The(KGC) has changed its licensing policy and will no longer issue online gambling licenses —— to operatorsin the U.S.

The KGC press release explained the new policy:

After careful consideration, the Kahnawàke Gaming Commission (the “Commission”) has directed that an applicant or existing licensee that accepts players from a US State without being authorized by the US State to do so, is engaged in an activity that adversely affects Kahnawàke’s jurisdictional integrity or reputation (the “regulatory directive”). An application from an operator that engages in this activity will be denied. Existing licensees have been advised that, not later than September 30, 2016, they must modify their operations to conform to the Commission’s regulatory directive or their licenses will be terminated.

Bovada and Ignition voluntarily relinquished their licenses

The KGC is based in the Mohawk Territory of Kahnawake in Canada, and has acted as an international online gambling regulator since 1999. The KGC list of permit holders shows 104 gambling domains actively licensed.

On the same day as the policy was promulgated, September 26, a separate notice announced that “Salmon River Technologies Limited (www.bovada.lv) and Lynton Limited (www.cafecasino.lv, www.slots.lv and www.ignitioncasino.eu) have both voluntarily terminated their Client Provider Authorizations.”

Salmon River sold its online poker business to Lynton early in August, but retained casino and sports betting under the Bovada brand. Ignition online poker must now decide to apply for a license in another jurisdiction, such as Panama, Costa Rica or Curacao, or continue operating without a regulatory badge.

The New Jersey DGE was the active force behind the change

A separate announcement on the same day from the New Jersey Division of Gaming Enforcement (DGE) provided the background to the KGC’s change of policy.

“The New Jersey Division of Gaming Enforcement (DGE) today announced that it has reached a series of agreements related to its licensee, Continent 8, LLC, that will prevent illegal Internet gaming websites from accepting bets from residents of the United States and New Jersey through a data center located on the Mohawk Territory of Kahnawake, Canada.”

Continent 8 specializes in online gambling hosting services and is licensed in New Jersey where it has a data center. It also operates globally from London, Paris, Dublin, Isle of Man, Malta, Guernsey, Gibraltar, Singapore and Montreal.

The DGE challenged Continent 8 on the basis that it was not only providing licensed operators with hosting for their internet gambling operations, but also for offshore operators targeting U.S. customers in defiance of U.S. law.

The DGE’s stance is similar to the one it adopted regarding licensed affiliates who were given a fixed date when they were required to stop marketing offshore poker rooms offering services to U.S. players.

The resolution of the Continent 8 issue led to communications with the KGC which in turn led to the policy change.

“After extensive discussions with the Mohawk Council of Kahnawake and the Kahnawake Gaming Commission (KGC) involving unique jurisdictional issues, the Division was able to ensure that any such websites originating from Kahnawake will no longer be available to United States residents in jurisdictions where these companies are not authorized to operate, after September 30, 2016.”

Regulatory cooperation to combat unlawful gaming is not new

In the KGC statement, Grand Chief Joseph Tokwiro Norton said:

“We consider the strengthening of our working relationship with the DGE to be a positive development for our respective jurisdictions, and for the online gaming industry.”

The policy change can be considered a feather in the cap for DGE Director David Rebuck, who has struggled with meeting operator complaints over black market operators since New Jersey online gambling was first legalized.

He said:

“This agreement is an important step in ensuring the integrity of Internet gaming operations in New Jersey and helps ensure that online gaming patrons can play on fair, regulated sites.”

In the more established gaming jurisdictions in Europe, cooperation remains at an early stage, although there have been some notable developments.

When the UK amended its gaming laws in 2014, the UK Gambling Commission (UKGC) required its remote gaming licensees to justify any gambling operations in countries where they did not hold a specific license to operate.

If the operations produce more than 3 percent of the company’s revenues, that justification must be in the form of a formal legal explanation of the legality of the operations.

In a cooperation deal with the Italian regulator AAMS, the iPoker network warned its licencees (paywall) that they must either get a license to operate in Italy, or cease operations there.

While not an inter-regulator deal, the AAMS arrangement with iPoker was using a third party to pressurise unlicensed operators — the same principle the DGE is applying with its cooperation with the KGC.

The DGE continues to find definitions of illegal operators difficult

The DGE largely followed the UKGC’s lead when it issued its own set of suitability criteria for licensees in April 2016.

At the time Rebuck explained something of the difficulty in identifying miscreants:

“Clearly, when a government agency attempts to divine the intentions of another sovereign jurisdiction through a critical evaluation of local circumstances and resulting actions or inactions, any conclusion reached is fraught with the likelihood of error or misinterpretation.”

Nevertheless, the DGE produced criteria that allow it to deny a license application based on whether an operator is acting legally in other jurisdictions.

Cooperation between regulators is likely to increase over time, and in acting for each others’ mutual benefit, they will gain another weapon in the armory against offshore operators.

The value of the weapon is not completely clear cut. While operators who are largely operating legitimately may move into the fully regulated sector, the least compliant operators will be left with the black market to themselves.

The market may polarise into those operators who comply with gaming regulators and pay the appropriate taxes, and those who operate ever deeper in the black market.

It will become even more important for laws and regulations to channel players away from less reputable companies.