How & Why Crypto Gambling Sites Get Licensed

07/12/2023 | Categories: Gambling Guides | Published by: Joe | Last updated: 05/01/2024

The topic of regulation often pops up in online gambling discussions. However, pertaining to crypto sportsbooks/casinos, many gamblers are curious if these platforms need to get licensed at all. Technically, that is unnecessary since they operate using a medium of exchange that many regions/countries do not recognize as legal tender. Hence, they are not seen as legitimate money-making businesses. Despite this, to supply users a sense of confidence that operators are not doing what they wish and that gamblers have someone to turn to, many crypto gaming/betting companies opt to get regulated.

Securing a license ensures that a gambling site operates within a legal framework as a legitimate business overseen by credible bodies in a specific jurisdiction. In short, a license is a document that allows a business entity to operate a gambling operation in a distinct territory issued by a regulatory authority. Obtaining one involves a process that entails providing extensive paperwork and paying various fees. The specifics vary from jurisdiction to jurisdiction, with some regions boasting laxer and other super stringent rules.

The role of a regulator, primarily, is to guarantee that everything offered is transparent and fair, that no minors are gambling, and that the provided services are not utilized for criminal purposes. Moreover, crypto operators choose to get licenses to enjoy various fiscal benefits that many offshore jurisdictions offer, benefit from attractive advertising deals, get a chance to work with credible software/hardware providers, and get the perks the authenticity and credibility licensing brings.

Again, operators get licensed chiefly to shield themselves from legal liabilities and to conduct their operations without impediments. They seek to mitigate the risk of shutdown, arrest, prosecution, conviction, or fines.

Why Do Crypto Casinos Choose the Licensors They Select?

Because of the low fees, tiny/no taxes, and the freedom they provide. That is pretty much it. Small islands like Curacao, Anjouan, Mwali, and so on usually do not force foreign operators to pay taxes on income earned from people not living in their countries. Thus, that means that the only costs that these companies incur are the licensing ones. They also have recognized financial institutions and participate in international trade unions, allowing the business entities registered with their government-created bodies to operate internationally. That opens the doors for operators based in them to accept gamblers from various territories worldwide.

On top of all this, regulators from the mentioned islands, and others similar to them such as the Kahnawake Gambling Commission, Panama’s Gaming Control Board, or the Isle of Man Gambling Supervision Commission, have not very strict rules for gambling companies, low fees, and provide them their licenses quickly.

For example, an operator can get a license in Anjouan in about a week, an unheard-of timeframe. In Curacao, this process may take a few weeks. Nevertheless, it is unlikely that in this short period, these bodies will do anywhere near the due diligence that country-specific regulators like the UK Gambling Commission perform.

How Does the Licensing Process Work?

For this case study, we shall take Curacao, as this Caribbean constituent country of the Netherlands is probably the home base for 80% to 90% of all crypto sportsbooks/casinos. Operators love Curacao because its corporate income tax is usually around 2% of net profits. Furthermore, it is one of the oldest jurisdictions, which is currently undergoing a deep reforming process that will probably make it far less appealing for interactive gaming brands, pending the establishment of the Curacao Gaming Authority.

Curacao currently has four licenses, and all are pretty easy to get, featuring minimal hassles, with some companies claiming that they have gotten regulatory approval in this country in as short as two business days. Hence, this makes Curacao a quality choice for startups who wish to test this industry and try and see how simple it is to expand to new markets.

It also should be mentioned that while country-specific regulators customarily give out different licenses for different forms of gambling, Curacao has a one-fits-all model. Therefore, you only need to pay for one license valid for slots, bingo, poker, sports betting, and virtually everything else.

To initiate the licensing procedure, every authorized person active in the online gambling business must supply a certified passport copy, certificate of boasting no criminal record, banker’s references, proof of residence, a resume, and similar documentation. This paperwork must not be older than ninety days and should be in English.

In the past, a Curacao license cost €21,900 annually, with a 6% sales tax added. For that price, licensees would get control for complying with the various licensing requirements, professional consultations, two domains and one validator, server rent, data storage, assistance in opening bank and processing accounts, private/public cloud, DNS hosting, administrative/legal aid, and back-office support.

Naturally, the steps to get a license, begin with a provided application, then a detailed report concerning requirement compliances, payments, and waiting two to six weeks (traditionally) for everything to get processed. Many entities pick a white-label casino to reduce wait times and problems. That is a product/service created and developed by one party, then gets sold/leased to another who presents it as their own. That allows the latter to work under the license of the developing company. In other words, it does not need to get its own, which makes things simpler.

After one gets a license, the mandatory checks every six months, verification of new personnel, and regular reporting of noteworthy incidents to the licensing body come.

Note that the cited €21,900 that gets divided into an application fee, various compliance charges, etc. After an operator gets granted a regulator’s seal of approval, they must pay a renewal fee each year. The company license renewal can cost between €4,000 and €6,000, and the gaming sub-license payable to the Curacao master license holder can run from €10,000 to €13,000.

In Malta, for comparison, online gambling service providers must pay for RNG games and betting licenses specifically (€25,000). And fork over cash for systems and compliance audits, plus pay a 5% tax on revenues from Malta users. That is why this jurisdiction is not that appealing anymore.

The main reason Curacao will most likely also lose much of its attractiveness in the future is that its new regulator, the Curacao Gambling Authority, has a €49,000 fee that can be paid in monthly installments.

Things Operators Consider When Getting a License

Of course, everything first starts with what the costs will be. That entails not just paying for a license. It also includes setting up operations in a given licensing nation. Plus, the financial constraints one may face there and the offered flexibility. Next comes considering that country’s economic, political, and social stability. That will go a long way in ensuring that an operator has a secure environment to run their business. Because wars, economic collapse, or adverse changes in legislation can wreak havoc quickly on a gambling business.

Double taxation is another thing gaming/betting companies pay attention to, as this will impact their allure. We say that because players/bettors from specific regions may get forced to pay double taxes on their wins if a regulator’s nation has not negotiated various tax treaties or has tax exemptions for distinct businesses/parties. Confidentiality requirements, including information sharing and privacy rules, should also be factored in, as should capital requirements, filing obligations, disclosure conditions, auditing, etc.

Lastly, gambling companies may take into consideration the list of regulator-blacklisted markets. These are customarily jurisdictions where government authorities have actively taken definitive measures to enforce gambling bans. Or they only allow locally licensed sites to operate.

For instance, nations like the United Arab Emirates, Egypt, Kuwait, Qatar, Jordan, and other primarily Muslim countries do not allow gambling and have strict anti-rules against it, so some regulators do not wish to get into conflicts with their authorities by accepting gamblers from these regions, and outright prohibit this.