It goes without saying that anyone concerned should err on the side of caution.