European i-gaming in 2019, the fog begins to clear

In the ongoing policy of “regulate and tax” by European governments for online gambling, 2019 has the feel of a new chapter in the process.

It does not mean that every development is good news for the gambling operators but it does at least remove some of the “fog of war”, allowing them to see the regulatory landscape. At the start of the year, Sweden became the latest European market to issue licences in its newly regulated e-gaming market. The gambling tax rate is set at 18%. The indications are that the early phase of this new market could be a competitive one with more than 100 licences already issued to some 70 individual operators for a population of 10 million people. How the market eventually shapes out will be influenced by the role that lottery operator Svenska Spel plays. It can now compete directly with those brands that previously offered services under offshore licences. Like Sweden, the Netherlands has had a protracted process of regulating its e-gaming market. After several years of delays and amendments, it was almost an anti-climax when the necessary law was approved in February. But it could still be 2021 before any newly licensed operators begin taking bets and with a tax rate of 29.1% it will be one of highest-taxed European e-gaming markets. Elsewhere in Europe, licences holders are finding that the headaches don’t necessarily end once the market has been regulated. In Ireland January 2019 saw the introduction of the higher gambling taxes previously announced by the government. Betting will now be taxed at 2% on turnover, doubling the rate. Taxes on betting exchange revenues from Irish customers rose from 15% to 25%. Paddy Power Betfair reported that these higher rates would have cost it an extra GB£ 20 million in betting duty if it had applied in 2018, although this did include its betting shops, not just online. The Italian government’s ban on gambling advertising and sponsorship will begin in July 2019 and is combined with a tax rise which came into force from 1 January - sports betting tax rising to 24% (from 22%) and an increase from 20% to 25% for e-gaming. In some markets, however, the regulatory fog refuses to lift quite so quickly. Not least of these is Germany, where the licences issued in the state of Schleswig-Holstein are due to expire at the end of June 2019. On a federal level, the status of the 20 sports betting licences remains uncertain. At the time of writing a vote on the latest version of the State Gambling Treaty scheduled for late March 2019 has not taken place. If the Treaty is eventually approved it could spell a breakthrough in the regulatory process, although there will still be complications. There could be a removal of the arbitrary limit of 20 sports betting licences but the ban on online casino and poker would remain, as would the 5% tax on betting turnover. There licences would run for an initial “experimental” phase of one year from 2020 to 2021. One potential complication is that Schleswig-Holstein would be permitted to run its gambling regulation alongside the treaty. This has a tax rate of 20% of revenues and permits e-gaming products. Of course, on a pan-European level, the UK departure from the European Union and the implications online remain as obscure as ever, even though the scheduled date for leaving is 29 March 2019. One of the main issues for e-gaming is the status of Gibraltar after the UK leaves. As 888 Holdings stated the relevance of Gibraltar’s status is the ability for licence holders “to rely on EU principles” in the freedom to supply services. In the absence of clarity, several operators, like 888, have taken licences in Malta and located servers in other EU member states, such as Ireland in order to mitigate the risk. Many European governments were reluctant to open their gambling markets to competition – some still are – so the path to regulation was never going to be a smooth, well-lit one. But in the early months of 2019 there is the sense that some obstacles are being removed.   by Lorien Pilling, director, Global Betting and Gaming Consultants