IMGL CONFERENCE REPORT
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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IMGL MAGAZINE | OCTOBER 2023
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