Official magazine of the International Masters of Gaming Law
®
MALTA MARKET FOCUS
INTERNATIONAL MASTERS of GAMING LAW MAGAZINE
VOLUME 3 | NO. 4 | OCTOBER 2023
WHEN LAWS COLLIDE: EU, AUSTRIA OR MALTA?
PLUS: A.I. IN GAMING A LAW WITH BIG IMPLICATIONS IN CANADA TAXING TIMES IN PERU AND ECUADOR LOTTERY COURIER SERVICES AND THE LAW USING CRYPTO TO BEAT THE GREY MARKET IN ARGENTINA ..& MUCH MORE!
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IMGL MAGAZINE | JULY 2023 IMGL MAGAZINE | JANUARY 2023
MALTA’S FATF GREY-LISTING IMGL OFFICERS 2023
Officers of IMGL for 2023
SUSAN BREEN Secretary MISHCON DE REYA LONDON +44 20 3321 7434 SUSAN.BREEN@MISHCON.COM
QUIRINO MANCINI President TONUCCI & PARTNERS ROME, ITALY +39 06 322 1485 QMANCINI@TONUCCI.COM MARC DUNBAR Executive Vice President DEAN MEAD & DUNBAR TALLAHASSEE, FLORIDA +1 850 933 8500 MDUNBAR@DEANMEAD.COM
ERNEST C. MATTHEWS IV Vice President, Affiliate Members INTERNET SPORTS INTERNATIONAL LAS VEGAS, NEVADA +1-702-866-9128 ERNEST@ISISPORTS.COM BIRGITTE SAND Vice President, Affiliate-Regulator Members BIRGITTE SAND AND ASSOCIATES COPENHAGEN, DENMARK +45 24 44 05 03 BS@BIRGITTESAND.COM
PETER KULICK 2 nd Vice President, Treasurer DICKINSON WRIGHT PLLC LANSING, MICHIGAN +1 517 487 4729 PKULICK@DICKINSONWRIGHT.COM COSMINA SIMION 1 st Vice President SIMION & BACIU BUCHAREST, ROMANIA +40 31 419 0488 COSMINA.SIMION@SIMIONBACIU.RO
KATHRYN R. L. RAND Vice President, Educator Members UNIVERSITY OF NORTH DAKOTA LAW SCHOOL GRAND FORKS, NORTH DAKOTA
+1 701 777 2104 RAND@LAW.UND.EDU
KATE LOWENHAR-FISHER Assistant Treasurer EXECUTIVE VICE PRESIDENT, CHIEF LEGAL OFFICER EVERI HOLDINGS INC
IMGL MAGAZINE | JANUARY 2023 IMGL MAGAZINE | OCTOBER 2023
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PRESIDENT’S WELCOME
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QUIRINO MANCINI President INTERNATIONAL MASTERS OF GAMING LAW
An exciting year ahead for the IMGL
W elcome to this edition of the IMGL Magazine with its rich collection of news and views from around the world of gaming law. Those of you who attended our wonderfully successful Zurich conference in September will have heard me announce that the IMGL spring and autumn conferences next year will be in Tampa Bay, Florida in April and Rome, Italy in October respectively. The Tampa Bay organizing committee has already started its work and early bird rates are now available for you to secure your place. I am looking forward to being involved in both events but especially the one in Rome, marking exactly twenty years since the IMGL was the last (and also first) time in my home country. This conference is being organised in partnership with the International Association of Gaming Regulators (IAGR) consistent with my plans to foster an ever closer and mutually beneficial dialogue and working relationship with regulators from across the globe . By the time you read this, our second student writing competition will be about to close. Kathryn Rand and her colleagues on the IMGL education committee will then be faced with the task of reviewing and judging entries from students of gaming law in the US and Canada. I
am convinced that this competition can play an important role in giving students a platform to test their writing skills in front of an audience of critical friends. Judging by the standard of last year’s competition, they are very much up to the challenge. The student writing competition is an introduction to the IMGL for the next generation of gaming lawyers and we will also have the opportunity to learn from their research and efforts. I wish all entrants the very best of luck. We plan to start a “rest of the world” writing competition next year. If you have ever wondered how articles make it to publication in the IMGL Magazine, the process is a simple one. Potential contributors should write to our Head of Publications at phil@IMGL.org and he will do everything he can to assist you to submit an article. This is very much conference season, and many of us will be speaking at, moderating or attendingone of the numerous industry events taking place. Keep an eye out for IMGL Masterclasses and for IMGL colleagues wherever you are and let’s continue to make the IMGL the best definitely most global network in gaming law.
Quirino Mancini
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IMGL MAGAZINE | OCTOBER 2023
EDITORIAL
From player claim tensions in Europe to insightful regulators contributions
W
elcome to the latest edition of the IMGL Magazine! It has been one of my priorities to expend and intensify
decisions, in the form of laws, that the regulators end up carrying out.
