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Could This Be The Beginning Of A Global Market Of Regulated Gambling Jurisdictions?




by:
Gemma Boore
Moris Mashali
Michael McCormack
Edwards Wildman Palmer LLP - London Office

 
April 9, 2013

Previously published on April 2013

Online gambling in the UK is a huge industry and, despite the economic crisis, growth has been unprecedented in the last five years. At the moment, the UK Government imposes strict regulations and requirements on operators including a gambling-specific tax of 15%: a rate too high for most online operators who have chosen to relocate to offshore tax havens such as Gibraltar, Malta and the Isle of Man. However, as reported here, the UK Government is planning to introduce a new point of consumption tax to bring offshore operators selling to UK gamblers into the UK tax net.

Gambling industry analyst, H2 Gambling Capital, has recently released a report analysing the worldwide online gambling market. Figures suggest that revenue from online gambling in the UK alone has increased by 80% in the past five years. Worldwide, the industry generated a massive €21.7 billion in gross win (the amount that the operator has won and the amount its customers have lost) in 2012 and the UK accounted for €3.1 billion of this market (14.3%). Now it seems it's not just the UK Government who want a slice of the gambling pie; other countries want in too.

At the moment, the US only accounts for around 11% of the online global gambling gross win. This has mainly been due to the Unlawful Internet Gambling Enforcement Act ("UIGEA"), which was signed by President George Bush in 2006. However, the UIGEA has now become part of history as the US Government has passed new federal legislation permitting online gambling in states in which gambling-specific legislation is in place.

Individual states have been quick to act. In New Jersey, a bill has recently been passed legalising online gambling, not only within the state but also allowing for agreements to be entered into with other states and further afield. New Jersey's bill includes a provision allowing for "compacts with foreign countries" meaning that European online gaming operators, who have effectively been locked out of the US for the last seven years, can now enter into gaming agreements with the US. New Jersey is one of three states (New Jersey, Nevada and Delaware) that have legalised online gaming but New Jersey is the first to allow compacts with foreign countries with the two others limiting participation to residents of their respective states. Nevada is also pushing for similar legislative change. Pennsylvania, California and Illinois have also released draft legislation, with the Illinois bill allowing for the state "to enter into agreements with other gaming entities, including foreign entities".

This is big news for gaming operators in regulated jurisdictions such as the UK, Gibraltar, Malta and the Isle of Man. Compacts between states and other countries will greatly expand the number of potential online gamers for each operator. The report by H2 Gambling Capital predicts that this change could result in gross win in the US market increasing to just over $7 billion by 2017, potentially representing just over 30% of the global regulated online gambling market.

Further, Romanian authorities have passed legislation allowing gambling operators to legally offer remote services to customers in Romania. Since 2010, Romania has had framework law covering remote gambling, but to date there has been no authority in place to issue authorisation to operators; effectively meaning that remote gambling has been impossible to carry out legally. However, on 27 March 2013, the Romanian Government passed an Emergency Ordinance establishing a new authority for the regulation of gambling: the National Gambling Office (the "NGO"). The NGO will not only monitor online operators but also issue authorisation for remote operators wishing to provide their services to Romania.

Reports of such significant market growth in global online gambling appear to have successfully stimulated countries such as Romania and several states in the US to introduce legislation to ensure that they become part of this so-called recession-proof market. Great news for operators and gamblers alike and a clear signal that a global market of regulated gambling is now closer than ever before.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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