PLAYER FUND PROTECTION
Player funds separation requirements
with no protection from bankruptcy, followed by insurance arrangements with a medium level of protection and independent trust accounts option offering the highest level of protection. Operators may choose to operate with whichever level they choose, however they need to make clear to their customers what level of fund protection they provide. Netherlands The Netherlands requires operators to maintain a license to keep deposited player funds separate from operational funds. However, the major difference between the Netherlands and the other two jurisdictions is that the Dutch regulation requires that funds be held independently of the operator. This requirement has been fulfilled by most Dutch operators by means of an independent third-party fund’s foundation 4 . The independent funds foundation is a not-for-profit foundation set up by the operator with the express objective of holding player funds in an independent account which cannot be accessed by the operator. The foundation is an orphan foundation, meaning it is not owned by the operator and is managed by independent directors and an independent supervisory board. The operator then enters into an agreement with the foundation whereby it is agreed that: a. The foundation will hold funds at least equal in amount to the funds held by the operator in their player account. b. The operator will provide the foundation’s management with the weekly balances of the player fund accounts to confirm the balance is sufficient to pay out the players in case of bankruptcy. c. The foundation will invoice the operator for this service. d. In the event of the bankruptcy of the operator, the foundation will disperse the outstanding player funds to the players. This model gives a high level of assurance that player funds remain fully independent from the operator and are shielded from any bankruptcy proceedings.
Denmark In Denmark the mandate for player fund separation is set out in the Guidelines for Operators of Betting and Online Casino as a requirement for being granted and maintaining a remote gaming license. The Guidelines state: “To protect player funds, the applicant must have a setoff- free account at a financial institution, which is kept separate from other funds. The funds in the account may only be used for payouts to players and they must be protected should the license holder become insolvent 1 ” In other words, the operator must: a. maintain a specific bank account; b. which must be separate from the operator’s operational accounts; c. for the specific purpose of holding funds as a guarantee; and d. is to be used to payout players in the event of bankruptcy. UK In contrast, the UK mandates player fund separation as part of the License Conditions and Codes of Practice 2 as a requirement for obtaining a remote gaming license. This requirement is set out in much greater detail in the Customer funds: segregation, disclosure to customers and reporting requirements. This regulation sets out three options for an operator to fulfill the requirement as follows: 1. Segregation of customer funds in a separate account; 2. Insurance arrangements, or an equivalent or; 3. Independent trust accounts 3 . These options are further assigned a level of fund protection based on how secure player funds are in the event of a bankruptcy. Segregation of customer funds being the lowest
1 Available at https://www.spillemyndigheden.dk/uploads/2023-09/Guidelines%20for%20operators%20of%20betting%20and%20online%20 casino%20version%208.0.pdf 2 Available at https://www.gamblingcommission.gov.uk/licensees-and-businesses/lccp/print 3 Available at https://www.gamblingcommission.gov.uk/print/customer-funds-segregation-disclosure-to-customers-and-reporting 4 Gambling Act, Article 31l available at https://wetten.overheid.nl/BWBR0002469/2022-10-01/#TiteldeelVb_Afdeling4_Artikel31l
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IMGL MAGAZINE | DECEMBER 2024
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