Many Countries Leave Offshore Sites in Limbo ; ‘Real Money’ Games on Tap ; California Casino Fight and Nevada

limbo

New Online Gambling Regulations and Laws in Many Countries Leave Offshore Gambling Sites in Limbo

By: Hartley Henderson – Exclusive to OSGA.com
When John Kyl proposed a law to ban online gambling to American citizens in the late 1990s many in the industry balked at the suggestion. The general viewpoint was that the internet was a global medium that should not be censored or regulated and furthermore other countries had a right to pass their own laws and it wasn’t up to individual countries to enforce their laws on foreign jurisdictions even if they didn’t agree with them. But it seems that Kyl may have been ahead of his time.

Almost two decades later most countries have chosen to try and enforce local gambling laws either by banning online gambling or putting in very strict regulations that attempts to shut out or tie the hands of offshore operators.

Gambling markets can be broken into three types, white, black and grey. White markets are jurisdictions where remote gambling is legal, authorized and accepted without concern or without any stipulations. Black markets are jurisdictions where remote gambling is absolutely illegal under all circumstances and grey markets are jurisdictions that fit somewhere in the middle. The number of white markets is very small and one would have to look long and hard to find any country that welcomes and encourages offshore gambling without restrictions.

The United Kingdom was one such jurisdiction and for the longest time the government was only happy to accept offshore operators catering to UK customers online and advertising in the British Isles provided they operated in a jurisdiction that held a white paper listing (a list that indicated the country where the operator was located adhered to the regulatory requirements of the UK Gaming Commission). But in the last few years things changed. The UK began to realize they were losing a lot of potential tax revenue from UK citizens wagering at companies located in places like Alderney or Gibraltar instead of at UK based gambling sites so the UK decided to put in place a law that ensures they would get tax revenue from British citizens regardless of where the company they are betting at is located. In particular the new law requires companies to obtain a UK Gaming Commission license (UKGC) if they want to cater to UK citizens and they have to remit a point of consumption tax of 15% from any wagers from UK citizens. This is applicable regardless of where the company is operating. So even if a company is operating in the gambling tax haven of Malta the company still must keep track of revenue from UK bets and submit 15% of that revenue to the UKGC. Moreover in order to keep the UKGC license the company must justify their presence in grey markets or black markets if more than 3% of their revenue comes from any of those jurisdictions and they have to show they are adhering to local laws if less than 3% of revenue comes from grey markets.

online gambling laws handcuff operatorsThe number of black markets, i.e. markets where offshore gambling is expressly forbidden is a bit larger than white markets although black markets are usually in Muslim countries where all forms of gambling are illegal (examples being the UAE, Bangladesh, Pakistan, Qatar, Jordan, Kuwait, Bahrain, Afghanistan, Palestine, Kenya, Mozambique, Iran, Iraq, Syria, Libya and Yemen), in communist countries which want to control all aspects of their citizens (examples being Cuba, North Korea and mainland China) and in the United States which made offshore gambling illegal with passage of the UIGEA in 2006. It should be noted that China is often listed as a grey market in articles but the laws of China specifically make it illegal for gambling companies to operate or for Chinese citizens to make wagers of any sort and both gambling operators and citizens can be arrested for illegal gambling. That said it’s understood that friendly games between citizens occurs frequently and the Chinese government is generally uninterested in friendly games. Chinese citizens can also legally venture to Hong Kong where horse racing is legal as are some other offerings by the Hong Kong Jockey Club or to the special administrative region of Macau located just off of both Hong Kong and the Guangdong province of China where all forms of gambling are legal. China also really has no way of dealing with offshore gambling since they don’t have any extradition treaties with Western countries nor do they have any way to effectively monitor online gambling so it goes on virtually unpunished. However, if anyone is caught gambling illegally or promoting an illegal website the Chinese government can be quite strict.

China recently imprisoned four citizens for playing at Bet365 and two citizens for promoting Bet365 on a blog. The easy solution for most companies would be to simply withdraw from the Chinese market but China represents such a large percentage of players that doing so could effectively bankrupt many of these companies who have a huge percentage of their players residing on the Chinese mainland. Thus most companies continue to operate in China in violation of local laws and simply put up the standard “play at your own risk” warning. China aside, companies that try to adhere to local laws have mostly withdrawn from the other black markets or never catered to them at all, but rogue operators that have set up shop and hold licenses from places like Costa Rica, Panama, Kahnawake and Cyprus aren’t too concerned about breaking local laws so they continue to offer gambling to citizens in all market types. The owners of those sites likely have no plans to travel to those areas so they are willing to take the risk.

