Netherlands Consults with Industry on New Online Gaming Regulation

Jan 28 will see the first formal meeting between the Dutch Gaming Authority (DGA) and operators interested in acquiring a license under new gaming laws.

New proposals will be published at the end of March and regulation is expected to come into effect by 2014.

Gaming regulation has been a hot potato in Dutch politics over the last few years as politicians clashed over the extent to which online gambling should be liberalized.

Under the existing Dutch Betting and Gaming Act, the operation of online poker is illegal in the Netherlands. The regulation ignores all forms of remote or online gambling.

But recent elections brought a new coalition government into power, and its leader Mark Rutte has taken on the issue. He is determined to create a legal online gaming structure to “exploit” the tax raising opportunities that regulation will provide.

Earlier suggestions that the new laws should only legalize online poker have fallen away and the new likelihood is that licenses will be awarded for casino and sportsbook betting too.

Preparations

The DGA, or Kansspelautoriteit, started operating on April 1 last year in preparation for anticipated regulation.

It issued so-called “cease and desist” letters to 40 major online gambling providers. According to the DGA, approximately half of the industry complied. Those that have not complied risk being “actively excluded” from the new regulatory system.

However, compliance has not required actual withdrawal from the market; all major online poker operators continue to accept Dutch players. Operators took certain mitigating action: Ending certain advertising in the Dutch language, redirecting websites on .NL domain name to more generate dot-com or EU websites, and pulling national advertising on print and television in the country.

A spokesperson at bwin.party told pokerfuse in November that they were complying with requests from the Dutch regulator during a “normal transitional period” ahead of the market opening next year, and had no plans to withdraw from the market. PokerStars confirmed the same.

The Danish Model

Previous political pressure built up to propose a regulatory model based on the Belgian system, which only offers licenses to companies with a brick and mortar presence in the country.

However, the former Secretary of State for the Justice and Security ministry rejected this model, and the new administration has made statements indicating a preference of a system based more closely on the Danish model.

The Danish system allows all foreign operators to apply, and imposes few restrictions on the games and stakes spread common in more heavy-handed regulations.

Not only is Denmark’s regime substantially more liberal than the Belgian model, it has the approval of the EU Commission and is not subject to legal challenges over potential breaches of EU law. Approximately 40 operators hold licenses and nearly all major online poker networks are available to Danish players.

The current bricks and mortar gaming tax rate in the Netherlands is set at 29%; Denmark’s is 20% on Gross Gaming revenue. 29% would be markedly high high if applied to online gaming and, as experience elsewhere in the EU has shown, would lead to a substantial reduction in the online poker market, hampering tax revenue raised long-term.

Industry representatives at the Jan 28 meeting have been asked to suggest what tax rates would be viable. With a population of slightly over six million, the total value of the gaming market is estimated to be €225m. Following a harrowing political negotiation over an austerity budget, the government is keen to secure the new revenue stream as soon as possible.

Other issues up for discussion will focus on the practicalities of implementing the new regime including such details as identity verification and anti-money laundering mechanisms.

Political divisions are likely to mean further debate and delay before the government can finalize the text of the new law. The earliest feasible date for its introduction would be in late 2012, but early 2014 may be a more realistic estimate.

Assuming that the political support for a “Danish” solution remains strong, Dutch poker enthusiasts will avoid the travails that have assailed Spanish, French and Italian players.