SIMON PLANZER PHD, Editor in Chief IMGL MAGAZINE
the geographical scope of the magazine’s authorship beyond Europe and the US. And I am thus delighted to bring another mix of articles to you that are rich in topics and diverse in geographical scope. It includes contributions on tax matters in Peru and Ecuador, crypto perspectives from Argentina, a case study from Mexico, insights into first nation gaming in Canada and much more. Law makers often neglect the fact that certain choices they make can cripple or boost the nationally regulated gaming industry. Two articles in this issue illustrate it. One discusses the link between ill-conceived gaming taxation and a blight on the legalized industry in Ecuador and Peru. Then we have a piece from Canada which reveals how amendments to the country’s Criminal Code and Indian Act could dramatically shake up the entire gaming. These two examples show yet again how important it is for the gaming industry and its various stakeholders to have an open dialogue with law makers. It is the latter’s
We also look back at the IMGL Zurich conference where delegates found expected and unexpected delights. Amid the expected high-value panel contents and social events, many were surprised to be – unexpectedly – able to take a dip in the city river of Zurich! The crystal-clear waters directly adjacent to the conference hotel met with (former and current) presidential approval. The conference hosted regulators from five continents and their views were a key part of the IMGL Zurich event. We look back at their contributions in this magazine issue. IAGR President Jason Lane kicked off the conference with a deep-dive fireside chat. His and the subsequent contributions of his colleagues were an excellent opportunity to listen and absorb regulators’ views. Further, this issue features two contributions from Europe that I suggest reading in conjunction. One from Austria, the other from Malta. They discuss the tensions that exist in
Contents 6
Austria courts set legal precedents
10 14 18 24 30 34 38 42 46
Regulator’s reflections: Carl Brincat, CEO of Malta Gaming Authority
IMGL conference review: regulators’ views were a key part of the autumn event in Zurich
Lottery courier services and the law
Online gambling taxes in Peru and Ecuador
Artificial intelligence in gaming
Change may be coming to gaming conducted by Canada’s First Nations
Betting on women’s sports: realizing the untapped potential
Do cryptocurrencies represent an opportunity for online gaming in Argentina?
To appeal or not to appeal: the Tamaulipas file, a study case from Mexico
IMGL MAGAZINE | JANUARY 2023 IMGL MAGAZINE | OCTOBER 2023
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EDITORIAL
the EU’s Internal Market with its two layers of legal rules. The tensions between national laws of the member states and the supranational set of rules of the EU. These tensions have received increased attention with Malta’s introduction of Bill 55 – yet, from another angle. Traditionally the tensions have related to Malta arguing the European fundamental freedoms of services and establishment for its licesensed gaming companies, while some member states have argued that games of chance are a special case where European principles can hardly apply. In the Bill 55 causa, it is vice versa: the plaintiffs in states like Austria argue that gaming operators relying on licenses from outside its jurisdiction are operating in contravention of its national laws and that players with gambling losses are entitled to claim for reimbursement. Accordingly, they cite European law (the Brussels Convention) to help enforce their national court decisions relating to player claims against operators. Malta, on the other hand, argues national law and ‘ordre public’ exceptions to refuse international enforcement of court decisions in Malta. Do not miss this multilayer transnational debate in Europe!
Click the covers to catch up on past editions and search our archive of gaming law articles at www.IMGL.org/publications
Yours sincerely, Simon planzer@planzer-law.com
IMGL Magazine is owned, published and distributed by: The International Masters of Gaming Law PO Box 27106, Las Vegas, NV 89126 USA The IMGL is a domestic non-profit corporation registered in Nevada, U.S. with registration number NV20121147120 Editor in Chief: Simon Planzer PhD, planzer@planzer-law.com Publication & Marketing Committee: Co-chairs , Stephanie Bell and Simon Planzer Members : Henrik Hoffmann, Kok-Keng Lau, Christine Masse, Peter Kulick, Anna Soilleux-Mills, Veronique dos Reis Head of Publications: Phil Savage phil@IMGL.org Design and production: SportBusiness Communications. Copyright: All rights reserved to IMGL. No part of this publication may be reproduced or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior permission from the publisher. The articles expressed in this publication do not necessarily reflect the views of IMGL but those of the authors. The publisher and editor do not accept any liability for the contents of the authors’ contributions.
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IMGL MAGAZINE | JANUARY 2023 IMGL MAGAZINE | OCTOBER 2023
AUSTRIAN UPDATE
Landmark decisions of Austrian courts in 2023 AMID HUNDREDS OF PLAYER CLAIMS, JUDGMENTS IN AUSTRIA’S SUPREME COURT, HIGH COURTS AND COURTS OF LOWER INSTANCE COULD HAVE A BIG IMPACT ON GAMES OF CHANCE. CHRISTIAN RAPANI AND JULIA KOTANKO REPORT .