The vast majority of countries are grey markets, i.e. they aren’t black or white. In those countries gambling isn’t illegal but there’s also no law on the books that makes it legal. Many of those countries have never tried to even address remote gambling or have just recently tried to address it. The grey markets tend to fall into 2 categories. The first category are countries where gambling is legal but restricted to government monopolies. In those cases it is generally understood that only the monopoly can offer gambling so all other companies that provide gambling and are not government entities are operating illegally. At the same time those jurisdictions have no means or intentions of enforcing laws against foreign operators. Examples of countries in the first category would be Canada, France and Germany. In Canada and France only the horse racing industry and the provincial lottery monopoly are authorized to own and operate all forms of gambling but in both cases there’s no means or desire to take action against individual bettors who choose to place bets at foreign sites nor are there any plans to go after foreign operators. The second category is countries that have given special consideration to major companies to take bets from their citizens and in return pay a large portion of the winnings back to the country’s coffers. Examples of the second category are Australia, Italy and Spain where they have opened the door to offshore gambling but require companies to buy a license and agree to strict regulations including paying a tax to the government. Many of those countries including Spain and Italy also require the companies to set up shop within their borders unlike the UK which is allowing companies to operate in other jurisdictions. Not surprisingly these restrictions shut out most small offshore operators who could never compete under such rules. Many companies believe that these restrictions are illegal and some companies have filed complaints with the EU. But while the EU seems to be sympathetic to the operators even ruled against the Germany and France it seems those countries have no intentions of abiding by the EU decision.

“John Kyl would certainly be smiling now … ”
What has been causing a the most confusion in the industry are countries that are saying they want to legalize and regulate remote gambling but put have no means to actually do so. Prime examples of that is Romania which passed a law recently that makes it illegal for citizens to gamble with “unlicensed operators” but unlike the UK it’s not possible for an offshore company to get a gambling license from Romania thereby making their regulatory scheme irrelevant and consequently all remote gambling illegal. Another example is Singapore which has issued a plan to regulate online gambling for only some companies, but Singapore law has no provisions that would allow companies to actually acquire a remote gambling license so again the new “legalization and regulation plan” is a farce because there’s no way of implementing it.

Needless to say all these new laws and so called regulations are causing confusion for both online operators as well as for those involved in analyzing the industry. As a result Ladbrokes has chosen to simply withdraw from almost all the grey and non-Chinese black markets. Clearly Ladbrokes seems only too willing to go back to being a UK based shop catering to UK citizens. PokerStars, Bwin.Party, William Hill and Bet365 also have a similar mindset. However, they have withdrawn from different countries than Ladbrokes either because they have a different opinion over which countries are truly grey markets or more likely because they have enough customers in some of those markets to justify the risk. The companies that are really in limbo are the non-UK based companies that want to adhere to local laws but would go under if they left all the grey markets. A prime example of that is Pinnacle.

The Curacao based company has recently acquired new management and is hoping to obtain a UKGC license. They withdrew from the U.S. a few years back and have recently announced they will no longer cater to UK residents until such time as they acquire a UKGC license. But to have any chance of acquiring that license they would have to stop catering to Asian grey and black markets and that is clearly out of the question since their whole strategy since withdrawing from the U.S. has been to focus on the Asian market. If Pinnacle withdrew from China, Hong Kong, Singapore, Malaysia, the Philippines, Korea etc. they may as well close shop since most of Pinnacle’s customer base would be gone.

So John Kyl would certainly be smiling now if he was paying close attention to the remote gambling situation worldwide. Compared to what many countries are doing now, the 1997 Internet Gambling Prohibition Act is quite moderate. After all Kyl simply wanted to make internet wagering illegal in the U.S. He would never have considered creating a law that would allow a blogger to be imprisoned for promoting an offshore gambling site nor would he have considered creating a licensing scheme that was a sham because it is impossible to actually receive a license.

Yet that is what is happening in jurisdictions around the world and companies have to figure out a way to either comply with new regulations or simply leave those grey markets for firmer footing. Of course to do so they would have to accept a huge hit to their bottom lines which in turn means layoffs, less tax revenue and a new strategy going forward. The only ones who benefit from all these new regulations are underground bookmakers and “rogue gambling sites” that never intended to abide by local laws and are only too happy to take the customers that are left behind.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley’s RUMOR MILL!

