Understanding Gambling: Key Elements of Consideration, Chance, and Rewards and the Need for a iGaming License
- Tradepass International Tax LLC
- 5 hours ago
- 5 min read
Gambling is a popular activity worldwide, often associated with excitement and the possibility of winning money or prizes. Yet, many people do not fully understand what gambling truly involves or why it requires strict regulation through licenses. This post breaks down the core elements that define gambling: consideration, the existence of a game of chance, and the reward. It also explains why obtaining a gambling license or an igaming license is essential for anyone operating in this space.
What Defines Gambling?
At its core, gambling involves risking something of value, usually money, on an event with an uncertain outcome. The goal is to win a prize or reward, which can also be monetary or non-monetary. To understand gambling fully, it’s important to look at its three key components:
1. Consideration
Consideration means that the player must stake something of value to participate. This is typically money, but it can also be other valuables or tokens. Without consideration, the activity does not qualify as gambling. For example:
Buying a lottery ticket for a chance to win a jackpot involves paying money upfront.
Placing a bet on a sports game requires risking a certain amount of cash.
Consideration is what makes gambling different from free games or contests where no purchase or stake is required.
2. Existence of a Game of Chance
A game of chance means the outcome depends largely on luck rather than skill. While some games mix skill and chance, the element of randomness must be significant for the activity to be classified as gambling. Examples include:
Slot machines, where the result is determined by a random number generator.
Roulette wheels, where the ball lands on a random number.
Lottery draws, where numbers are picked randomly.
Games purely based on skill, like chess or poker played without betting, do not fall under gambling. However, poker with betting is considered gambling because of the money at stake and the chance element in card distribution.
3. Reward
The reward is what the player hopes to win by participating. This can be money, prizes, or other benefits. The reward must be something of value and is usually proportional to the risk taken. For example:
Winning a cash prize in a casino game.
Receiving a jackpot in an online lottery.
Earning points redeemable for goods in some gaming platforms.
Without a potential reward, the activity would not motivate players to risk their consideration, and thus it would not be gambling.
Why You Need a Gambling License
Operating gambling activities without a license is illegal in most countries. A gambling license or igaming license is a legal authorization that allows businesses to offer gambling services. Here are the main reasons why such licenses are necessary:
Protecting Players
Licensing authorities enforce rules that protect players from fraud, unfair practices, and addiction risks. Licensed operators must:
Use certified random number generators to ensure fair play.
Provide clear terms and conditions.
Offer responsible gambling tools like self-exclusion and deposit limits.
This protection builds trust and ensures players have a safe experience.
Legal Compliance
Governments regulate gambling to control its social impact and generate tax revenue. A gambling license ensures that operators comply with:
Local laws and regulations.
Anti-money laundering policies.
Age restrictions to prevent underage gambling.
Without a license, operators risk heavy fines, legal action, and closure.
Market Access and Reputation
Holding a gaming license allows operators to enter regulated markets legally. Many countries require a valid license for online casinos or sportsbooks to operate within their borders. Additionally, a license enhances the operator’s reputation, attracting more players who seek trustworthy platforms.
Examples of Licensing Authorities
Malta Gaming Authority (MGA)
United Kingdom Gambling Commission (UKGC)
Gibraltar Regulatory Authority
Curacao eGaming
Each authority has its own standards and requirements, but all aim to maintain integrity in gambling.
The Role of an iGaming License in Online Gambling
The rise of online gambling has made the igaming license especially important. Online platforms offer casino games, sports betting, poker, and lotteries accessible worldwide. Because of the digital nature, regulation is crucial to:
Verify the identity of players.
Prevent fraud and hacking.
Ensure fair software and payout percentages.
An igaming license confirms that an online operator meets these standards, providing a secure environment for players.
Practical Examples of Gambling and Licensing
A local casino must obtain a gambling license from its country’s regulatory body before opening doors. This license ensures the casino follows safety and fairness rules.
An online sportsbook needs an igaming license to accept bets legally and protect customer funds.
A lottery company must have a gaming license to sell tickets and distribute prizes lawfully.
Without these licenses, operators cannot legally offer gambling services, and players risk losing money to unregulated and unsafe platforms.
Summary
Gambling means risking something of value—usually money—on an outcome that is uncertain, with the hope of winning a reward. Legally and practically, three elements must be present for an activity to qualify as gambling: consideration (the player pays or stakes something to participate), a game of chance (the result depends largely on luck, even if some skill is involved), and a reward (a prize or benefit of real value).
Because these activities involve money, randomness, and the potential for harm, most countries require operators to hold a gambling or iGaming license. Licensing frameworks are designed to protect players from fraud and unfair games, enforce responsible-gambling measures, and ensure that operators comply with laws on taxation, anti–money laundering, and age restrictions. A valid license also gives operators access to regulated markets and strengthens their reputation with both players and payment providers. Authorities such as the Malta Gaming Authority, the UK Gambling Commission, Curacao eGaming, and others supervise land-based and online operators to ensure integrity, transparency, and security across the sector.
If you are planning to launch or restructure a casino, sportsbook, lottery, or online gaming platform, make sure your licensing, tax, and corporate structure are built correctly from day one.
Andrea Ricci, CPA, assists non-U.S. entrepreneurs and iGaming operators with:
Choosing the right gambling / iGaming license jurisdiction
Designing compliant, tax-efficient international structures
Coordinating with local counsel, platforms, PSPs, and regulators
Ongoing U.S. and cross-border tax reporting and advisory
Reach out to Andrea Ricci, CPA – Tradepass International Tax LLC to discuss your project and ensure your gambling or iGaming business is properly licensed, compliant, and ready to scale globally.
Get in touch with Andrea Ricci, CPA to receive end-to-end advisory and iGaming compliance support for starting your online casino and securing your Costa Rica or Rota casino license.