Introduction This year, Austria has seen a number of judgments in the High Courts as well as courts of lower instance that are of special importance to games of chance and betting operators offering their services to Austrian consumers. This article aims to highlight the most relevant rulings as well as their potential impact on the gaming industry. Directors of online games of chance operators The Austrian Supreme Court has previously ruled that there is a separate and independent claim against the “Geschäftsführer” (managing directors) of games of chance operators due to a violation of a protective law. The legal basis for this separate claim is the law of damages (tort law) due to violation of
protective law. This claim may be filed regardless of whether a claim was also and/or first filed against the company itself. Previously the main argument in such tort cases against directors directly was that Austrian courts do not have jurisdiction, as neither the damaging action nor the damage occurred in Austria. This line of argumentation was successful until Summer 2023 in more than a hundred first and second instance rulings. However, the Austrian Supreme Court has now made two rulings in similar cases regarding jurisdiction. In these cases, a well-known process cost financier from Switzerland had claims from Austrian players assigned to them and then made the claim against the games of chance operator in their own name at an Austrian court. The games of chance operator argued especially that the Austrian courts do not have jurisdiction, as the place of damage and the place
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AUSTRIAN UPDATE
of the damaging act is not in Austria. The Austrian Supreme Court – in a nutshell – did not follow this reasoning and stated that the place of damage is in Austria and thus Austrian courts do have jurisdiction. This case law is highly likely to affect the reasoning applied in cases of directors ( Geschäftsführer ) and the cases regarding directors that are currently pending at the Austrian Supreme Court will need to be monitored closely. Lootboxes The authors are aware of two first instance civil court rulings regarding “lootboxes” in Austria. Two judgments of courts of first instance dealt with the question of whether lootboxes are to be considered games of chance. A game of chance according to the Austrian Gaming Act is a game in which the decision on the outcome of the game depends exclusively or predominantly on chance. The two courts (Hermagor and Floridsdorf) came to dissenting results: • the District Court Hermagor ruled that the lootbox under review there was to be qualified as a game of chance; however • the District Court Floridsdorf ruled that the lootbox under review there was not to be qualified as a game of chance. At the District Court Hermagor, the main consideration of the court concerned the question of whether the stake was matched by a winning. Here the court especially focused on whether the content of the lootbox was tradable as an economic good in the ordinary course of business and thus whether a profit can be made. Legally, the court considered that – despite the prohibition contained in the terms of use – there is nevertheless an actual market that is used by game participants to trade in the content of the lootbox. For this reason, the court came to the conclusion that the digital contents of the lootbox have an economic value. The court of first instance considered the fact that the operator does not offer the prospect of winning the prize itself to be irrelevant, “since according to the wording of the law it is also sufficient if someone else does so”.
Consequently, the court ruled that the lootbox in question constituted a game of chance for which there was no licence under the Austrian Gaming Act. Therefore, the contracts concluded between the parties were deemed null and void, which is why the claim was granted to the extent of the amount actually spent on lootboxes. However, in the course of the reversal, the player has to hand over the contents acquired with the lootbox. Both judgments are not published. The decision of the District Court Hermagor in favour of the player has become legally binding. However, the decision of the District Court Floridsdorf was appealed by the claimant and the court of second instance reversed the decision of the court of first instance. Whether a legal remedy was also filed against the second instance ruling is unknown at the time of submission of this article. New cases regarding lootboxes are already pending and will need to be followed closely.
Online sports betting Legal framework of online sports betting
The Austrian legal system differentiates between games of chance, which are primarily subject to the Gaming Act and the monopoly on gambling established therein, and betting, which is regulated at the state level by nine state betting laws. In the absence of a nationwide betting regulation and the resulting fragmentation into nine state betting laws, the regulation of online betting has developed differently in the individual states. At the time of writing, only five state betting laws 1 contain explicit provisions for online betting. The remaining four state betting laws do not contain explicit provisions for online betting, although they have all been amended or rewritten in recent years. Judgment of the Austrian Supreme Court – Styria Betting Act
The Supreme Court dealt with the following facts and questions:
Between October 2019 and April 2020, a Styrian betting customer placed online bets via his smartphone with a licensed provider domiciled in Malta on its website. The betting
