SBC News Vincent van ‘t Riet - Mbolo.nl- Dutch gambling reform throws up winners & losers

Vincent van ‘t Riet – Mbolo.nl- Dutch gambling reform throws up winners & losers

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Vincent van ‘t Riet – Mbolo.nl

The die is finally cast. The Dutch Council of Ministers (cabinet) has given state secretary Fred Teeven the go ahead for his gambling reform. Last Friday, Teeven finally got the approval he sought after on three main issues: online gambling, lottery reforms and privatisation of the state owned Holland Casino. But Teeven is not home and dry yet. Or to put in Grand National terms: he has cleared the first hurdle with promise, but still has a full circuit to go.

It always seemed an uphill battle for Teeven when he set out on his gambling mission four years ago. Halfway through his exercise he changed his strategy by focusing solely on online gambling. This turned out to be a mistake. Changing the current legislation on gambling needed reforms on all levels, online and offline. When the lobbyists of the offline license holders started banging on parliamentary doors Teeven quickly made amends and changed his tune to a much broader scope of reforms.

After summer recess, parliament will discuss and vote on the proposed legislation. First up is the Tweede Kamer (similar to the House of Commons). Most political parties are in favour of gambling reforms. The general consensus is that something needs to change as the digital world is getting the upper hand in society. But there are still some hurdles to cross for the state secretary. His coalition partner PVDA (Labour) has been overly critical in the last few months. MP Mi Lei Vos has been on a gambling crusade and has put many parliamentary questions on the board, especially around the lack of enforcement against illegal operators. Vos does have a point. Teeven’s standard reply that enforcement is a key action of the Gambling Authority (KSA) is getting weary. KSA is clearly not equal to, nor aware of the reality of online gambling operations. Unlicensed operators are able to conduct their business with minimal fuss, a true Dutch way of dealing with issues. Governmental supervisory bodies in the Netherlands tend to be more speaking partners than true watchdogs with an appetite to search and destroy than we see in other jurisdictions. But that seems to be the reality in The Netherlands, a bit of everything for everyone.

When investigating the details of the proposed reform it does indeed show that most stake holders have gotten at least something to cling on to. The current offline operators without a Dutch license can obtain one as soon as 2015. And, more importantly, are able to continue operating from Malta, Alderney, and Gibraltar, without KSA making life too difficult. The State lottery and De Lotto, two main lottery organisations in The Netherlands, have been given the go ahead to merge in order to prepare themselves for the competition in 2015 by creating a competitive online platform. State lottery is currently state owned and will be sold off in order to merge with De Lotto, who have numbers lotto and sports betting in their portfolio.

The charity lotteries like the Postal Code lottery are allowed to lower their pay-out percentage from 50% to 40%. The extra 10% can for instance be used for product development according to Teeven. In reality, the charity lotteries will opt for an online casino license in 2015 to utilise their huge database. In the meantime their charities and/or their customers will have to make do with a lower contribution. All lotteries will have their current licenses extended until 2017 even though EU regulations and more importantly recent Dutch court rulings (Betfair case) do not agree with license extensions without a proper transparent tender process. But Teeven made it clear that in 2017 the lottery market will be liberalised. Holland Casino will be privatized which means that the future of the 14 casinos seems to be safeguarded. Whether new operators are keen to invest in loss making casinos far away in the Dutch rural areas remains to be seen. The ones that have a lot of appeal like Amsterdam, Rotterdam and Scheveningen, will no doubt generate interest. The hefty 29% tax on GGR also makes operating an offline casino a less desirable venture for new operators.

There are, however, three losers in this whole escapade: the offline slot machine parlors, horse racing and perhaps most importantly, the consumer. Owners of the slot machine establishments (268 in total) will have to make do with an unfavourable 29% tax on GGR (likewise Holland Casino) whereas new online operators will only have a 20% on GGR gaming tax. They will also see no change on their limited product offering which makes innovation basically impossible. The horse racing tote (Sportech Racing) received no mention at all in the gambling reforms, indicating that Teeven is not willing to help this ailing part of the legal Dutch gambling community. To make things worse the sole beneficiary of the tote license holder (NDR) will see their contribution dip to almost nothing. Future online sports betting operators are not obliged to contribute to good causes such as Dutch horse racing. Keeping the tote afloat solely on an offline basis seems as likely as Honduras winning the next World Cup.

Dutch gamblers will also lose out. From 2015 onwards their online winnings will be taxed as opposed to a virtually tax free situation now. Again, in true Dutch tradition, the tax office currently turns a blind eye to online winnings acquired through unlicensed gambling websites. The anonymity of gamblers will cease as all future punters – online and offline – will have to register at a centrally operated database. Problem gamblers will be barred from future license holders through this system. This will result in problem gamblers fleeing to illegal circuits where help from organisations like Centrum voor Verantwoord spleen (gambling addiction) is a faraway cry. Teeven expects 80% of online gamblers to use legal websites. Another group that will seek their gambling need elsewhere are the gamblers that prefer cash and anonymity above everything. The size of this group should not be underestimated.

A look into the crystal ball throws up the following: Teeven has a fight on his hands in parliament to keep his plans afloat, especially with his supposed ally Labour. Responsible gaming, tax differentiation (20% vs 29%) and level playing fields will probably highlight the parliamentary discussions. The slot machine operators and Holland Casino will seek legal advice and may take the government to court on the tax differentiation issue.

The current offshore operators will keep moaning about the 20% tax level (22% if you count the obligatory contributions to KSA and measures against gambling addiction) but most will in the end happily apply for a license. The Dutch lotteries will become proper online casino and sports betting operators with a lottery on the side (large ones for that matter). KSA will wait and ponder anxiously if any potential entrants to the Dutch market take immediate legal action when Teeven goes ahead with his license extensions without a transparent tender process. The Dutch minister of Finance will be thrilled with an annual boost of gambling tax. Dutch media will happily rub their hands with joy as marketing spend on gambling will go through the roof as everyone fights for their position. Dutch sport will benefit from appealing sponsorship and endorsement deals. Finally, the Dutch horse racing community will dump 10 tons of manure on Teevens doorstep. But at least gambling will be reformed after 50 protective years.

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Vincent van ‘t Riet – Founder Mbolo Consultancy

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