Under Czech law, gambling is generally defined as a game of chance, betting or a lottery in which a participant wagers a bet while no return of such bet is guaranteed, and the win or loss is entirely or partly subject to chance or unknown circumstance. This definition derives from Section 3 of Act No. 186/2016 on gambling (the Gambling Act).
The Gambling Act explicitly differentiates seven types of gambling described below (odds betting and totalisator game are counted as one because they differ only in the manner of prize determination). Any game that fulfils the general definition but does not meet the requirements of one of the below listed types of gambling is prohibited. Therefore, operators need to make sure that their games either fall into one of these seven categories or do not satisfy the general definition (e.g., no bet involved or a skill-based game); otherwise they could be risking non-compliance.
|Type of gambling
|A numerical lottery, cash prize lottery, in-kind prize lottery or instant lottery.
|A game where a win is subject to guessing of a betting event (in particular a sport result or event of public attention). The prize is determined based on the winning probability (odds).
|Same as odds betting but the prize depends on the number of winners because the total amount of wagered bets is distributed among all who correctly guessed the betting event according to a predetermined payout percentage.
|A game in which a win is subject to achieving the full predetermined pattern of numbers on the betting ticket. Such pattern on the ticket is marked off by the better based on the randomly drawn numbers that are called out in succession, while neither the number of the betters nor the payouts are determined in advance.
|A game operated through a technical device directly handled by the player (including, without limitation, reel slot machines, electromechanical roulettes and electromechanical dice).
|A game in which the players play against the house or one another at the live game tables, while the number of betters and bets at one spin (round of betting) are not determined in advance.
|A game where wins are determined based on a draw that includes only the betting tickets that have been sold.
|A knockout type of a card game tournament, in which the number of the game participants has been agreed in advance and the total deposits by one gambling participant wagered in one tournament do not exceed 500 koruna per 24 hours.
Because the above list of allowed types of gambling is exhaustive, questions arise (and will inevitably arise in future) with respect to certain games such as fantasy leagues, pool betting, spread betting, skill competitions (e-sports) and free prize draws. We give our brief view on these below, although there is no official or definitive guidance on these yet.
A free prize draw is quite similar to what Czech law traditionally considers to be 'consumer lottery' or a 'consumer game'. As such, and subject to other further conditions deriving from consumer protection laws, these types of games will be permissible. Some forms of consumer lotteries were heavily restricted and even prohibited before the adoption of the Gambling Act.2 The Gambling Act itself does not limit consumer lotteries from being hosted as they are deemed to be a business practice (Directive 2005/29/EC) and not within the scope of the Gambling Act (i.e., they are not a type of gambling).
Pool betting (pari-mutuel betting) is essentially the same as totalisator games as defined under the Gambling Act and, therefore, is allowed.
Spread betting is not currently being offered by any of the major licensed Czech gambling operators. In theory, such a game could be operated under the definition of a live game, but this, along with the game's rules, would have to be discussed with the licensing authority, which is the Ministry of Finance (the Ministry).
Fantasy league is not specifically regulated by the Gambling Act as a separate type of gambling, but its operation should be allowed under the Gambling Act as long as its rules meet the criteria of a live game or a technical game.
Skill competitions, such as e-sports, are hard to pinpoint from a regulatory standpoint, since the term is wide-ranging. Mere betting on an outcome of an e-sports match (or any other skill competition) is allowed, but would require an odds-betting licence. However, a game where one might bet on one's own performance (pay participation fee) and where a win or prize is paid out at the end based on the participant's results might fall under the category of a live game as defined by the Gambling Act and, therefore, could require a gambling licence in order to be operated in compliance with the Gambling Act. The amount of luck or unknown circumstance in such a game is crucial when assessing whether or not a skill game requires a gambling licence.
Hedging financial products (e.g., insurance) and gambling have a lot in common, since the outcome in both is dependent on luck or an unknown event. According to the Czech Civil Code, both fall under the category of aleatory (risky) contracts. The Civil Code further makes hedging financial contracts enforceable, unlike obligations from bets concluded between individuals (natural persons), which are not enforceable under the Civil Code. Note that bets made between a licensed gambling operator and individuals (consumers) are enforceable.ii Gambling policy
Gambling is generally allowed under the Gambling Act, with the number of licences not being limited. Each applicant for a gambling licence is entitled to obtain it, provided that the regulatory requirements are met. However, on a local level, individual municipalities may decide to restrict gambling within their city limits. Municipalities are only able to restrict land-based operations of technical games, live games, bingo and small tournaments. Municipalities have no influence on the operation of online gambling.