1 Vorarlberger, Tyrol, Salzburg, Upper Austria and Lower Austria.
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AUSTRIAN UPDATE
customer always carried out his betting activities in Styria. With his lawsuit, the betting customer now demanded the repayment of his sports betting losses. The betting customer justified the claim for repayment in particular as follows: 1. The Maltese provider had offered the online bets without a valid licence and thereby violated the provisions of the Styrian Betting Act, which is why the betting contracts were unlawful and void. 2. The Maltese provider was also accused of a breach of protective duties, as it had violated individual (player protection) provisions of the Styrian Betting Act, for example, as live sports betting was prohibited under the Styrian Betting Act. The Maltese provider essentially countered that the Styrian Betting Act was not applicable because it did not regulate online betting, which is why there could be no violation of its protective provisions. The court of first instance dismissed the claim because the Styrian Betting Act did not regulate online betting and there was also no unintended loophole. The Court of Appeal confirmed the decision of the court of first instance and stated that online betting was not regulated by the Styrian Betting Act. Furthermore, the obligation to obtain a licence and to notify under the Styrian Betting Act requires a betting shop, which is a fixed place of business that can be entered by betting customers. “A betting operator who, like [the Maltese provider], has no physical presence in Styria is therefore not subject to the Styrian Betting Act”. The betting customer appealed to the Supreme Court, which deemed the appeal admissible because it had not yet issued an opinion on the Styrian Betting Act in connection with online betting. Legal assessment of the Supreme Court In legal terms, the Supreme Court considered the following in particular when assessing the betting customer’s appeal: At the outset, the Supreme Court clarified that sports betting is not covered by the federal monopoly on gambling, but falls
within the competence of the nine states in terms of legislation and enforcement. The Supreme Court then found that neither the Styrian State Betting Act itself nor the materials refer to online betting or specify the territorial scope of application. With regard to a licensing requirement, the Styrian State Betting Act stipulates that the activity as a betting operator may only be carried out after a licence has been granted and that every betting operator must permanently operate at least one betting shop. According to the definition in the Styrian Betting Act, a betting shop is a place of business where bets are offered, betting offers are accepted, bets are placed or brokered, or betting customers are referred. The Supreme Court also found that the state betting laws of all states have been amended or revised in recent years and that Styria (as well as Burgenland, Carinthia and Vienna) is one of the states that do not explicitly provide for online betting. The other federal states, however, contain provisions on online betting and cover it if the server is located in the respective state, “so that only then is a licensing obligation given”. In the next step, the Supreme Court analysed a multitude of literature, including the commentary by the two authors, and dealt intensively with the interpretation of the term “exercise” in order to be able to assess which activity is subject to a licensing requirement under the Styrian Betting Act. In this context, the Supreme Court stated that a broad interpretation of the term “exercise” does not correspond to the will of the legislator and that enforcement would not be possible in practice if the term were understood in a broader sense. Nor can the state legislator be presumed that its state betting law is intended to regulate conduct outside its state territory, i.e. in other federal states or in other member states of the EU or in other third countries, solely because of possible effects in its state territory. The Supreme Court then came to the interim conclusion that “the Styrian Betting Act only regulates the offering, conclusion and brokering of bets by means of conduct within the state territory. Sports bets offered by a betting company from a location outside the state territory via the internet are not covered by this, because this does not constitute a betting activity in the sense of the law. It follows that the law does not
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AUSTRIAN UPDATE
apply to this form of activity as a betting operator. The offering and acceptance of online sports bets by [the Maltese provider] without a licence in accordance with these provisions does not therefore constitute nullity”. With regard to the alleged violation of protective obligations, the Supreme Court then stated that an analogous application of individual provisions of the Styrian Betting Act requires the existence of a genuine (unplanned) legal loophole. The Supreme Court further concluded that the “state legislator [had to be] aware of the offering of online betting at the time of the enactment of the Styrian Betting Act 2018 and nevertheless decided against the inclusion of a regulation of betting offered via the internet”, which is why an unplanned loophole is excluded. Consequently, an (analogous) application of individual provisions of the Styrian Betting Act is ruled out and the betting customer cannot invoke individual (protective) provisions. Consequently, the appeal of the betting customer was not upheld by the Supreme Court. Decision of the Austrian Constitutional Court – Vorarlberg Betting Act Only recently, the Austrian Constitutional Court dealt with the constitutionality of the provision of Section 1 (4) second sentence of the Vorarlberg Betting Act in the context of a party application for a judicial review. This provision states that the place of business for online betting is “the place from which the betting operator provides the data for the medium”. In accordance with the legal materials, this place is regularly understood to be the server location. The applicant claimed that the definition of the place of business for online betting in the Vorarlberg State Betting Act was unconstitutional, as “the Vorarlberg Betting Act does not apply if the server from which the data for the electronic
medium is provided is not located in Vorarlberg”.
The Constitutional Court refused to deal with the application due to a lack of prospects of success, as in particular the state legislator is not to be opposed “if, in the case of enabling betting activities via an electronic medium, it defines as a place of business that place from which the betting operator provides the data for the medium”. The Austrian Constitutional Court thus clarified that the connecting factor to the server location (location “from which the betting operator provides the data for the medium”), which is common to the five state betting laws that provide for explicit online regulations, is constitutional. Conclusion The above described jurisprudence affects integral questions for gaming operatory in Austria. The first step for director cases, namely the competence of Austrian courts, is still undecided, but reasoning applied to comparable cases based on tort may already now indicate the line of argumentation that the Supreme Court may apply. This could lead to the competence of Austrian courts for claims against directors directly, which, in light of existing Supreme Court case law and general attitude of Austrian courts towards games of chance operators, being taken into consideration by all stakeholders. Nevertheless, specific areas such as lootboxes are still dynamic and are to be monitored closely. Furthermore, the latest Supreme Court and Constitutional Court rulings have led to a welcome increase in legal certainty for online sports betting operators. The legal assessment of the High Courts may also be used for arguing the legality of online sports betting offerings in the other Austrian states. At the end of the day, every specific set up will need to be evaluated.
