Interview with Renata Beržanskienė(Sorainen)
The Lithuanian Gaming Law (the Law) which came into force on the 17th of May 2001 has recently received some new Amendment. Which are the key changes in the law and when does it come into force?
The amendments of the Law came into force from 1 January 2016. The key changes are related with organisation of online/remote gambling. This was not allowed in Lithuania before. It took nine years to adopt these amendments. The amendments should help to fight with illegal online gambling. The changes are related to licensing, procedural matters, promotion of gambling, gambling establishments, supervision of gambling organisers. The law did not meet reality for almost a decade and the state was losing money as it was estimated that every year the state has lost almost 6m EUR of unpaid taxes.
As online gambling – a relatively new phenomenon that has spread in the world due to new Internet technologies and e-commerce. Respectively sovereign state could regulate the gambling sector with licensing requirements as it is risky to leave this to market self-regulation. Online gambling is not as easily controlled by means of the traditional regulatory measures. Internet has no borders and consumers can easily reach other countries. With the development of e-commerce and electronic payment technologies it has become easier to set up online gambling transactions, thus problem of applicable law arises. For example, US tried to combat this negative phenomenon of blocking websites, banning electronic payments for gambling and online gambling by prohibiting same. However, it eventually became clear that even these measures were not effective enough.
On 2013 the Supreme Administrative court of the Republic of Lithuania banned online gambling in our country as the Law which was passed on 2001 did not provide for a possibility of online gambling.
As we know there have been added some new restrictions for companies that engage in online gambling. Which are the new restriction and do you think that this will attract more foreign operators to apply for licenses on the territory of Lithuania?
There is a requirement to have a branch office in Lithuania, minimum paid share capital requirement and requirement to open a certain number of real-life gambling establishments in Lithuania. These requirements are consider as limitations. The requirements to establish real-life gambling houses and to have a minimum paid share capital are likely contrary to the basic principles of European Union law, such as free movement of services and capital. If you do not meet these requirements, the licence for online gambling will not be issued and the Supervising Authority might stop all financial operations and settlements for those violating the Law.
According to current wording of the Law, it is prohibited to advertise gambling, except for certain specified gambling-related information, such as the names of companies organising online gambling. The amendments introduce a new prohibition – it will be illegal to make gifts to players after they participate in gambling activities. Another new rule is that it will be unlawful to organise contests, lotteries, trial bets and other activities outside gambling houses or outside the organizer‘s webpage.
There are some amendments dedicated to fighting the negative effects of gambling addiction, they include: that gambling organisers are obligated to put up signs warning players or visitors about the addictive nature of gambling and informing them about the legal gambling age. Also players can ask gambling organisers to limit their participation in online gambling activities, eg to limit the maximum amount that the player who made the request can bet. Players participating in online gambling always have to get clear information about the time they have played, their betting amounts and their gambling results.
What are the key sectors in the Lithuanian gambling market based on niches? Sports betting, casino, poker?
Who are the key operators at the moment and how is the taxing done in percentages?
According to the information provided by the State Gambling Control Commission, 15 gambling companies operate in Lithuania. The biggest player is Olympic Casino Group Baltija, which operates in Lithuania, Latvia and Estonia. Other important players are Unibet, TOPsport, others. Sports betting is very popular in Lithuania, as we still are the basketball country.
The last year in Lithuania showed significant signs of revitalization. If during the beginning of economic crisis most of operators were complaining of diminished customer flow as they were trying to save and spend less money. This trend in turn caused significant decrease in turnover, complicated options to regain funds invested into business, these days there is significant revitalization in this sector. Until now the center for entertainment business is Vilnius because of higher number of people, higher salaries, also of tourist concentration, those conditions are more favorable to expand entertainment business there. I think this will attract new players in the market as now we see acquisitions in this sector.
What advice would you give to potential new entrants considering Lithuania (operators, affiliates, suppliers etc)?
