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The Change in Legislation for iGaming Companies in the US and Europe

14 February 2018, 17:55 CET

Ever since the first casinos started to appear in France in the 18th Century governments started to impose regulations, and taxes too, on them and today this is even more the case.

And with global gambling revenue predicted to reach $635 billion by 2022 it's also a business area that many new operators must surely be considering looking to invest in over the next few years.

But before making any kind of move into the industry it's essential to have a good idea about the legal frameworks and regulatory environments that apply, both in Europe and in the US, and, inevitably, it's complicated.

Looking at Europe

EU flagLooking first at Europe, one might expect that the EU would have universal rules that apply across all of the countries within it, but you'd be wrong.

Although they're on their way out of the EU once the Brexit deal has been agreed and put into action, it's worth examining the UK first as theirs is one of the most comprehensively regulated gambling markets in Europe with some of the laws having been enforced as early as 1698 when a statute was introduced to make all lotteries not controlled by the State illegal – a ruling that remained in force until 1934.

However the modern legal framework has been created by the Gaming Act of 2005 which had two main aims. The first was to liberalize the market for operators, for example by the granting of licences to build and operate so-called mega casinos and also to impose some regulations on the fast-growing field of online gaming. As a result, the UK is also the country that many others look to for guidance on legislation.

But, despite this, there are also great disparities between the laws across other European countries as just a few examples will show.

In France, the traditional home of the land-based casino, the laws are heavily weighted in favour of these and against their online counterparts who are simply not permitted to offer casino games. Meanwhile, in Spain, there's a far more liberal approach whose main regulation is that all online operators have to use an .es domain if they are to be granted a licence to operate.

Germany, however, presents a very different picture where federal and state law are very much at odds with each other. For instance, when a nationwide treaty called the Glücksspielstaatsvertrag was introduced, the state of Schleswig-Holstein refused to sign it preferring to create their own laws. And, while they have subsequently signed it, they have also issued 23 licenses for online operators in direct contravention of its rules.

Legislation in the US

US street

Over in the US things are no more clear-cut with three levels of regulations that govern gambling – surprisingly complicated for a country with a long history of it as a major pastime, as well as a big business too.

The regulations operate on a local, state and federal level with some states having laws that date back centuries while others have barely any legislation in place. Although Nevada has traditionally been "the gambling state" it's by no means typical and can't be taken as the norm. To provide a perspective on the sheer range of rules that feature across the other 49 states it's also worth looking at just three of them.

At the most extreme end of the scale is a state like Indiana where all private gambling is outlawed so even enjoying a quiet game of poker at home would, technically, be breaking the law. Meanwhile, over in Alabama, while private gambling is also forbidden, residents are free to indulge in pari-mutuel betting on activities like bingo as well as visiting reservation casinos run by Native American tribes.

But in the north-east of the country the state of Massachusetts takes a far more liberal approach offering players the choice of tribal and commercial casinos, dog and horse racing and all the social gambling they could ever want. What's more, there is no mention at all of online gaming in their state legislature so, one could argue, that it's completely unregulated, at the state level at least.

Of course, laws around gambling don't simply affect the operators, they're also very relevant for the players themselves. At the most basic level these cover considerations such as the minimum age for entering a casino or playing online but, with so much money potentially involved, they extend to tax laws too.

Taxing questions

Tax

While in the UK there is no tax to be paid on gambling winnings, in France there is a flat rate of 12% on all winnings and in Spain there's a 20% tax on all lottery winnings of over 2,500 euros. Meanwhile, in America, things are far more complicated with tax thresholds dependent on both the size of the winnings and the game that they have been won on with all taxes at a level of 25% on winnings.

But while the UK currently charges no tax on any kind of gambling winnings on the principle that they are the result of luck, there are currently feelings of disquiet among many players who rely on playing poker as a source of income. This is due to the ongoing debate about whether poker is game of luck or skill. A number of studies which have used computers to analyse and play billions of hands of poker have started to prove that the latter may well be the case.

This is because scientists have been able to write algorithms which result in the computers wining more hands than they lose in simulated games, the logic being that if you can program a computer to win then it obviously does involve a level of skill. If the UK government does take notice of these findings then, very soon, it could well be that poker winnings are taxed just as the tournament winnings of a professional tennis player or the weekly pay of a footballer would be.

A final thought

So, as you can see, there are many considerations to be taken into account by anyone thinking about setting up a gaming business in Europe or the US, not least passing the many regulatory requirements needed to get licence to operate.

Therefore, it stands to reason that heading for countries where the legislation is the least restrictive and most liberal would be the most practical course of action. And with the obvious appeal of getting involved in an industry that's set to grow and grow, we can expect to see many optimistic entrepreneurs heading down this route in the near future.

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