In 2020, the Ministry has launched a list of individuals banned from gambling (such as individuals on welfare, bankrupt individuals, etc.). This list is a non-public administration information system administered by the Ministry designed to protect not only the players themselves, but also their families and communities. An individual is added to the list based on a decision of a state authority or a request of the concerned individual. The gambling operators may not allow an enlisted person to enter the gaming premises and may not allow them to set up or use a user account pursuant to the Gambling Act. As of 1 April 2021, a total of 205,923 individuals were registered in the list, of whom 889 were registered at their own request and 205,034 were registered on the basis of a decision of a state authority.3iii State control and private enterprise
The gambling market is open to anyone who meets the Gambling Act's requirements. The Czech Republic neither owns nor operates any form of gambling.iv Territorial issues
Gambling in the Czech Republic is predominantly regulated on a national level with some regional aspects. Generally, each person applying for a gambling licence has to obtain a 'basic licence' from the Ministry. For certain types of land-based gambling (technical game, live game and bingo), the applicant needs to obtain an additional licence to 'place a gambling venue' from each city in which the gambling venue is planned to operate. Municipalities may decide to ban the operation of technical games, live games, bingo and small tournaments within their city limits on a non-discriminatory basis. If a certain city bans gambling within its limits, the applicant will not be able to operate in this city. Nonetheless, the basic licence would still be valid and the gambling operator would have the option to move its venue to another city.
Additionally, small tournaments and raffles (if the prize pool is higher than 100,000 koruna) must be notified to a city in which they are supposed to be hosted, so that the city has the option to prohibit them.v Offshore gambling
One of the intentions of the Gambling Act was to give the Ministry effective means of stopping offshore gambling operators from offering their services to Czech citizens. The Ministry was granted the power to place a gambling operator without a Czech licence (e.g., a Maltese licence would not suffice) on a blacklist. Once blacklisted, payment and internet connection providers are obligated to block payments and internet connections to such entities.
To date, the Ministry has already placed over 394 web pages on the blacklist; however, approximately half of them are variations on bet.com (117 variations), favbet (34 variations), webbyslot.com (21 variations), supercatcasino (19 variations) or slottyway (17 variations). Furthermore, a payment account identifier is listed in five cases only. The Ministry has increased its activity in this respect; compared to the last year, there are over twice as many subjects on the blacklist. Apart from the blacklist provisions, most of the illegal gambling operators that used to operate in the Czech Republic prior to the effective date of the Gambling Act have voluntarily decided to withdraw from the Czech market or cease their operation until they obtain a Czech gambling licence. In 2017 and 2018, the Ministry commenced proceedings to block the web pages of 39 companies, 16 of which stopped offering their services to Czech citizens, while seven were blacklisted.4
The blacklist provisions of the Gambling Act may be interpreted rather broadly and even web-hosting entities, and potentially other service providers, that enable illegal gambling may be placed on the blacklist.
Legal and regulatory frameworki Legislation and jurisprudence
The relevant gambling legislation in the Czech Republic is as follows:
- Act No. 186/2016 on Gambling, which sets out the basis for gambling legislation;
- Act No. 187/2016 on Gambling Tax, specifying the gambling tax obligations of gambling operators (tax rate, tax calculation, tax period, etc.);
- Act No. 280/2009 the Tax Code, which covers all tax-related proceedings (gambling, income, VAT, etc.);
- Act No. 500/2004 on the Administrative Code, specifying the rules for administrative proceedings (e.g., licencing, emplacing on the blacklist);
- Act No. 586/1992 on Income Tax;
- Act No. 40/2009 the Criminal Code (operation of unlicensed gambling constitutes a criminal offence);
- Act. No 40/1995 on Regulation of Advertising;
- Act No. 253/2008 the Anti-Money Laundering Act; and
- individual decrees issued by municipalities restricting gambling within their city limits.
The Ministry is the gambling supervising authority. Some gambling aspects are also supervised by the Czech Customs Administration (Customs) and by the relevant local municipalities.
Customs not only supervises land-based gambling operations but it is also the entity with exclusive powers to impose fines for violations of the Gambling Act with respect to land-based gambling. The Ministry supervises both land-based and online gambling, grants, changes or withdraws basic licences but it is only authorised to impose fines with respect to online gambling violations. Last but not least, municipalities grant, change or withdraw licences for gambling venues. Furthermore, municipalities may also issue individual decrees with additional requirements for land-based gambling within their city limits.iii Remote and land-based gambling
The Gambling Act distinguishes between remote and land-based gambling. The most significant difference is that only a one-step licence process is required (basic licence) for the operation of online gambling. In addition to the basic licence, land-based gambling operators need to obtain a gambling venue location licence (second step). Some municipalities may decide to exclude gambling within their territory (or its part), which means that the gambling venue location licence cannot be obtained for that particular location. Online gambling may be carried out within the whole territory of the Czech Republic and cannot be restricted on a local level.
The aim of the Gambling Act is, however, to treat both online and land-based gambling equally and, therefore, the differences between the two are insignificant and usually originate from the nature of land-based gambling (e.g., no internet blocking) or online gambling (e.g., no video surveillance requirements).iv Land-based gambling
The number of land-based gambling venues is not limited by any national or local quota. A municipality may, however, decide to prohibit or restrict land-based gambling within its city limits. In fact, an increasing number of municipalities is imposing such restrictions. Nevertheless, the growth in the number of municipalities imposing such restrictions has slowed down significantly in recent years. According to the latest available figures from 31 December 2020, there were 709 municipalities regulating gambling in their territories (in 2019, there were 706), of which 444 (i.e., 63 per cent) completely banned technical games (in 2019, it was 439).