DR. CHRISTIAN RAPANI Attorney at Law Rapani For information contact +43 316 839045 c.rapani@rapani.at
JULIA KOTANKO Senior Legal Associate
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IMGL MAGAZINE | OCTOBER 2023
REGULATOR’S REFLECTIONS
Dialogue and data the keys to effective gaming regulation, says MGA Chief Carl Brincat
HAPPY 1ST BIRTHDAY TO ONTARIO’S iGAMING MARKET! ONE YEAR AFTER CANADA’S MOST POPULOUS PROVINCE LEGALIZED ONLINE GAMING JACK TADMAN LOOKS AT THE LEGAL HIGHLIGHTS AND NOTABLE DEVELOPMENTS
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IMGL MAGAZINE | OCTOBER 2023
REGULATOR’S REFLECTIONS
IMGL PRESIDENT QUIRINO MANCINI OPENED THE CASINO BEATS SUMMIT IN MALTA WITH A ONE ON-ONE INTERVIEW WITH CARL BRINCAT, CEO OF THE MALTA GAMING AUTHORITY. PHIL SAVAGE CAPTURED THEIR DISCUSSION TOGETHER WITH ADDITIONAL THOUGHTS FROM CARL HIMSELF.
Quirino Mancini: Malta has been a pioneer in regulating iGaming so has a perspective on 20+ years of the industry’s development. What are the top lessons you would like to share with newly regulating markets? Carl Brincat: Regulating an industry that is constantly changing and evolving can be challenging, but for me, there are two key elements. The first is to maintain an open dialogue and collaborative approach with licensees and all stakeholders. Casino Beats is just one of many conferences we attend throughout the year. Our presence at such conferences, the regulatory workshops we hold and the fact that we rigorously consult on regulatory developments shows that the Malta Gaming Authority is engaged with the industry and forward- facing in our development of innovative policies. Second, I must stress the importance to us of being a data- driven authority. Data is our most valuable asset. It serves as a guiding force for various functions across the Authority, ranging from legislative reforms and policy development to software development and data protection. We try to ensure that our decision making is always driven by data and evidence rather than making policies that are driven by reactions to adverse occurrences or perceived risks. These are the two most important issues in my view: having a constructive dialogue with the industry and ensuring that decisions are underpinned by evidence. QM: The industry is seen by some as profiting from the weaknesses of the vulnerable. Does a Maltese license improve or worsen this perception and what can the MGA do to support and improve the industry’s reputation? CB: Gambling has been a part of human history for centuries, and it will always exist, whether we try to ban it or not. Prohibition or the lack of effective regulation leads customers towards
unregulated gambling activities, which can be significantly more harmful to people and society than gambling which is sensibly regulated. Unregulated offerings may prey on the vulnerable but the same cannot be said for regulated operators. Regulated operators spend a lot of time, energy, and money developing tools and know-how to prevent problematic gambling behaviour, and to detect it and assist the players affected when prevention is unsuccessful. Gambling may carry a risk of addiction, but the same can also be said for other activities that may spiral into behavioural addictions if they become compulsive. It is how we help people avoid that addiction, and address it if it occurs, that matters most: harm minimisation. The MGA has worked tirelessly to increase the effectiveness of our oversight of the gaming industry at large, and to bolster cooperation with our foreign counterparts and share best practices. Our position is that, above all else, safe, sustainable, and responsible gambling is of paramount importance to the sector. The recent amendments to the Player Protection Directive are testament to the MGA’s commitment to continue prioritising the welfare of players. The amendments introduce five markers of harm that indicate where a player might be experiencing problematic gambling. This has created a benchmark for all MGA licensees to follow when determining effective measures and processes to detect and address the issue. With Maltese regulation so focused on harm minimisation, operators that choose a Maltese license show their intention to conduct their business in a manner which is sustainable for its players. QM: What do you say to those who claim that Malta undermines national sovereignty by issuing gambling licenses to operators who use them to offer their products in jurisdictions where their activities are unregulated? CB: Online gambling is, by nature, a global and cross-border
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REGULATOR’S REFLECTIONS
activity. Hence, in our view, the natural starting point when it comes to regulating an online business is to recognise that it is not restricted to one jurisdiction alone. Rather it is an advantage that a business can offer its services across borders, whilst always respecting its legal obligations wherever its customers may reside. That said, given that gambling is a business which is often subjected to regulation, we acknowledge that there are limitations to this approach. It is for this reason that our licensees are required to show they have justifiable legal reasons when they offer their services in other jurisdictions. These reasons will naturally vary depending on the jurisdiction. Within the EU, for example, Malta has always defended, and will continue to defend, its licensees’ freedom of establishment and freedom to provide services – essential pillars of the European common market since its inception. Where there are restrictions to those freedoms which are justified in line with the jurisprudence of the Court of Justice of the European Union, Malta respects those frameworks. Regrettably, there still remain a handful of countries that insist on regulatory models that, in our view, are not compliant with EU law and can push players towards the unregulated black market; a situation which is helpful to no one – least of all, to the players. Malta has always worked to defend its position in relation to these jurisdictions and will continue to protect its long- standing public policy which seeks to protect the status of the Maltese gaming licence, as well as any licensed activity which is lawful in terms of the Gaming Act and other applicable regulatory instruments. In doing so, any challenges to the rights of the licensees and the validity of the licence which are not in line with Malta’s time-honoured policy position will continue to be contested. While every jurisdiction is free to introduce its own regulations and policies within their territory, one must not lose sight of the fact that it remains our principal priority as regulators to ensure that customers are able to play within a regulated market which is subject to strict legal obligations aimed at protecting players and which is overseen by a competent regulator that will take swift enforcement action in cases of non-compliance on the part of the licensee.
