Italy’s E-gaming regulation enters next phase


Italy’s E-gaming regulation enters next phase

gbgc-gaming-growth-slowdown-2012Online gambling operators, particularly those who offer online bingo and the accompanying side games, are welcoming the latest news from Italy. Side games represent a significant revenue source for operators and are an important element for all online gambling services. Giulio Coraggio, Senior Associate at DLA Piper, stated that the “regulations of online slots is not new as those regulations were already contained in the general casino regulations.

The major change is that from 3 December 2012 it will be possible for operators to launch online slots which in my view will be incredibly beneficial for the market as it will attract a number of players betting so far on non-Italian licensed websites because of the lack of availability of online slots on Italian licensed platforms. Therefore I do expect that the launch of online slots will considerably reduce the Italian black market.”

 

Alongside the introduction of online slot games and the new online bingo set of rules this is undoubtedly a positive turn of events for the industry. According to many, this will definitely help to revive declining revenues. This is very good news for the remote bingo market that has seen a reduction in the turnover of 27.7% compared to 2011 mainly due to the launch of cash poker and casino games. Also, this change might further boost online slot games that will be launched on the 3 December 2012 as slot games usually operate as side games of bingo games,” Coraggion added in his blog.

He commented: “Actually the revenues in the market have increased during the last year especially because of the launch of cash poker games and casino table games. Also I expect that the launch of online slots and the fight against the black market will further increase the turnover of the market that is becoming more mature. The turnover of bingo and sports betting was substantially reduced while on the contrary the aggregate turnover of the market was increased as a consequence of the launch of casino table games and cash poker.”

The reason behind delaying the allowance of slot games in Italy until December is believed to be to give local operators time to prepare to regain competitive balance. Coraggio explained, “There is a political reason behind this delay. Indeed, video lottery operators are worried that the launch of slots might hamper their market as online slots are games similar to those included in the current video lotteries’ offering but enjoy a more tax friendly regime. The problem is however that online operators can rely on a much lower turnover and have to compete with non-Italian licensed operators targeting Italian players in breach of Italian laws. At the same time I can understand the concerns from video lottery operators given that there are some online operators that through gaming terminals located in shops (“totem”) illegally try to compete with them. Hopefully there will not be a delay in the launch of slots, but AAMS is considering implementing stringent measures to fight against totems.”

However, regarding gaining competitive advantage by the local operators, this may be “given by the knowledge of the market, but I do not expect any regulatory advantage over European giants” Coraggio added. “The market was long awaiting these regulations as the current regulations are very restrictive and do not allow the offering of the same game mechanic available on the .COM website. The feedback that I received from all my clients on the draft online bingo regulations was positive and the sole concern relates to the timing for their coming into force. Indeed, the regulations make reference to guidelines for the certification of the platform that are likely to be similar to those available for casino games but have not been published yet. Likewise the launch of the new bingo will require the adoption of a new bingo protocol of communication with the servers of AAMS that has not been published yet. There are some operators that have focused their business on bingo and potential delays might hamper their business strategy.”

In comparison, Stefano Sbordoni, IT Law Professor and Lawyer, Studio Sbordoni, expressed doubts that the local operators would gain advantage by the delay. “On the contrary, unlicensed operators (those that are – or should be – banned by the above described ruling) will gain competitive advantage.” He added “The fear from the relevant segment of operators of offline slot machines is that there could be a cannibalization of their market share through the setup of totems that would allow to play online slots, such confusing the player and cheating them and the Regulator. I do not share that fear.”

Some say that the driver behind permitting online slots in Italy is double sided. Firstly, to get hold of the money that is allegedly spent on websites that already offer online slots but aren’t sanctioned and secondly to use the revenue for public good, such as to provide help to the territories devastated by earthquakes. It could then be seen as an offset to the negative sided character of gambling by assisting public welfare. Regulators are now heralding the so called public interest in particular in order to upgrade the industry image that suffers greatly from its reputation and negative side effects. It has now become crucial to associate gaming with assisting the public good, whilst, importantly, the tax issues will always be ahead of all other priorities when promoting international cooperation amongst European Union’s Member States.

Despite the fact that the new regulations will undoubtedly have a positive impact on bingo there is the element of taxation that remains to be addressed for it to be successful. Coraggio explained: “The launch of new online bingo regulations will finally make bingo a competitive product while at the moment because of the regulatory restrictions it is still considered as a niche product. However, the success of bingo games will require an additional effort from the regulator as the current 12% turnover tax regime is excessively high in order to compete with for instance online slots that enjoy a 20% gross profit tax regime and obliges operators to keep a payout too low. If the taxation of bingo is made equal to the one applicable to casino games and the minimum payout is increased to 90% as prescribed for casino games, bingo will become a very competitive game. As to online slots, the sole downside that I envisage is the time of approval of new games by AAMS, but the new decree setting out the approval process should considerably speed up the process.”

This era of legal change that Italy is undergoing in European can be described in many ways and Giulio Coraggio believes that it “can be considered a complete maturity of the Italian market. Now that the offering of games will become equal to the one of .COM websites my view is that even the operators that were more dubious about the Italian market will apply for a license. This change might mean that operators will start a fight against non-Italian licensed operators forcing most of the operators that want to target Italian players to obtain a local license. At the same time since most of the major operators will be licensed in Italy it will become more and more dangerous for Italian players to play on non-Italian licensed platforms.”