This article originally appeared in the November / December issue of the magazine Gambling Insider : Xavi Muñoz Bellvehí, Gaming Lawyer at Spanish law firm ECIJA, analyzes the legal aspects of the Spanish online gaming and betting market with Gambling Insider.
The Spanish gaming and betting market was regulated in 2011 by Law 13/2011 and a number of statutory provisions. There are currently around 80 operators in Spain offering their online gambling services and Gross Gaming Revenue (GGR) in this market continues to grow.
The last licensing period closed at the end of 2018 and no new window is expected any time soon. In this situation, and given that gambling and betting licenses are non-transferable under Spanish law, at present they can only be acquired by purchasing the company that owns them.
Currently, according to the report of the Directorate-General for Gambling Regulation (DGOJ) of the Spanish regulator for the second quarter of 2020, the number of active operators by segment is: (i) Plants: 46; (ii) Bingo: 3; (iii) Casino: 46; (iv) Competitions: 2 i; (v) Poker: 9.
Spanish licensing system
The offering of any gambling or betting activity in Spain is conditional upon obtaining a prior license. The law provides for three types of license: general license, single license and authorization.
General Licenses: Licenses these authorize operators to offer games classified under the categories of lotteries, wagers, lotteries, contests and other games (casino games). Licenses that can only be obtained during the term of the license are for betting, other games and contests. These general licenses are valid for 10 years and may be renewed for the same period.
According to the regulations, operators who provide gambling services to clients and have a gaming platform will be required to obtain a license. However, those companies that "partially" engage in gambling activities will also be required to obtain a license if their income from that activity is directly related to the revenue they generate from the gambling business.
This provision also applies to those companies that will be considered "operators and co-organizers of the game". In this sense, it refers to the companies that manage the gaming platforms to which other operators belong or belong. This applies in particular to poker and bingo networks or other networks operated by a co-organizing company.
Single Licenses: Licenses these can only be obtained by those operators who previously obtained the appropriate general license above. Therefore, each Single License must be granted under a General License. Contrary to General Licenses, there is no specific license window for Single Licenses, as long as the company already has a corresponding General License.
There are 16 types of single licenses, each one for a specific game; specific orders govern each type of game. Such orders specify where and how these games may be offered, maximum deposit and / or withdrawal amounts, customer rights, advertising allowed, etc. These single licenses are valid for five years, although in some cases they are referred to as three-year and may be renewed for the same period.
Permits: they must be obtained in order to perform activities corresponding to the individual licenses previously indicated, but occasionally and occasionally. They are not widely used and can be applied for at any time.
Total GGR for the second quarter was 208.85 million euros (247.36 million euros), compared to the first quarter GGR of 217.97 million euros.
The COVID-19 pandemic led to the closure of major sports competitions, both national and international, significantly impacting the betting segment in the second quarter. However, other segments (bingo, casino, contests and poker) saw an increase in the quarter compared to the first quarter and additionally in previous years. Especially for poker and casinos, this quarter was the highest.
'It should be noted that the new government in Spain has taken a stricter stance on the gambling sector and has therefore recently approved a draft Royal Decree on the commercial communication of information about gambling activities in Spain; it is expected to be approved by November 2020. "
Advertising and sponsorship
Advertising, promotion and sponsorship of gambling and betting is allowed, but only as long as they relate to gambling and betting that has been properly licensed in Spain. Gambling licenses granted in other countries do not allow games to be offered, advertised or promoted in Spain. The advertising of gambling or bookmakers operated by operators who are not properly licensed is illegal activity in Spain and is subject to heavy fines that can be imposed by DGOJ.
Advertising agencies, media channels or website editors are responsible for ensuring and checking, prior to posting any advertisement or promotion, that the operator / advertiser is properly licensed; and that such specific advertising is allowed under the operator's license through the General Register of Gambling Licenses maintained by DGOJ. In any event, if these media entities disseminated advertisements from unlicensed operators, they would also be liable.