Regulators and legislators must recognise that regulation and control should work to the benefit of all relevant stakeholders. In an industry which is so global, we remain hopeful that, eventually, there will be an acknowledgement that, despite their differences, the fundamental aims of every legislative framework are predominantly the same. Working towards cooperation and, as far as possible, alignment, would benefit all parties involved. The MGA has repeatedly encouraged regulators to dedicate effort and resources, time and discussion towards the goals of consumer protection and the prevention and detection of crime and corruption. QM: You have called for operators sign up to a “social license” which would position them as responsible providers of entertainment with safeguards for those who struggle to enjoy it without harm. How would such an approach work? Is it just about industry codes of practice or do you see a role for regulators to get involved? CB: As I said at the start, the MGA strongly believes that evidence-based, self-regulatory measures and industry collaboration serve as a driving force to maintain and improve the sustainability of the industry. The notion of a ‘social licence’ has become a global priority – and not just within the gaming industry – as companies and governments become increasingly aware of the impact they have on society and the environment. Operators should strive for more than just compliance with regulation and mandatory standards, particularly in an industry where their services could potentially have detrimental effects on their consumers. Many operators already go beyond their duty of compliance in this respect and should communicate more what is being done right within the industry. As regulators, I believe our role is to lead by example. Therefore, if we expect our licensees to go beyond the minimum required of them – sometimes at significant financial and opportunity cost – we should also embrace broader sustainability considerations in our own operations. On top of this, we should take our licensees’ sustainability efforts into account when determining their regulatory standing and their associated regulatory risk. We should reward behaviour that aligns
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REGULATOR’S REFLECTIONS
with our desired industry standards, and not focus solely on penalising undesirable behaviour. With this in mind, the MGA is working on a voluntary ESG (environmental, social and governance) code of good practice for the gaming sector. We are delighted to be the first regulator looking holistically into the sustainability of the gaming industry. The initial feedback from the sector has been very encouraging, and we look forward to working closely with our licensees to continue transforming the gaming sector into a more transparent and sustainable one. Unlike other industries, ESG reporting is relatively new to the gaming sector. Although some of our licensees report on ESG publicly and set their own sustainability standards – which we applaud and fully support – we believe that the wider sector lacks common priorities for ESG in gaming. We aim to close this gap with our voluntary ESG code of good practice, where part of the approach will also be to give back to the industry, by providing them with information that they can use to improve their performance, and also by acknowledging the efforts that they make in this regard. QM: You have no doubt observed the trend in Europe and elsewhere to restrict or ban outright the promotion and advertising of gambling. What is your view of such developments and do you think they contribute to safer gambling? CB: While banning gambling advertising can be seen as a response to concerns about excessive gambling and its potential societal impacts, as I mentioned, gambling always did and always will exist, whether we try to ban it or not. The important thing is that people are empowered with the knowledge to make informed choices about where to engage in gambling activities in a legitimate and safe manner. Although every country’s approach differs, I believe banning advertising can be counterproductive. It does not enable regulated operators to distinguish their services from unregulated ones; aside from undermining the investment that such operators have made to access a market, this also risks diverting players to operators that are not subject to responsible gambling requirements.
We believe that responsible advertising, coupled with robust player protection measures, contribute significantly to safer gambling. Our approach focuses on promoting responsible gambling practices, ensuring that operators comply with strict regulations, and providing resources for individuals facing gambling-related issues. QM: It would seem that regulators have a lot of common ground in terms of their objectives and priorities. What would it take to achieve greater coordination of regulation? CB: As I’ve mentioned before, the fundamental aims of every legislative framework are predominantly the same in that regulators typically strive to supervise a well-regulated industry that balances economic interests with the protection of consumers and society as a whole. Enhanced dialogue between public authorities and stakeholders is therefore vital: the entire gambling industry (not only operators but also related stakeholders such as ancillary service providers and consumer associations) could play a crucial role in designing more responsive and cross-border regulatory strategies, as well as more effective instruments of enforcement to combat money laundering and corruption. Facilitating the sharing of data helps gain a deeper understanding of industry trends, potential risks and emerging issues within an ever-evolving gaming industry. This would enable regulators to respond more effectively to challenges that transcend borders. Standardising best practices in areas such as anti-money laundering and responsible gambling can also help create a more uniform approach to gaming regulation, which gives the industry greater legal certainty and clarity, and helps us as regulators to use our resources effectively. This does not only stem from a willingness on the part of regulators, but above all it depends on the respective governments acknowledging these common objectives, regardless of other differences that may exist, encouraging their regulators to cooperate with their counterparts in other jurisdictions, and allocating the necessary resources accordingly.
