The Dutch gambling market is developing rapidly. In an earlier blog we wrote about the changes in Dutch gambling law, such as the liberalisation of the casino market and the plan to open the market for online gambling. That plan has now become reality. The Remote Gambling Act (“Wet KOA”) entered into force on 1 April 2021: a day that, according to René Jansen, the chairman of the Netherlands Gambling Authority (KSA), everyone at the KSA has been looking forward to for a long time. In this blog we will update you on the latest developments on the gambling market and, because well begun is half done, give you a number of tips for applying for an online gambling licence.
Developments on the gambling market
A developing market requires an active regulator. The KSA has certainly not been idle these past few years. Because the Betting and Gambling Act did not allow online gambling until recently, the past and current offering of such gambling services in the Netherlands is illegal, in principle. Only Toto (sports games) and Runnerz (harness racing and horseracing) may currently legally offer online gambling services. All other providers must ensure that their services are not available in the Netherlands. The KSA is cracking down on illegal gambling, because it is impossible to check the reliability and fairness of those services. On 17 September 2019, the KSA imposed fines of €400,000 and €350,000 on Royal Panda and LeoVegas, respectively. Both companies tried to reach Dutch consumers by enabling payment via Dutch payment system IDEAL when gambling online. On 8 January 2021, the KSA also imposed a fine of €500,000 on Virtual Coin Gaming and a fine of €100,000 on an individual involved. The sanctioned company offered illegal online gambling services in the Netherlands via its website FutGalaxy.
Market for online games of chance
These examples demonstrate that the KSA is actively enforcing the (until recently) illegal market for online gambling. But combating illegal online gambling is nevertheless a futile task. An important characteristic of “remote” gambling is the lack of physical contact between the provider and the player. Because many European countries have not issued licences for offering online gambling services in the past, many companies have set up offices in countries with favourable conditions, in order to reach European consumers (Malta being a case in point for the Netherlands). The borderless nature of the Internet and the rapid technological developments make adequate enforcement virtually impossible. At the insistence of the companies that do want to set up offices in Europe and offer legal online gambling services, many European countries, such as Italy, France, Germany, Spain, Belgium, Denmark and Sweden, have legalised and regulated the market. On the basis of this development and the relatively high number of illegal gambling services in the Netherlands, the Netherlands has also decided, as one of the last European countries, to open the market for online gambling.
There has been a call to open the market for gambling in the Netherlands for some time already. In 2005, a bill was introduced aimed at making it also possible for Holland Casino to offer its services online. But that bill was defeated in Senate (Eerste Kamer). The first concrete intention to fully regulate the online gambling market can be found in the 2012 VVD and PvdA coalition agreement. That coalition agreement expressed the ambition to “modernise” the gambling policy and to “regulate” online gambling services in order to reduce illegal online gambling activities.
This was followed in 2013 by a bill in which the coalition agreement plans were implemented. After a lengthy legislative process, the Wet KOA was adopted by the Parliament (Tweede Kamer) in July 2016 and by the Senate in February 2019. When the Remote Gambling Decree and the Remote Gambling Ministerial Regulation had also been adopted, thereby implementing, for instance, addiction prevention, consumer protection and fraud and crime prevention, the KSA converted the Wet KOA and the lower regulations into a licensing process. Since 1 April 2021, it is now possible to apply for a licence on the KSA website. The first group of licensees should be able to offer their services online as from 1 October 2021.
Online gambling: unchartered territory
Because the Wet KOA has been in force only since April, the (until recently) largely illegal market is unchartered territory for all the parties involved. To gain an impression of the size of the market, several parties, including the KSA, have analysed the Dutch online gambling market.
It is estimated that more than 1 million people in the Netherlands occasionally come into contact with online gambling and that the Dutch online gambling market amounts to roughly €1.1 billion. The vast majority (70%) of the services offered is expected to be legal after the Wet KOA enters into force. The KSA expects to draw 9 out of 10 of the current players away from illegal providers. In addition to estimating the size of the market, the KSA is also attempting to anticipate the number of gambling services providers that wish to enter the online market once it opens. A survey in 2019 showed that more than 125 companies, from the Netherlands and abroad, have expressed an interest in a licence. Depending on the number of licence applications, the KSA itself expects to issue between 70 and 80 licences in the initial licensing process. That expectation is in keeping with the recent opening of the online gambling market in Sweden. The Swedish equivalent of the KSA has now issued more than 80 licences.