Companies that wish to engage in online/remote gambling activities will have to establish: 1 gambling house or 5 betting terminals for horse racing or, 10 machine parlours or, 20 betting shops or 20 totalisator shops. Companies who want to engage in online gambling, should get the licence for remote gambling from the Supervisory Authority. There are requirements set in order to get such licence and the Supervisory Authority might establish new requirements. From our practice we can say that the Supervisory Authority is cooperative.
Companies that wish to engage in online gambling will have to have a minimum paid share capital of EUR 1,158,000. Foreign entities will also have to raise their minimum paid share capital to the required amount, even if the country of origin has not established any requirement for a minimum paid share capital. Such companies will have to either invest in government bonds or hold in bank (or at the company) a fixed amount of at least EUR 72,400 for the sole purpose of paying out online gambling winnings. As regards the bank, it is not clear whether it should be a Lithuanian bank or not necessarily. The law does not specify what bank it should be, so any reputable EU bank should be suitable, keeping in mind that the money does not necessarily have to be in bank. The essence here is that there must be a separate amount for paying out online gambling winnings. So the objective is that there must be a fixed amount for paying out the winnings, so that players do not experience any inconvenience waiting for their payments, etc. In the event that the amount decreases to less than EUR 72,400, the amount must be restored to the required level within two calendar days.
The Law expands the rights given to the supervisory body ie, the Gambling Control Authorityhttp://www.lpt.lt/en. With the introduction of online gambling, the amendments will give authority to the supervisory body concerning online gambling, issuing of licenses for organising online gambling, etc. The main change regarding the supervision is a right given to the supervisory body to order Internet service providers to block access to illegal gambling sites. The right to order ISPs to block access to illegal gambling sites is probably the most controversial provision of the amendments. It has been strongly criticized as superfluous and as establishing Internet censorship. ISPs will have to take on this burden. The rules established by the supervisory authority establish that illegal web-sites should be blocked using DNS and the users will be transferred to information web-site created by the Supervising Authority. This will be done after the court order will be obtained. In practice I presume it might create many problems and in Internet already there are some tips how to access illegal websites.
The tax rate for lotteries and non-remote gambling stays the same – 5% and 15% respectively. For the remote/online gambling, the tax rate will be 10%. Any gambling organized remotely using means of remote communication will be taxed 10% and gambling that’s organized non-remotely will be taxed 15%.
Since your company consults for more than one market, we would also like to hear your thoughts on Estonia. What is the current situation in the country is what is the current view regarding online gambling for remote operators?
In Estonia remote gambling has been regulated since 2010. The market has thereafter been rather stable with one or two new operators entering the market each year. Access to the webpages of non-licenced operators is blocked – currently about 1130 domain names of non-licenced operators are blocked in Estonia and the list is growing.
The process to obtain the licences necessary to operate remote gambling is fairly straightforward once the necessary paperwork and technical solutions are in place. Certain Estonia-specific IT developments are unavoidable for operators that want to obtain the Estonian licences. For example the Estonian regulator (the Tax and Customs Board) maintains a national self-exclusion list, where players can self-exclude themselves from gambling. All operators have to interface their systems to the national self-exclusion list in order to ensure that self-excluded players are not allowed to play. Gambling operators must also connect their electronic recordkeeping and control system with the information system of the Tax and Customs Board.
In 2015 advertising restrictions were alleviated for lotteries and sports betting. Advertising of games of chance is permitted only in certain exceptional cases.
The gambling tax rate for remote gambling is 5% and it is applied on the charges received by the operator for organising the game.
Looking further afield, where are the major emerging opportunities in Eastern Europe for operators at this moment?
I would recommend Lithuania. On December 2015 it was announced by Forbes that
Lithuania has made the biggest progress and is in 17th place, which is better than USA, Estonia and Germany. The last year Lithuania was in 25th place. „Doing Business“ also raised our index and now we are on 20th place. The amendments of the Law and a rise in our economy will give a stimulus to develop business in this sector. From our practice we see that there are already some acquisitions and interest in this sector.
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