The Evolution of Payment Methods: Legal Considerations for the Gaming and Betting Sectors
Introduction
The rapid evolution of payment methods spurred by digital innovation, consumer demand and changing financial infrastructure has had profound implications for the gaming and betting industry. Operators are increasingly exploring new payment methods, including digital wallets, open banking solutions, Buy Now Pay Later (BNPL) offerings, and cryptocurrency. However, each payment method brings with it distinct regulatory, compliance and reputational risks.
Understanding the key legal considerations for gambling businesses operating in the UK, particularly in light of the Gambling Commission’s evolving stance, relevant financial regulations, and broader legislative frameworks is crucial for risk management, licensing integrity and future scalability.
Payment Providers and Gambling Commission Licensing Obligations
UK-licensed gambling operators are required to ensure that all payment methods used to fund gambling activities are compliant with both gambling law and financial regulation. This is a condition of holding a remote operating licence under the Gambling Act 2005 and reinforced under the Licence Conditions and Codes of Practice (LCCP).
Under LCCP Condition 17, operators must only use payment services that are regulated by the FCA or a comparable regulator in another EEA state. This obligation extends to merchant acquiring relationships, wallet integrations, and banking-as-a-service providers. Failure to do so may result in enforcement action, including fines or licence suspension—as seen in high-profile Gambling Commission actions such as InTouch Games Limited (2023), where AML and affordability controls around customer funding sources were found to be deficient.
Accordingly, it is important that operators perform enhanced due diligence on all third-party payment providers and ensure contractual relationships reflect LCCP and FCA regulatory perimeter guidance.
Cryptocurrency Payments
The use of cryptocurrencies like Bitcoin and Ethereum as a means of deposit or withdrawal remains a contentious area in UK gambling law. The Gambling Commission’s position, as reiterated in its 2022 and 2023 guidance, is clear: operators must only accept funds traceable to legitimate and verifiable financial sources.
Cryptocurrencies, owing to their pseudonymous and decentralised nature, raise red flags for Anti-Money Laundering (AML) and Know Your Customer (KYC) obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
The FCA has also signalled its scepticism of cryptoassets in financial promotions under the Financial Services and Markets Act 2000 (FSMA) and has banned the sale of crypto-derivatives to retail consumers. This hostile regulatory environment makes direct crypto acceptance extremely difficult for UK-licensed operators—despite interest from international markets.
Accordingly, crypto payment integration must be approached with caution and should involve direct engagement with both the Gambling Commission upon taking specialist legal advice. Operators remain liable for verifying the source of customer funds, regardless of the underlying technology.
Open Banking
Open Banking, enabled under the Second Payment Services Directive (PSD2), has introduced new real-time payment options, such as account-to-account (A2A) transfers, which bypass traditional card payment methodologies. These methods reduce processing fees and improve transaction speeds, offering tangible benefits for gambling operators.
However, these services must be delivered through regulated Payment Initiation Service Providers (PISPs) or Account Information Service Providers (AISPs). The FCA’s PSD2 Guidance and Perimeter Reports specify that firms engaging in payment initiation must hold appropriate permissions and safeguard customer funds in accordance with relevant FCA principles.
Moreover, A2A methods introduce challenges in AML transaction monitoring due to their real-time nature. The Gambling Commission expects operators to adapt their Customer Interaction and AML policies, especially with open banking transactions that may not pass through traditional screening tools.
Open Banking represents an exciting development but must be integrated in a way that aligns with AML and consumer protection obligations under both gambling and financial regulatory frameworks.
Buy Now Pay Later (BNPL)
The increasing popularity of BNPL services such as Klarna, Clearpay and Zilch has prompted gambling operators to explore whether these can be used to fund customer accounts. The Gambling Commission’s answer is unequivocal: BNPL is not an acceptable funding method for gambling.
In line with its 2020 ban on credit card gambling (which followed the Review of Gaming Machines and Social Responsibility Measures and came into force under Section 336 of the Gambling Act 2005), the Gambling Commission views BNPL as a form of deferred debt. This is fundamentally incompatible with responsible gambling objectives and could breach Social Responsibility Code Provision 3.7.1, which prohibits the acceptance of credit.
Any attempt to integrate BNPL into payment flows would likely result in a breach of licence conditions and invite Gambling Commission enforcement. Operators should ensure product and payment teams are trained accordingly.
Conclusion
The evolution of payment methods in the UK gambling industry offers new commercial opportunities—but these must be carefully balanced with an increasingly complex legal and regulatory environment. Whether integrating crypto, open banking, or third-party fintech partners, gambling operators must ensure full compliance with Gambling Commission, FCA, and AML legislation.
We advise gaming and betting operators on all aspects of payment integration, platform partnerships, and regulatory risk management. From Gambling Commission licence applications to FCA liaison and risk audits, we provide end-to-end legal support to keep you compliant.
This article is intended for information purposes only and provides a general overview of the relevant legal topic. It does not constitute legal advice and should not be relied upon as such. While we strive for accuracy, the law is subject to change, and we cannot guarantee that the information is current or applicable to specific circumstances. Costigan King accepts no liability for any reliance placed on this material. For further details concerning the subject of the article or for specific advice, please contact a member of our team.
Arianne King
Gaming Specialist
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