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IMGL MAGAZINE | OCTOBER 2023
IMGL CONFERENCE REPORT
Jason Lane, chief executive of the Jersey Gaming Commission and president of IAGR, opened the IMGL conference with a fireside chat with Dr. Simon Planzer
Regulators’ views were a key part of the IMGL conference in Zurich WITH REGULATORS IN ATTENDENCE FROM FIVE CONTINENTS, THE IMLG AUTUMN CONFERENCE WAS AN OPPORTUNITY TO LISTEN, LEARN AND SHARE
R egulators are a key constituency for gaming lawyers. They are the conduit via which lawmakers put into practice the acts they pass, and they are responsible for interpreting, applying and enforcing the rules under which our industry operates. Part of the mission of the IMGL is to facilitate dialogue between regulators and the industry, building confidence and trust on both sides and hopefully contributing to better regulation of the gambling industry. It was, therefore, no accident that the input of regulators was evident throughout the IMGL autumn conference in Zurich. It was, as they say locally, the red thread which ran through the two days and gave the event its direction. From the opening fireside chat to the closing regulator’s round table the voice of those who the industry looks to for legal certainty was heard. Of course, the best dialogue is never a one-way street and implicit in the invitation of regulators to IMGL conferences is that they have as much to learn and absorb as the rest of us. Whether that is by gauging the reaction in the room when they road test an idea, listening attentively to the other conference sessions, or participating in lively conversations with other attendees during networking breaks and the social program, there are key takeaways to be had.
There were regulators from five continents in attendance in Switzerland, but the warmest welcome was reserved for Olena Vodolazhko a member of the Ukrainian Gambling and Lottery Commission. Her presence had been anticipated in London in 2022 but war in her country meant the visit had to be postponed. Audience members showed their appreciation as Olena took to the stage in Zurich, marking the first time that a regulator from Ukraine had attended an IMGL conference. Looking backwards and forwards Industry veteran Jason Lane, Chief Executive of the Jersey Gaming Commission, could look back to a time before online gambling when life as a regulator was very different. “Everything was mechanical,” he said, “but whilst we might not have been able to Google the details of licensees, there was a very open exchange of information between regulators, the police and other authorities. So open, in fact, that you couldn’t imagine it happening today. Technology and the amount of data available has changed everything, but the key is still to strive for constructive collaboration between the industry and regulator.”
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Getting it right from the start As more and more jurisdictions legalize gambling, politicians and officials are faced with the challenge of designing and implementing a system of licensing and regulation from scratch. That challenge is compounded by the desire on the part of both politicians and operators to move fast which can result in regulation that is rushed out too quickly and subsequently hard to unpick. There was a great deal of experience of regulating from scratch in the room, but it was left to a panel of regulators, former regulators and experts to share their advice on the issues faced when regulating new markets and products. It is tempting to suggest that there is enough experience around the world for new jurisdictions simply to take an oven- ready regulatory regime off the shelf. That underestimates the cultural differences and differences in legal systems that exist in many countries, as well as the process by which regulation is decided and approved by governments and citizens. The Ukrainian Gambling Commission was created just three years ago and has barely had the chance to operate in peacetime. Nevertheless, it has a great deal of ambition and sees the establishment of a welcoming gambling market as part of its plan for economic recovery once war is over. Olena Vodolazhko, one of the commissioners, was not shy to admit what many regulators keep to themselves. “In Ukraine,” she said, “the main challenge we have is the lack of professionals, lawyers and experts with a deep knowledge of the specific features of gambling market regulation. That goes for legislators as well as the Commission. The politicians expected that, after legalization, the illegal market would disappear which, as we know. is unrealistic. It is not so easy to find experts from outside the country both because of budgets and the war, but our team is trying to learn from other jurisdictions so I am here to listen and learn as well as to share our experience.” Ukraine is far from unique as, almost by definition, it is hard to find experts in gambling law and regulation in jurisdictions where it is not yet legal. Legal expertise is not all that is required either, as financial, audit, systems and consumer protection must all be considered. Birgitte Sand, Danish regulator from 2010 to 2020 was sympathetic and had some words of advice. “Most regulators
Lane was quick to point out the achievements of two decades of regulated gambling. ‘When I started in around 2000 there was no measurement of anything other than casino gambling and bingo. There was no online, and we had £3 to £4 billion in what we called ‘drop’. Now the entire industry is regulated and is worth £14.1 billion in GGY so a huge growth in the sector and its value in that time. That represents the creation of a great deal of value, the payment of a huge amount of tax and the creation of a large number of jobs. Law makers and regulators would do well to recognize that, especially in European jurisdictions which are currently more downbeat and negative about gambling.” He speculated that the industry may be a victim of its size and the noise it makes. “While we may think of it as large, it is still small enough not to be very important to politicians who are under pressure and gambling represents an easy target. Governments are schizophrenic: they can simultaneously hold the view that liberalization boosts economic growth and tax returns whilst at the same time demonizing the industry. It seems to me that we have gone from a point where regulation was about ensuring there was no criminal element in gambling to becoming consumer protection specialists. Regulators spend 90 percent of their time ensuring that a tiny segment of the gambling population has access to tools to look after themselves. I can’t think of another industry where that has happened. It wouldn’t happen in the alcohol or tobacco industries because the duty they pay is so much greater. Lane outlined his recipe for sound market conditions. “Ingredient one is a stable, regulated playing field where everyone involved knows and understand the rules and has fair access to the market. Access to the regulator is the second element, but that has to go hand in hand with responsibility by operators. They need to invest in appropriate systems that are well managed with consistent and accurate data. And there needs to be good internal communications between marketing and compliance to avoid, for example, sending promotions to excluded customers, something which still happens far too often.” Asked what he saw as his priorities for the future, he said he was trying to make sure the industry isn’t driven out of business through unintended consequences. “That’s the political part, but regulators all have the challenge of keeping up with technology, securing the resources we need to do our jobs and continuing to have a working dialogue with the industry.”