…………………………………………………………………………………………………………………………………………………………………

wonder woman slot

‘Real-money games’ eyed

by Ray Poirier
www.gamingtoday.com
Gaming machine manufacturers eye ‘real-money games’Social media and the Internet are affecting the world’s youths in a way that has never been seen before in history and that fact has not escaped the gaming industry, especially the manufacturers of gaming machines.

As the AP’s Kimberly Pierceall recently reported, the goal of manufacturers seems to be to develop machines that “don’t look like slot machines.” They are called “skill-based games.”
So far, their popularity has been in the “for fun category,” but that is changing rapidly.

Soon, Piereceall writes, players in the United Kingdom will get a chance to make real wagers after sinking a battleship, knocking a character off a perch, or playing a word worth a triple-word score.

In Mexico City, she added, Merkur Gaming is testing a slot machine that has players sit inside a cozy, futuristic-looking orb much like sensory heavy arcade video games.

And New Jersey wants to get into the act with the Division of Gaming Enforcement, saying it is seeking game developers’ proposals to conduct “real-money” gambling on these skill-based games. This would make New Jersey a nationwide laboratory for a betting phenomenon many have predicted will become the next big thing.

What’s happening is manufacturers are working on machines that will offer more skill-based, social games that will be familiar to young people.

In the past, manufacturers designed their machines to appeal to the older set who were happy to pull a handle or press a button to see the reels turn.

Now, as was obvious at the recent Global Gaming Expo, a different approach is being taken to appeal to young people who have grown up with a variety of non-gambling games, many of which will require skill.

A new company, Gamblit Gaming, for instance, has developed a machine with a four-sided touch-screen table that with a flick of the finger could launch a virtual slingshot sending a puppy clad in a police uniform flying toward a zombie cat. Not necessarily what your grandmother would be looking for.

Eric Meyerhofer, CEO of Gamblit Gaming, says the potential market in the United States for such betting is $8 billion to $10 billion.

“Casual games are played in such abundance across such a wide demographic. We think there’s quite a large market for this,” he added.

Still, as Bally Technologies Inc. (BYI) indicated at the G2E, the traditional players will not be forgotten. One of its show highlights was the appearance of Lynda Carter, TV’s “Wonder Woman,” who introduced the new slot machine bearing her name.

From the response, the company believes the machine will be a hit.

Ray Poirier is the longtime executive editor at GamingToday.
Contact Ray at RayPoirier@GamingToday.com.

……………………………………………………………………………………………………………………………………………………………..

indian casino

California Indian casino fight has implications for Nevada

 

By HOWARD STUTZ
LAS VEGAS REVIEW-JOURNAL
California voters never have rejected a statewide ballot question dealing with Indian gaming, but they soon will have to weigh a matter that pits tribe vs. tribe.

To be more accurate, Proposition 48 is several tribes vs. the North Fork Rancheria Band of Mono Indians and Station Casinos.

The Nov. 4 measure could determine if North Fork can move forward with a $350 million casino complex west of Highway 99 in the town of Madera, roughly 42 miles from the tribe’s reservation but just 30 miles north of Fresno.

Station Casinos, which already manages an Indian casino in Santa Rosa, will help finance and build the North Fork property, then run it under a management agreement.

Neighboring Central California tribes oppose North Fork, and earlier this year they qualified the referendum for the ballot.

It’s not that the tribes oppose casino gaming. They just don’t want more competition for their own operations.

Since last year the tribes and their financial backers have raised close to $14 million to fund the “No on 48” campaign, according to the California Secretary of State’s office.

North Fork, Station Casinos and California’s Democratic Party have raised almost $400,000 for the ‘Yes on 48’ effort.

“Hopefully, the more they spend, the more the voters will see through their motives,” said North Fork Tribe Vice Chairwoman Maryann McGovran. She said the opposition doesn’t want new competition.

Station Casinos Chief Development Officer Scott Nielson declined comment.

Passage of Proposition 48 also could jump-start a long-stalled Indian casino project slated for Barstow, giving Southern California residents another gaming option.

Voters are being asked to approve or reject the tribe’s agreement with the state, which was approved by California lawmakers last year and signed into law by Gov. Jerry Brown. The North Fork tribe argues the casino, with 2,000 slot machines and 4,500 employees, would be an economic catalyst for the region.

The issue surrounding the casino is the controversial “land into trust” designation, by which an Indian tribe receives U.S. Department of Interior approval to build a casino on land that was not part of a reservation prior to passage of the federal Indian Gaming Regulatory Act. The action has been referred to as “reservation shopping” and is often opposed by other tribes.