It is worth mentioning the newly implemented Code of Conduct on commercial information regarding gambling activities, which entered into force on January 15, 2020 and applies to all companies that adhere to this code. Of the 80 online gambling operators currently licensed in Spain, 48 comply with the Code of Conduct. Following the code of conduct is not mandatory, but demonstrates the operator's willingness to promote responsible gambling and is therefore recommended.
Spanish gaming law provides a broad definition of the persons or entities that may be liable, which includes "any person or entity who commits any of the violations provided for by law, and any other person who supports, advertises or promotes it, or any way to benefit from them. " For such infringements, the same liability that would apply to gambling operators and bookmakers could be applied jointly to the media and advertising agencies, with fines ranging from EUR 1 million to EUR 1 million.
It should be noted that the new government of Spain has adopted a stricter stance with regard to the gambling sector and has therefore recently approved a draft Royal Decree on the commercial communication of information about gambling activities in Spain; It is expected to be approved by November 2020. This Royal Decree is very restrictive and prohibits publication in various areas such as digital and audiovisual commercial communications, sponsorship, bonuses and betting predictions. We will have to wait for the final text, although this may be a sector limitation.
In fact, when we take into account marketing spending in the second quarter of 2020 which was 40.6 million euros, compared to 118.24 million euros in the first quarter, it fell exponentially with a quarterly decline of -65.65%.
It should be taken into account that Q2 was affected by the announcement of an emergency due to COVID-19, which resulted in the application of broad restrictions on advertising and promotion of gambling games. Therefore, with the new Royal Advertising Decree coming into force, these results are likely to become a reality for marketing in the near future. However, with the exception of betting due to the cancellation of sporting events, gambling overall increased despite advertising restrictions, so operators spent less on marketing and continued to perform very well.
“DGOJ is actively investigating and imposing penalties for offering illegal or illegal betting and gaming services in Spain, opening sanctioning procedures for operators who are not licensed; as well as operators licensed to use unauthorized technical systems and non-compliant operators. "
The tax system
The tax rate for all games will be 20% Gross Win (defined as the amounts wagered minus the prize payout). For draws and promotional games, the tax rate will be 10% of the prize value. Additionally, there is an annual tax of 0.00075% on the operator's gross income.
It is important to know that there is a special tax regime applicable to companies located in the small Spanish enclaves of Ceuta and Melilla. Such operators will have a 50% tax reduction, which is 10% gross winnings. These companies further lowered the taxation of corporate income tax and other taxes.
The Spanish state-owned lottery and betting company ("SELAE") and the Spanish national association of blind persons ("ONCE") are operators designated for the commercialization of the national lottery games. The games that SELAE and ONCE are commercializing can be performed by ticket or other electronic, telephone or interactive means. These companies can also offer any other games available to other operators, provided that they obtain the appropriate license. Traditional SELAE and ONCE games are exempt from gaming taxes and VAT. Prizes won by clients of these entities are exempt from personal income tax up to the amount of EUR 2,500. If this amount is exceeded, personal income tax is payable in the amount of 20%.
The law stipulates that gambling operators, as well as any other company that offers them support, advertising, promotion or that profits from illegal gaming activities, will be liable for any violations of the law. This is a very broad definition that can include any company that is directly or indirectly involved in any way in illegal gambling. DGOJ is empowered to initiate appropriate sanction procedures and impose appropriate sanctions. Other public authorities, such as media and television regulators and Autonomous Regions, may also be competent depending on the type of breach.
These violations are classified as:
Minor violations: they may be subject to a written warning and a fine of up to € 100,000.
Serious violations: they can be fined between EUR 100,000 and EUR 1 million and suspend gaming activities for up to six months.
Very serious violations: they can be fined from € 1 million to € 50 million, losing their license and shutting down any gaming activity.
DGOJ actively investigates and imposes penalties on the offering of any illegal or illegal betting and gaming services on Spanish territory, opening sanctioning procedures for operators who are not licensed; as well as operators with licenses operating on unauthorized technical systems and non-compliant operators. Overall, we can say that after nine years, the Spanish gambling market is quite mature, with a fairly active regulator to help keep illegal offers out of the market.