This article originally appeared in the November / December issue of the magazine Gambling Insider : Modern regulations are certainly a complex topic. GVC Regulatory Director Martin Lycka shares with Gambling Insider with your personal views on the key to the soundness of the regulatory framework and the emerging market situation in Sweden, Germany and the Netherlands.
Legal and regulatory certainty is the modern mantra of the online gambling industry. It unlocks investment opportunities and secures access to assets necessary for its smooth operation, such as payment services and app stores. The European online gambling market as a whole is nearing the end of a great shift from a poorly regulated area to one in which each country has its own regulations. In most cases, the regulation allows private gambling operators to enter their respective markets provided they are licensed and paid the tax.
Countries that regulated online gambling drew inspiration from themselves. However, there is a strong element to re-inventing the wheel, usually to reflect the country's political and cultural inclinations and other peculiarities. Leaving aside the commendable efforts of the European Commission to harmonize the technical standards that apply to online gambling products, the existing European regulations (like those arising in the US) are a patchwork of national laws and regulations of gambling operators, as well as others in this space, are about to go through.
Each new territory added to the operator's list of licensed jurisdictions adds to the overall complexity of the technology, product and regulatory compliance processes on which business is based. For this reason, it is extremely important to evaluate each new kid on the block from two key points of view: assessing the commercial potential of a given market based on a cost-benefit analysis based on data and assessing the impact of implementation in the country. - specific regulatory provisions will have an impact on the entire operator ecosystem.
Buying power in combination with pre-regulation market shares plays a key role in the first part of the analysis; the rigidity and clarity of the applicable technological rules determine the outcome of the latter. A positive result of the assessment favors operators applying for local licenses, which consequently reduces the size of the remaining unregulated market.
With the above in mind, it is no surprise that European jurisdictions with high GDP have attracted a lot of attention from the online gambling industry. The first wave of regulations covered France, Belgium, Spain, Denmark, and a little later also Great Britain. Conversely, despite drafting regulatory plans many years ago, Germany, Sweden and the Netherlands took longer to reach the safe haven of regulated markets. In fact, the Dutch ship is not due to land until next year, while the trip the Germans took was full of twists. Of the three, the Swedish authorities struck first.
The Swedish online gambling regulation entered into force on January 1, 2019. The regulation itself is modeled on the existing Danish online gambling regulation, which allows all online products, including sports betting, poker and casino, provided that you purchase a local license. The gambling tax rate is 18% of Gross Gaming Income (GGR). These regulatory parameters certainly justified the flurry of initial license applications and operators have indeed committed to it accordingly, hoping to repeat the regulatory success they had previously experienced in Denmark.
However, it became clear almost from the outset that the Swedish authorities intended to decide on a stricter interpretation of some key applicable rules, such as those relating to betting offers or advertising. This approach raised concerns about the Regulation's ability to effectively capture the regulated market and deter unlicensed operators in Sweden. Research on the newly regulated Swedish market shows that the current level of sewage in the market is below 80%.
“The recent developments in Germany are a significant breakthrough in a fairly long regulatory saga. They provide long-sought legal and regulatory certainty in one of the largest European gambling markets. Their actual impact on the German market has yet to be measured, but the practical operation of the new rules is likely to provide industry with the opportunity to lobby for further improvement.
Unfortunately, the downward trend is expected to be further worsened by additional regulatory restrictions introduced in July 2020. These restrictions, introduced by the government in response to the COVID-19 pandemic, include, among other things, a weekly casino deposit limit of SEK 5,000 (570 USD) and a limit of 100 SEK for bonus offers for registration. The additional restrictions are expected to expire at the end of 2020. The main question that the Swedish authorities will face is whether their regulatory approach is appropriate to ensure an adequate level of consumer protection within a regulated market.
The confusing path of Germany
As online gambling is a prerogative of the 16 German Länder, unlike one of the German federal authorities, Germany has always intended to adopt an approachsonderweg, to find a consensus on the specific regulatory status of online sports betting and casinos. . The regulation authorizing the above-mentioned Product lines are expected to enter into force on July 1, 2021, after years of difficult political negotiations. In the meantime, operators can rely on a combination of recently awarded sports betting licenses and a tolerance policy for poker and slot machines to continue serving customers.
Sports betting licenses set out rules that will govern the main features of a regulated German product. These include some limitations on the betting offer as well as a set of wagering limits, with a possible increase of up to EUR 30,000 ($ 35,492) per client account. Operators who have obtained their sports betting licenses are now required to submit to the German regulatory authority a plan to implement their individual licensing requirements for approval. The plan will regulate the future timeframe.
The policy of tolerance for poker and slot machines provides for a set of compliance criteria that these products will have to meet in order to be approved. The key criteria are customer verification, deposit limits (€ 1,000 per month per customer account) and advertising of poker and slot machines. The policy entered into force on October 15, 2020, with additional slots restrictions on December 15, 2020. The Tolerance Policy was modeled on German post-July 2021 regulations, giving early insight into German authorities' plans. settlement of all the above-mentioned matters in the future.
The recent developments in Germany are a significant breakthrough in a fairly long-standing regulatory saga. They provide long-sought legal and regulatory certainty in one of the largest European gambling markets. Their actual impact on the German market has yet to be measured, but the practical operation of the new rules is likely to provide industry with the opportunity to lobby for further improvement.
The Flying Dutchman will finally land
Like the German regulatory process, the Dutch version is nearing a happy ending. Authorities in the Netherlands have been trying to regulate online gambling for the better part of the last 10 years. Countless drafts and consultations later, the new Dutch Remote Gaming Act was adopted in February 2019 and is expected to enter into force on March 1, 2021. Like its Swedish and German counterparts, it will allow all currently standard online gambling industries: sports betting , casino (including slots) and poker. The products will be subject to a gambling fee of 29% GGR plus some tax extras. The first licenses are expected to be granted in late summer 2021.
The Dutch authorities beat their German counterparts with a tolerance policy that allows offshore operators to continue serving the Dutch market in the run-up to future licenses. The Dutch iteration of the tolerance policy provides for a number of criteria for operators to ensure that operators do not target Dutch customers, such as excluding Dutch, usually Dutch symbols, or the use of .nl domains. Adherence to the policy of tolerance is subject to strict control and enforcement.
It follows that the Dutch online gambling market will enter the regulated era during the next year. The degree of market success, like all other regulated markets, will be determined on the basis of the degree of targeting a hitherto unregulated offer to the regulated structure. It is certainly in the interest of operators, customers and the Dutch authorities that the stakes are as high as possible.
And this is a key lesson for emerging markets. Only a sufficiently high ratio of the distribution channel can ensure an adequate level of consumer protection on regulated markets.