In 2013, the Interior Department determined North Fork had a “historical connection” to 305 acres in Madera. There was also “strong support for the project” from the community.

McGovran said the opposition has clouded the issue.

North Fork went through a nearly decade-long, two-part process with the Department of the Interior to put the land in trust. The process included environmental impact studies and approval by local government leaders and residents.

She said the North Fork tribe, California’s fifth-largest with almost 2,000 members, opted not to have the land declared “restored,” a process used by other tribes with casinos, including several opposed to North Fork. Tribal members thought the “land into trust issue” would be clearer to residents of Madera.

“We wanted to do an open and transparent process,” McGovran said. “We have the land. This is no longer a land issue.”

‘no one is really on the fence’

At stake is big money.

California leads the nation in Indian gaming revenue, accounting for more than 25 percent of the U.S. total, according to Casino City’s annual Indian Gaming Industry Report. In 2012, the state’s 66 casinos collected a total of $6.96 billion in gaming revenue.

“Most of the California tribes are opposed to North Fork,” said Victor Rocha, editor of Pechanga.net, who has been involved in Indian gaming politics since 1998. “The land into trust issue is the main reason. No one is really on the fence.”

North Fork and Station Casinos are backed by Brown, several state Democratic groups, Madera-area lawmakers from both parties and organized labor, including UNITE HERE. The Los Angeles Times has editorialized in favor of the referendum.

No on 48 is backed by U.S. Sen. Dianne Feinstein (D-Calif.), the California Farm Bureau Federation, and the Napa and Marin county boards of supervisors. Most of California’s major newspapers have taken the same stance in editorials.

Opposition forces argue that passage of the referendum would “open the floodgates” to off-reservation casinos as more tribes seek trust land for business purposes.

“This move by North Fork, if it goes forward, will incentivize tribes in rural areas to move to more lucrative locations,” Cheryl Schmit, director of Stand Up For California, told the Associated Press earlier this month.

Brownstein Hyatt Farber Schreck attorney Jennifer Carleton of Las Vegas, who specializes in the Indian gaming matters, called that argument “ludicrous.”

In the past 25 years, only six U.S. tribes have been able to move “land into trust,” and Carleton said recent court decisions only make it harder.

“In 2014, it’s become extremely difficult to acquire land into trust without the historical tie,” Carleton said.

Proponants of Prop. 48 also say it actually would prevent at least one other tribe from building a casino in an environmentally sensitive area of Humboldt County. The Wiyot Tribe has said it agreed to a revenue-sharing plan with the North Fork casino and would not seek to build on its own property.

Among the opposition is the Table Mountain Rancheria, whose casino is about 25 miles from the proposed North Fork site. The tribe has put more than $10 million into the campaign since last year.

New York-based Brigade Capital Management has put $3.1 million into the opposition effort. The investment firm has money in the Chukchansi Gold Casino, which is also near the North Fork site, though it was closed indefinitely Oct. 10 because of a tribal disagreement.

It’s unclear if any of that money will have much impact, however. Observers say opponents will file a federal lawsuit if voters approve the project.

If the referendum fails, the tribe plans to file a lawsuit asking the Secretary of the Interior to unilaterally sign off on the casino in recognition that the land already has been put in trust, McGovran said.

While the outcome of the vote would have a dramatic impact on the fortunes of the North Fork tribe and on Station Casinos, voter approval could effect gaming in far-away Las Vegas.

Barstow has long wanted an Indian casino near the Mojave Desert city’s outlet malls just off Interstate 15 — a location sure to bleed off Southern Californians taking the busy freeway to Sin City.

The Los Coyotes Band of Cahuilla and Cupeño Indians would see passage of Prop. 48 as an endorsement of a long-stalled effort to build a casino on 23 acres some 157 miles north of the tribe’s historical reservation, which encompasses more than 25,000 mountainous and hard to develop acres about 70 miles northeast of San Diego.

The tribe and Barstow have had a development agreement since 2004. The Department of Interior this year published an environmental impact statement on the site after eight years of study — the first step toward putting the land into trust.

That’s why the Los Coyotes, the City of Barstow and BarWest Gaming — a group led by the operators of Detroit’s Motor City Casino — all back the North Fork bill.

“Legally, Proposition 48 has no affect on us one way or another,” said Tom Shields, spokesman for the Barstow development. “The concern is that the vote could be an indication one way or another as to the public’s general support. In the end, we think each proposal needs to stand on its own.”

Rocha said most major California tribes would oppose a Barstow casino on the same grounds as the North Fork development.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

Be Sociable, Share!

Comments are closed.