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ITALIAN REGULATORY UPDATE – Q01/11

April 28, 2011 News & Reports

By Quirino Mancini*

It could hardly be disputed that when it comes to remote gaming (such notion including Internet, mobile and interactive tv), the Italian market is at present the most, and probably also the best, regulated gaming environment across Europe. So much so, that the basic principles of the Italian regulatory model combining the possibility to offer quite a wide range of remote gaming services to the requirement of doing it only and strictly under the scope of a locally-granted licence, have been replicated also across the Alps by other jurisdictions (notably France and Denmark) that in the past several months decided to open up their domestic markets. More first-tier European countries are now poised to follow suit in the months to come (Spain for one) although they are understood not to be aiming at copy/pasting the Italian model altogether given also the various peculiarities (highlighted in bold below) of such model whose main features can be summarised as follows:
A licence granted by AAMS (the Italian regulatory body) is required to provide remote  gaming services to Italian residents. Hence not only offshore-based, but even operators licensed elsewhere in  the EU are not allowed to carry out across-the-border services in Italy using the licence held in their home countries

  • Between the late days of 2006 and July 2009 AAMS awarded some 60+ remote gaming licences which are all already operational. A new licensing round is now under way as better discussed in below, with up to 200 fresh remote gaming licences being put up for award upon simple application
  • A full purpose AAMS remote gaming licence covers fixed odds/pool sports and horserace betting, skill gaming (including online poker and any other card tournaments which are all eligible for skill gaming classification), instant lotteries (subject to a sub-distribution agreement with the current exclusive licence holder), online bingo, online casino, online poker and other cash games, bets on virtual events and betting exchange (subject to these two latter games being regulated by AAMS)

The one-off cost of a full purpose AAMS remote gaming licence is €350.000 plus Vat at 20% and it will last 9 years.

The AAMS licence is open to any applicant based in an European  Economic Area jurisdiction (“EEA”, ie European Union countries plus Iceland, Norway and Liechtenstein).  It can  be granted directly to a foreign applicant provided he holds an EEA passport

The AAMS licence may be issued even to a non-operator (such as a  startup or a company coming from a totally different business) subject to: (i) release in favour of AAMS of an € 1,5 million bank guarantee, and (ii) certification by an independent auditing firm that the applicant holds all  required technological infrastructure and management resources to run the  prospective licence

Remote gaming  services may only be offered to Italian residents through a dedicated,  ring-fenced platform to be certified by an AAMS-approved testing lab and that  must be linked up the central control system ran by AAMS via its technological  partner SOGEI so that each bet/wager placed by an Italian customer may be recorded, monitored, tracked, validated and taxed in real  time

Provision of remote gaming services from a foreign-based ‘.com’ platform to Italian residents is strictly forbidden and subject to the blacklist  restrictions currently enforced by AAMS

Whoever offers online gaming services in Italy without holding an AAMS-granted licence is  subject to imprisonment from 6 months up to three years. Whoever organises, offers and takes  remote bets in Italy on any games regulated by AAMS but in a way other than  that required by the AAMS rules, is subject to arrest from three months up to  one year and to a fine ranging from €500 to €5000 even if the violator does  hold an AAMS licence

Foreign-based AAMS licensees are allowed to keep their gaming  servers abroad provided they are located in the EEA space and a full, real  time connection with the AAMS central control system is in place

The gaming  software of the poker and casino games available on the Italian platform must  be certified by an AAMS-approved testing laboratory

As mentioned above, nearly 60 remote gaming licences are already active in Italy which means that the local market is very crowded and highly competitive although there still appears to be some room for further growth now that the existing and also the prospective licensees are allowed to offer such popular games as online poker, online casino and other Vegas-style cash games as a result of regulatory developments that took place in the early months of 2011.  Indeed, as a result of two AAMS decrees enacted respectively on 10 January 2011 (regulations of real money games of chance) and 9 February 2011 (filing deadlines for existing licensees to upgrade their licences and then seek an authorisation to go live with the cash games as well as for newcomers to apply for an AAMS licence),  the current AAMS licensees willing to offer poker and casino games will be allowed to do so subject to: (i) having their gaming platform and gaming software duly certified by an AAMS-accredited testing house, (ii) seeking an AAMS authorisation to go live with such new games, (iii) signing an addendum to their current AAMS licence agreement to upgrade it and put it on a par level with the new standard AAMS licence agreement that was also introduced by AAMS in connection with the new licensing round officially opened on 11 March 2011 (as AAMS finally implemented the new remote gaming regulations by publishing the relevant guidelines), thereby making it possible for newcomers too to lodge their onw licence applications.

With the above regulatory developments currently all under way, the biggest challenge for the Italian regulator is to be able to effectively and timely cope with massive filings from both existing licensees and new applicants, that almost inevitably will quickly pile up on the AAMS desks.

As for the operators, those already holding a licence will strive to go live with their online poker and casino products before their competitors, while the newcomer ones will want to gain a pole position in the application filing race which is now officially open and that will see AAMS award up to a maximum of 200 fresh licences for “remote gaming” (ie Internet, mobile and interactive tv).
Once, later this year, the existing AAMS licensees and the newly-licensed ones are all granted their respective titles to  operate fully in compliance with the new AAMS rules,  an even fiercer battle will kick off on the ground at customer recruitment/retention level, and more generally in terms of expensive advertising and marketing campaigns.  Indeed with most blue-chip operators of the online gaming business already holding (or however poised to soon secure) an AAMS licence, Italy will no longer be a place for small to medium size operators hence it is envisaged that the local market will see more merger and acquisition deals with further consolidations and business integrations than already occurred thus far.  Also, in an effort to diversify and expand their business model thereby better meeting the needs of a very demanding and still hungry market, not only at player level but also in terms of non-gaming companies with a strong brand and a solid customer database with a growing appetite to seek fast-entry ways into the lucrative gaming business, it is anticipated that more AAMS licensees will develop a business-to-business service to be ran alongside their own business-to-consumer, traditional operations.

*Quirino Mancini (qmancini@scm-partners.it) is a partner – Head of the Sports, Media & Gaming practice at Sinisi Ceschini Mancini and co-founder of www.gaminglaw.eu

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