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Regulating Exchange betting and online slots Spain

June 12, 2013 News & Reports

By Ángel Jiménez

The starting point for the regulation of online gaming in Spain is the Law 13/2011, of 27 May, on gaming regulation (hereinafter, LRJ for its Spanish initials). During its discussion in Parliament, the LRJ evolved from a rather restrictive regulation model as far as operators and games are concerned (it started from a limitation on the number of licenses and, consequently, of operators) to another in which restriction applied exclusively to games (so that only explicitly regulated games are considered permitted).

From this perspective, the LRJ included five game modalities (lotteries, raffles, betting, contests and «other games») and left to the Administration to decide upon the approval of the so-called basic regulations for each one of the different game types. Expressed differently, although the LRJ determines and defines the categories around which the different games will be grouped together, it leaves to the national (state) gaming Administration (at present, the Ministry of Finance and Public Administrations –MINHAP in its Spanish abbreviation) to decide which games can be commercialized in Spain, as well as the regulatory requirements that will be demanded for their development.

Therefore, when less than half a year had elapsed since the publication of the  LRJ, the Administration approved what today stands as the Spanish game catalog, formed by a group of Ministerial Orders published on 8 November  2011, to which must be added –as a consequence of the ultra vires effectiveness of the (explicitly repealed) previous legislation– lottery games and raffles which, even today, two years after the approval of the LRJ, continue to be governed by their old regulation, thus de facto preventing the development of this activity within the framework of the new regulation in the case of raffles.

As we say, the LRJ did not focus on providing full content to the game modalities that it was defining, with the exception of betting, about which it incorporated quite a detailed development that defined three types of bets depending on the event on the result of which the bet was made (sports betting, horseracing betting and other bets) and another three types according to the organization and distribution of the amounts wagered (fixed-odds, pari-mutuel and exchange betting).

The regulation that came after the LRJ incorporated fixed-odds betting into the three possible types according to the betting object; sports betting, horseracing betting and other bets; and pari-mutuel betting into two of them: sports betting and horseracing betting. However, it completely forgot about exchange betting, even though it was a type of bet for which there was an evident demand and which had developed without any apparent difficulties before the approval of the LRJ (during the period in which no specific regulation existed for online gaming) and later (until the entry into force of the LRJ sanctions regime following the award of the first licenses within the framework of the said law).

Be that as it may, the decision of the national (state) Administration left exchange betting outside the regulatory context, despite the fact that such bets were explicitly contemplated by the LRJ which, unlike what happened with most game types, even included an ad hoc definition of the tax base for exchange betting in the Tax on gaming activities.

In short, the lack of regulation for exchange betting constituted a glaring omission at the time –and it must be seen as such even today– which effectively meant prohibiting one type of game. And the ultimate reasons justifying that omission or explaining the enormous delay accumulated in its regulation still remain unreported or unknown.

Together with the omission of the regulation for exchange betting, the other important game which did not have its regulation included in the first regulatory package was online slots.

Despite being regarded as an essential part within the casino game offer, slots currently lack a regulation in the national (state) online context. In practice, this means that they must be considered forbidden (although it is a widely spread type of game in the physical channel and is even regulated in some Autonomous Regions for its online development and operation).

Nevertheless, it is also true that, contrary to the case of exchange betting, slots were not explicitly mentioned by the LRJ and that, therefore, and despite their undeniable interest and relevance, the Administration cannot be accused of having inexplicably shelved their regulation until a later time in this case. However, it is a game which –because of its importance– should have undoubtedly formed part of the initial game offer before other types which were actually regulated and which belong –the same as slots– to the modality that the LRJ refers to as «other games» (which includes all those game types which are left outside the group of modalities defined in the Law).

I do not think it is necessary to highlight the importance that the introduction of these two games would have had for the proper development of the newly regulated Spanish gaming sector and how hard it becomes to explain its initial omission. However, when two years have already elapsed since the publication of the LRJ today, it is even more striking to check that neither of them has been introduced yet and that even today we must only content ourselves with the announcement of their future regulation.

In late October 2012, approximately one year after the publication of the initial regulatory package, The Directorate General for Gaming Regulation (the DGOJ –for its Spanish initials– is currently the directive unit within the MINHAP which has –apparently for an indefinite period of time– assumed the powers that the LRJ had reserved to the unborn National Gaming Commission) made public its intention to collect the opinions of the different gaming market players regarding the possibility of initiating the regulation of exchange betting and online slots.

This first consultation, after the gaming sector had already taken for granted that the activity concerning the regulation of betting exchange would start in the first month of 2013 (not so much in the case of online slots, which generated more uncertainty), was followed by another consultation in February, officially justified by the fact that not enough data had been provided during the first consultation to enable the DGOJ to prepare a well-grounded proposal.

The result of the second consultation was made public by the DGOJ on 18 April last, announcing that the regulation of both betting exchange and online slots would be dealt with and that the regulatory processing of both game types would be carried out consecutively, starting with that of betting exchange and later continuing with online slots.

This announcement made by the DGOJ brought an end to the speculation and uncertainty generated after its first failed announcement, which had even cast doubt on the MINHAP’s real willingness to regulate both games which –as is well-known– did not enjoy favor with some lobbies whose negative influence has been felt during a significant part of the online gaming regulation process in Spain.

After the announcement made by the DGOJ removed the uncertainty about the MINHAP’s willingness to regulate, uncertainty still remains about the moment in which the long-awaited regulation of exchange betting and online slots will be effectively published.

In this respect, the fact that the previous Director General of the DGOJ left only a few days after the announcement is definitely not good news, since it once again infects the market with the virus of doubt in relation to what the future appointment of a replacement might hold in store for us.

It seems logical –and so it is assumed by us– to think that the DGOJ’s announcement could have not been adopted without knowing the opinion of its hierarchical superiors: the Secretary of State for Finance and, most probably, the Minister of Finance and Public Administrations, which is why logic leads us to believe that the change of Director General should not affect what had been announced.

And yet, will the change of Director General affect the date of approval for the new regulation meant to govern both exchange betting and online slots? In principle, the change does not seem to have contributed to the speed with which the authorities should deal with this regulation, which is bound to arrive with a delay of nearly two years in the best of cases.

Of course, the DGOJ does not find itself in a period of regulatory effervescence like the one which was experienced during the months following the approval of the LRJ. In fact, no regulatory proposal whatsoever has been published yet by the DGOJ at the moment of writing these lines, which most probably has to be interpreted within the context of the appointment of the future Director General and –in our opinion– not so much under other circumstances, since the text of the proposal should be almost for sure sufficiently advanced already when it was publicly announced that the regulation process was going to begin.

In any case, what we have before us is not only the first process of introduction for new games within the framework of Spanish online gaming regulation but also the first chance to check if the new regulation deepens into what seems to be the right course to follow: the elimination of obstacles for the development of the today still incipient online gaming market in Spain.

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