Why Sub-Licenses Exist in the Online Gambling Ecosystem
As the online gambling industry scaled globally, regulators and platform providers faced a structural challenge: how to allow multiple brands to operate efficiently without issuing and supervising hundreds of standalone licenses. The solution in certain regulatory frameworks was the sub-license.
A sub-license allows a gambling brand to operate legally under the authority of a master license holder, rather than holding a direct license from the regulator. While this model enables faster market entry and lower operational barriers, it also introduces layered accountability, compliance dependency, and regulatory risk.
This article provides a comprehensive, industry-level explanation of sub-licenses, covering their legal meaning, operational mechanics, regulatory expectations, commercial advantages, limitations, and why regulators increasingly scrutinize their use.
What Is a Sub-License?
A sub-license is a delegated operational authorization granted to a gambling brand or entity by a master license holder, with approval (explicit or implicit) from the regulator.
Key characteristics:
- The sub-license holder does not own the primary gambling license
- Legal authority flows from the master license
- The regulator recognizes the master license holder as ultimately responsible
- The sub-license holder operates within defined limits
In simple terms:
A sub-license allows a brand to operate, but not independently.
Sub-License vs Direct Gambling License
Understanding the distinction is critical.
Direct Gambling License
- Issued directly by a regulator
- Operator is independently accountable
- Full compliance responsibility rests with the licensee
- Greater regulatory autonomy
Sub-License
- Issued via a master license holder
- Accountability flows upward
- Limited operational independence
- Compliance obligations are shared but controlled centrally
A sub-license is not a shortcut to regulatory freedom—it is a trade-off.
Why the Sub-License Model Emerged
Sub-licenses exist for several structural reasons:
- Regulatory Efficiency
Regulators prefer supervising fewer, stronger entities. - Market Scalability
Enables rapid onboarding of brands without issuing new licenses. - Platform Economics
Supports B2B and white label business models. - Risk Centralization
Concentrates liability in one accountable entity.
This model favors control over decentralization.
The Legal Nature of a Sub-License
A sub-license is:
- Contractual (between master license holder and sub-licensee)
- Regulatory (subject to regulator approval or notification)
- Conditional (revocable at any time)
It is not a transferable asset and cannot exist independently.
If the master license is suspended or revoked, all sub-licenses collapse immediately.
Who Issues a Sub-License?
A sub-license is issued by:
- The master license holder
- Within parameters defined by the regulator
- Often subject to regulatory vetting of the sub-licensee
Regulators do not deal with sub-licensees as primary entities.
Typical Rights Granted Under a Sub-License
A sub-license usually allows the brand to:
- Operate a gambling website or app
- Offer approved games and betting products
- Market under a unique brand identity
- Accept player deposits and bets
- Generate revenue independently
However, these rights are restricted and supervised.
What Sub-License Holders Cannot Do
Sub-license holders generally cannot:
- Modify compliance frameworks
- Change AML or RG policies
- Select unapproved suppliers
- Expand into new jurisdictions independently
- Grant further sub-licenses
They operate within a controlled sandbox.
Sub-License and White Label Operations
Most sub-licenses exist within white label models.
Structure:
- Master license holder owns the license and platform
- Sub-licensee operates the brand
- Compliance, payments, and risk remain centralized
The brand focuses on marketing and acquisition; the master focuses on regulation.
Regulatory Expectations for Sub-License Holders
Although accountability flows upward, regulators still expect sub-licensees to meet standards.
Fit and Proper Checks
Sub-licensees are often subject to:
- Background checks
- Ownership transparency
- Criminal record screening
- Financial integrity review
Regulators aim to prevent unsuitable actors entering via sub-licensing.
Operational Compliance
Sub-licensees must comply with:
- AML procedures
- Responsible gambling rules
- Advertising restrictions
- Data protection laws
- Player fund safeguards
Non-compliance triggers enforcement—upstream and downstream.
Accountability Chain in Sub-License Structures
One of the most critical aspects of sub-licensing is liability flow.
- Player harm → Sub-licensee action
- Compliance failure → Master license liability
- Regulatory penalty → Master license enforcement
- Repeated violations → Sub-license termination
Sub-licensees cannot shield themselves behind the master license.
AML Obligations Under a Sub-License
Sub-license holders:
- Follow AML policies defined by the master license holder
- Conduct KYC checks
- Monitor player behavior
- Escalate suspicious activity
They cannot design their own AML framework.
