The new Gambling Act and remote gambling in Estonia

At the end of 2008 Estonia adopted a new law on gambling, which has closed many gaps and expressly addresses on-line gambling. The Gambling Act entered into force on the 1st of January 2009. It regulates the organization and state supervison of gambling in the territory of Estonia and on vessels under Estonian flag. It replaced the 1995 Gambling Act, which llacked sufficient regulation by 2008 due to technological developments. This ended the long discussion over the legality of on-line gambling in Estonia, Agnes Karpati, legal advisor at Complus Cosulting OÜ writes.

On-line gambling, or more precisely remote gambling will be allowed from the 1st of January 2010, when the relevant parts of the Gambling Act will enter into force. From that day those operators who possess a valid Gambling Activity Licence in Estonia will be able to apply for remote gambling operation permits.

But what is remote gambling?

Remote gambling is a way of organizing gambling and in which the outcome of the game is determined by an electronic instrument and the player can participate in the game through a means of communication, such as telephone, Internet or broadcasting. The emphasis is on the determination of the outcome. Therefore the use of telecommunication for the sole purpose of accepting stakes is not considered remote gambling.

The Gambling Act categorizes game systems accordingly: games of chance, lottery, toto and games of skill. For example games of chance is where the outcome depends on chance and which is played with mechanical or an electronic instrument or with the assistance of the facilitator of the game. This category includes the traditional casino table games and slot machines.

All those games can be offered remotely, which are expressly allowed by and correspond to the requirements of the Gambling Act, if the operator possesses all necessary licences and permissions. The drafters have mentioned games such as poker, BlackJack, roulette, but any other game that fits the definition of game types in the Gambling Act may be offered.

Activity licence and an operation permit for organizing a type or subtype of gambling as remote gambling will be issued separately and operators will be closely scrutinized by the Estonian authorities. Depending on the type of game (games of chance, games of skill, toto, etc.), the forms of enterprise and a minimum of share capital are prescribed by law and the shareholding structure and background of operators will be monitored and checked. Operators, who wish to organize games of chance must be established as a private limited company (OÜ) or public limited company and must have a share capital at least 1 000 000 euros.

Most of the rules established for traditional operators will apply to remote gambling operators as well. Just like any casino, on-line casinos will have to make sure that no underage persons can play on their sites, they will have to register players by identification of the person, age and domicile. Determination of the game outcomes must be random and no third party nor the operator can influence that. Gamblers have to be informed about the rules of the games and warned about the dangers of the addictive nature of gambling, etc.

In addition to the general rules, more specific rules are envisaged for remote gambling operators. Important data must be saved in case of interruption and in instances of such interruptions, changes and results must be registered. The player has to be natural person. No loan agreements can be concluded nor facilitated at the gambling location, which limits the circle of services that can be advertised or offered by gaming sites. The server containing the software for the determination of the game outcome must be located in Estonia and must be accessible to Estonian authorities at any point in time. Estonian authorities can also request and independent expert opinion to verify that the operator’s system is in compliance with the rules of the Gambling Act. Operators also must keep account of stakes and winnings of all players and ensure that all winnings are transferred only to the account, from which the player made the payment for betting.

Remote gambling operators must submit an electronic gambling report every 3 months. From the 1st of January 2011, the electronic accounting and control system of operators must be linked to the system of the Customs and Tax Board.

It is a fact that a number of foreign on-line casino sites have been and are accessible in Estonia, although their operators have no local licence - since it is not possible to obtain it at the moment. This does not necessarily mean that those operators are not licenced at all as many of them have already gone through a licencing procedure and hold licences from other EU member states. The activity of these on-line operators fall under the free movement of services and their home state regulation may even be more strict in some cases than it will be in Estonia. However, from the 1st of January 2010 thousands of on-line gambling operations accessible in Estonia will become illegal if the operator does not comply with the Estonian Gambling Act and access to those sites can and will be limited. On the other hand, it may not be economically rational for many operators to legalize their activity by establishing a new enterprise in Estonia and going through the whole licencing process (again). In order to solve this problem the drafters included provisions on subcontracting of gambling activities.

Gambling operators may outsource their activity, or part of it, with the written approval of the Customs and Tax Board, but such outsourcing may not impede the overall control of the gambling operator, nor obstruct the supervision by the Customs and Tax Board. Nevertheless, the operator will remain liable in all aspects and such liability cannot be excluded by an agreement between the parties.

In fact, foreign operators will not necessarily need to go through the licensing procedure in Estonia, if they want to offer remote gambling. A gambling operator has the right to broker or mediate prizes or stakes of games organized by foreign operators who do not possess operation an permit in Estonia. In this case, the broker of prizes and stakes will be considered as a gambling operator, and the foreign operator will be considered as the subcontractor, to whom activity directed to the organization of gambling is outsourced.

Therefore, foreign remote gambling operators already offering their services in Estonia may legalize their activity by contracting a properly licenced operator under the Gambling Act. In this case, the home country's regulation will continue to apply to the foreign operator and the Estonian operator will be liable for compliance with the Estonian laws.

As to those illegal operators who will not comply with the Estonian laws, the general internet service provider is obliged to impede access to remote gambling if the ISP is aware that such remote gambling is illegal. In addition to that, the payment processor must refuse to transfer payments if it becomes aware that a remote gambling is illegal. A payment processor can transfer payments, if it is convinced that such payment is not made for the purpose of making stakes.

In addition to the Gambling Act, the Money Laundering and Terrorist Financing Prevention Act also appies to organizers of games of chance. This imposes certain obligations on on-line casino operators and they will have to apply enhanced due diligence measures in case of high stakes or suspicion of money laundering.

To sum it up, it can be said that the new regulation on remote gambling will be strict and specific and may cause difficulties for present and future remote gambling operators. Foreign remote gambling operators having a valid license in another member state, but whose services are in fact already present in Estonia also will have to comply with the requirements of the new Gambling Act without exception. This new regulation is said to be compliant with EU rules and allows for a relatively easy procedure for those already holding a gambling licence elsewhere.

Marge Tubalkain-Trellbbnatchararipaev.ee