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don’t have experience when they come into the job, I certainly didn’t. The most important thing is to work out what you don’t know. You need to have the personal competences to do the job, but then be honest about areas where you don’t have first-hand knowledge or expertise. Then find people in the industry who can advise you in an open and honest way. Plenty of operators will be ready to give advice and you can bring on board expert individuals and 3 rd -party consultants. It’s fine to admit that you’re new in office and much better than not listening to the industry.” Matthias Spitz of German law firm Melchers shared their experience of regulation which was rushed through with no consultation with industry stakeholders. The result, he said, “is a situation where the regulated market is struggling. They have seen a drop of 70 percent of revenue, and that means a lot of players have gone offshore. As well as a regime which challenges their viability, the regulations are also unclear and operators are concerned about the risk of liability. This is likely to be resolved through litigation, but that should really be a last resort rather than a way to clarify the rules. The lack of communication with the industry has been damaging to the regulator and it is hard to recover from that damage. It would have been much better to communicate and take more time to get things started off from a strong base.” Martin Sychold gaming law advisor to the Australian, Swiss and Lichtenstein governments agreed. “I know of three small jurisdictions that regulated gambling. Two of them had perfect regulation covering every aspect of the market and to date there has not been a single license application. The third was more pragmatic. It worked with the industry to create a regime that worked not just on paper but in practice and that has a thriving market.” Regulation is not just about writing the rules but assembling a team and hiring outside experts. That takes a sizeable budget, and the money has to be expended before the tax revenues start to flow. One of the first challenges for a new regulator is to persuade their political masters to give them enough money to do the job. Sychold said: “Different areas of expertise are indispensable and the biggest challenge in new or developing jurisdictions is to persuade parliamentarians and those who set budgets to allocate enough money. In Lichtenstein it took a small scandal for the government to take it seriously. Now they have the funding they need and everyone is happy.”
It is not just about budget but budget sustainability. If regulators are relying on funds from central government or asked to be self-sustaining rather than having their own budget it places them in a very difficult position. The temptation is to see license fees and fines as a way to achieve that, but it is a slippery slope when it comes to industry trust. “If there is a suspicion that a regulator is imposing fines as a way of boosting their budget then there is no way for that regulator to be respected,” said Birgitte Sand. “They are put in an impossible position which jeopardises the success of the regime which relies upon trust.” The regulator can often be the meat in the sandwich between policy makers and industry. Influencing those who pass the laws is as important as consulting with operators. This has been the lesson from Ukraine but it is the situation elsewhere too. “You cannot expect legislators to change the rules every few months,” says Sand. “Realistically it will be more like every five years, so you have to make sure you are in a position to influence policy when it’s up for debate.” Escalation of enforcement fines Once a regime is in place and operators have launched their products, the focus will often quickly turn to enforcement for any breaches of license conditions. There have recently been some eye-watering fines in the UK and Australia, although it is worth noting that these tend to have a money laundering element and fines in the gambling industry are still modest compared to those for money laundering offences. In kicking off the discussion, Martin Sychold set the scene in 4 words: “Give me the money. Where does the money come from?” he asked. “It comes from consumers, and at some point, what starts out as consumer protection ends up as consumer exploitation.” Nevertheless, in some jurisdictions, fines, or agreed sanctions as they often are, are their first choice for enforcement, ramping up the levels of financial penalty for repeat offenders. But who is driving the escalation of fines, are they working and does the industry just accept them as the price of doing business? Carl Brincat, CEO of the Malta Gaming Authority presides over a regime which sets a maximum level of €25,000 per breach. He says that “regulators are accountable to politicians so if the pressure is there to be harsh on the industry then lobbying the
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