Failures are treated as systemic risks.
Responsible Gambling Under Sub-Licensing
RG is one of the most sensitive areas.
Sub-licensees must:
- Enforce betting limits
- Support self-exclusion tools
- Identify problem gambling behavior
- Intervene and report
If a sub-licensee fails, regulators penalize the master license holder first.
Sub-License Duration and Renewal
Sub-licenses are:
- Time-limited
- Subject to periodic review
- Renewable only with approval
- Terminable at short notice
There is no guarantee of permanence.
Commercial Advantages of a Sub-License
Despite limitations, sub-licenses offer strong benefits:
- Faster market entry
- Lower licensing costs
- Reduced regulatory complexity
- Access to established platforms
- Easier payment processing
This makes them attractive for new brands.
Cost Structure of a Sub-License
Typical costs include:
- Setup fees
- Monthly platform fees
- Revenue share with master license holder
- Compliance and reporting costs
While cheaper than full licensing, margins are shared.
Risks of Operating Under a Sub-License
Sub-license holders face unique risks:
- Dependency on master license stability
- Limited strategic flexibility
- Exposure to other brands’ violations
- Sudden termination risk
- Restricted exit options
A sub-license is operational leverage, not ownership.
Sub-License Termination Scenarios
Sub-licenses may be terminated if:
- Compliance breaches occur
- Commercial terms are violated
- Regulatory pressure increases
- Master license is downgraded
- Jurisdictional rules change
Termination often occurs with minimal notice.
Sub-License vs White Label Brand Ownership
Many brands misunderstand ownership.
Under a sub-license:
- The brand may own marketing assets
- But not the regulatory infrastructure
- Not the license
- Not the compliance framework
This limits long-term independence.
Regulatory Trends Affecting Sub-Licenses
Globally, regulators are tightening controls:
- Increased scrutiny of white label models
- Caps on number of sub-brands
- Mandatory disclosure of sub-license structures
- Higher accountability for master license holders
Some regulators are actively reducing sub-license availability.
Sub-Licenses in Highly Regulated Markets
In strict markets:
- Sub-licenses may be prohibited
- Direct licensing is mandatory
- White label models are restricted
This reduces the viability of sub-licenses for market expansion.
Banking and Payments Under a Sub-License
Banks and PSPs:
- Assess the master license holder first
- Then review sub-license risk
- Monitor transaction patterns
If the master license loses banking access, all sub-licensees suffer.
Data Protection and Player Funds
Sub-licensees:
- Often do not control player fund segregation
- Rely on master license systems
- Share data infrastructure
This creates shared data risk.
Exit Strategies for Sub-License Holders
Exiting a sub-license requires:
- Player migration planning
- Brand transition
- Potential relicensing
- Regulatory approval
Exits are rarely smooth or fast.
When a Sub-License Makes Strategic Sense
A sub-license is suitable when:
- Speed matters more than control
- Capital is limited
- Market testing is the goal
- Compliance expertise is lacking
- Long-term licensing is planned later
It is a launch vehicle, not a final destination.
When a Sub-License Is a Bad Idea
Avoid sub-licenses if:
- You want regulatory independence
- You plan long-term brand equity
- You operate in strict jurisdictions
- You require full control of risk
- You plan to sell or list the company
Sub-licenses limit strategic freedom.
Sub-License vs Master License: Power Balance
- Master license = control, risk, authority
- Sub-license = access, speed, dependency
The balance always favors the master license holder.
Why Regulators Are Re-Evaluating Sub-Licensing
Concerns include:
- Excessive brand proliferation
- Inconsistent player protection
- AML blind spots
- Regulatory arbitrage
As a result, sub-licensing is under global review.
Future of Sub-Licenses in iGaming
The future trend points toward:
- Fewer sub-license structures
- Higher compliance thresholds
- Stronger master license oversight
- Gradual shift to direct licensing
Sub-licenses will remain—but as a controlled exception, not the norm.
Final Thoughts
A sub-license is a powerful but constrained tool in the online gambling industry. It enables rapid market access, reduces upfront regulatory burden, and leverages established infrastructure. However, it comes with dependency, shared risk, and limited autonomy.
For operators, sub-licenses should be viewed as temporary strategic instruments, not permanent foundations.
For regulators, they remain a balancing act between efficiency and control.
For the industry, sub-licenses highlight the tension between scalability and accountability.
Used wisely, a sub-license accelerates growth. Used carelessly, it amplifies risk.