An estimate can be made of the course of the licensing process on the basis of the information published on the KSA website. One thing is certain: the procedure for applying for a licence under the Wet KOA is tough. To quote KSA chairman René Jansen: “I can assure you: [a licence] is not easy to come by.” Interested companies will have to meet strict requirements regarding addiction prevention, consumer protection and fraud and crime prevention. The process presently consists of 16 sub-topics, which are briefly addressed below.
The (1) general requirements of the licensing process provide that a licence application must be submitted in Dutch. The application costs amount to €48,000. To verify that the interested applicant is (2) reliable, all directly and indirectly involved legal entities and antecedents must be investigated. An organisational diagram must also be submitted. In addition to reliability, the applicant’s (3) integrity also plays an important part. To demonstrate the prevention of fraud and abuse in gambling, the applicant must submit an integrity policy, including an integrity risk analysis. The KSA furthermore sets great store by the applicant’s (4) continuity. The applicant must demonstrate that its gambling funds are separated from its operating capital and it may have to issue a guarantee.
The finances are another important aspect of the licence. The applicant must draw up a policy document to demonstrate that appropriate safeguards are in place for the safe settlement of (5) payment transactions. It must furthermore be demonstrated that the payment instruments used are issued by a licensed credit institution. In addition, the applicant must ensure that (6) the gambling funds are separated from other assets. That can be done in the form of a bank guarantee, by means of a trust account foundation, a trust account or another provision. Finally, the applicant must provide a (7) financial guarantee. It may do so, for instance, in the form of a bank guarantee, a deposit or a suretyship.
Another important aspect of the licensing procedure is checking whether the applicant meets the requirements of the (8) Money Laundering and Terrorist Financing (Prevention) Act (Wet ter voorkoming van witwassen en financieren van terrorisme) and the (9) Sanctions Act (Sanctiewet), and the requirements regarding the prevention of match-fixing. The applicant must draw up an anti-money laundering policy in order to satisfy the requirements under the Money Laundering and Terrorist Financing (Prevention) Act. The Sanctions Act requires that the applicant complete a statement as part of the digital application form. These legal requirements also apply in the case of (10) outsourcing. To demonstrate that the legal requirements are met also in the case of outsourcing, an outsourcing policy and outsourcing agreements must be in place and a compliance officer must be appointed.
A number of requirements regarding the registration of players, the storage of data and the inspection of gambling systems furthermore apply. The applicant must demonstrate, for instance, that it can verify whether a player is registered in the (11) Central Exclusion Register (CRUKS). For that purpose the applicant must provide a release declaration. The applicant must also set up an (12) internal supervision system. A policy document must be drawn up for that purpose, explaining the system and describing which officers are in charge of the supervision. The applicant must furthermore have a (13) control database in place that allows the KSA to access certain digital data. The applicant’s gambling system must also be inspected by an inspection authority. The outcome of the (14) inspection of the gambling system must be submitted to the KSA.
Finally, a number of conditions apply to (15) advertising and (16) addiction prevention. The applicant must draw up an advertising and marketing policy demonstrating compliance with the applicable legislation. A similar policy document is required to demonstrate that the applicant complies with the Dutch addiction prevention system. The applicant must furthermore have a legal representative in the field of addiction prevention.
As described above, obtaining a licence to offer online gambling will not be easy. Thorough preparation is crucial.
Companies that are interested in a online gambling licence are well advised to start their preparations in good time. Collecting and submitting the large number of supporting documents is a lengthy process. Timely preparation is particularly important for applicants that wish to be among the first group of licensees. Providers that (successfully) submit their applications before 15 April 2021 will most likely be able to enter the market on 1 October. Providers that submit their applications after 15 April will probably have to wait some time before being allowed to offer online gambling services.
It is also advisable to commence the affiliation with the Central Exclusion Register and the inspection of the gambling systems in good time. Despite the fact that the Central Exclusion Register and the inspection of the gambling systems must be completed by 1 July 2021 at the latest, this is likely to take up most of the applicant’s time.