Some of the largest Czech cities are among the municipalities completely banning technical games – for example Prague, Brno or Ostrava.5 These restrictions have to be carried out in a non-discriminatory way, based on objective and previously known criteria. Municipalities are not allowed to choose one specific gambling operator, which will be allowed on their territory. Municipalities expose themselves to possible sanction by the Czech Office for the Protection of Competition when issuing such restrictions. The threat of relatively high fines from the Office is one of the reasons why municipalities are considering a complete ban on gambling in their territories, which is not discriminatory by its nature.
With respect to types of gambling venues, there are only two types in the Czech Republic: casinos and gambling rooms (sometimes also referred to as gambling parlours).
The differences between the two are mostly seen in the legally permissible types of gambling offered, the number of slot machines and venue opening hours.
Casinos may offer live games, technical games, bingo or a combination of live games with either technical games or bingo, and may be open 24 hours a day. The number of technical game devices (slot machines) is, however, limited. If a casino intends to offer technical games, then at least 30 slot machines must be operated. For each live game table, a casino may operate an additional 10 slot machines. If 10 live game tables are operated throughout the day, then a casino may operate an unlimited number of slot machines, provided that at least 30 are already in operation. There is a minimal tax associated with the number of slot machines as stated in Section V.
Gambling rooms may only offer technical games and must operate at least 15 devices. A gambling room's opening hours are limited to between 10am and 3am. Municipalities may further restrict the opening hours of gambling venues by a decree.
Betting shops (venues offering sports betting or totalisator games) are not considered as gambling venues and, therefore, do not have to meet the same regulatory requirements. Lottery tickets may also be sold without any venue-specific restrictions and, therefore, lottery tickets are normally sold at post offices, tobacco shops, etc. Not even municipalities are empowered to restrict land-based sports betting, totalisator games and sales of lottery tickets within their city limits.v Remote gambling
Remote (online) gambling is generally allowed and the same regulatory obligations as for land-based gambling apply. Only raffles and small tournaments may not be provided online.
Gambling operators need to obtain a basic licence for the operation of online gambling (lotteries, odds betting, totalisator games, technical games, bingo or live games).
Online gambling operators are prohibited from offering or providing any devices (tablets, etc.) to players enabling them to play an online game of chance. If this restriction were not in place, the secondary licence to place a gambling venue that grants municipalities the power to decide whether or not to allow gambling within their city limits would lose its purpose, since online gambling licences are valid within the whole territory of the Czech Republic.vi Ancillary matters
Gambling operators are not required to purchase gambling equipment from licensed entities and are free to choose from a variety of national or even foreign suppliers. However, in order to use a gambling device in a gambling venue, the gambling operator has to get the gambling device certified and obtain a professional assessment and approbation of service worthiness for such a device. Certifications may be issued only by professional entities appointed by the Ministry. According to the list of appointed professional entities maintained by the Ministry (last updated on 27 January 2022), 10 entities are able to issue certifications.
Only an EU- or EEA-based legal entity complying with certain statutory requirements (such as organisational requirements and transparency of ownership structure) may apply for a basic gambling licence. Individuals holding a managerial or similar position within a gambling operator do not require any specific personal licence. An applicant for a basic gambling licence must, however, demonstrate to the Ministry that it possesses substantive personnel and organisational capacity required to carry out its activity. According to the Ministry's guidance note on the basic licence application, an applicant needs to cooperate with at least five individuals who have more than three years of experience with gambling operation and provide the Ministry with excerpts of their CVs.
The Gambling Act requires gambling operators to equip gambling rooms and casinos with monitoring devices, make a back-up copy of their surveillance footage, and store the original and back-up footage for two years.vii Financial payment mechanisms
Under Czech legislation, there are no specific restrictions concerning financial payment mechanisms related to gambling except for AML and KYC obligations (those applicable to gambling providers). Furthermore, there is a blacklist of illegal gambling providers that contains details of their bank accounts to which the providers of payment services cannot transfer any money. As for the use of cryptocurrencies, this issue is not yet comprehensively addressed in Czech law. In essence, they are, among other things, unregulated currency (they are neither issued nor regulated by the central bank). Cryptocurrencies are not funds (under the Act No. 370/2017 Coll., Act on Payment Transactions, as amended) and are not recognised as an official currency in the Czech Republic. Cryptocurrencies are neither electronic money (they do not fulfil the requirements of Section 4(1) of the Act on Payment Transactions), nor non cash funds.
The Czech Gambling Act only deals with funds (both in the case of a player's user account where funds are to be deposited and in the case of winnings that are to be paid in funds). However, as stated above, cryptocurrencies do not meet the definition of funds. Therefore, while some gambling operators accept deposits in cryptocurrencies, they subsequently convert these deposits into the Czech koruna equivalent (legal currency) and pay out winnings in Czech koruna.