With the Olympic and Paralympic Games in Rio and the UEFA Euro Championships in the offing, we look at the pressure on the Netherlands to open up access to gambling operators and the potential changes to its Betting and Gaming Act.
The recent announcement of a sponsor agreement between the Royal Dutch Cycling Union (KNWU) and the Gibraltar-headquartered sports betting operator Unibet, caused quite a commotion in the Netherlands where gambling is strictly regulated and online gambling is prohibited.
Current situation and possible legislative changes
European Member States take one of two approaches to licensing gambling. Some have a strict regulatory framework and others essentially operate controlled monopolies. As a result, selling online gambling services across borders is limited and is often illegal, particularly as unlicensed gambling services are mushrooming in certain jurisdictions.
The Netherlands, while generally known for its liberal approach, is very strict when it comes to (online) gambling. The Dutch gambling market is essentially a state monopoly. Currently, the Wet op de Kansspelen (the Dutch Betting and Gaming Act 1964) prohibits licensing of online gambling websites. In addition, the Betting and Gaming Act only permits establishing one licence for casino gaming. 'Holland Casino' is the only licensed and legal casino operator in the Netherlands and all its revenues go to the treasury of the Dutch state.
Sports betting is also a monopoly-based activity in the Netherlands. Article 15 of the Dutch Bet-ting and Gaming Act, defines sports betting as "letting participants guess and predict results of previously announced sporting events". Lotto is the only licensed sport betting company in the Netherlands and it is also the most important financer of the Netherlands Olympic Committee (NOC*NSF). NOC*NSF is the main organisation for organised sports in the Netherlands, to which all 76 major national sports associations and 28,000 sports clubs are affiliated. Unsurprisingly perhaps, Lotto is also the main sponsor of sport associations in the Netherlands.
For years, successive governments have been trying to modernise the regulatory framework around gambling in the Netherlands focussing on three key objectives:
- a legislative proposal for legalising online gambling services (under strict regulations);
- restructuring of the casino market, by (partly) privatising Holland Casino and offering more room for other (lottery) initiatives, and;
- preventing gambling addiction, fraud and other criminal behaviour and strengthening consumer protection by regulating (online) gambling appropriately rather than prohibiting it altogether.
Drastic changes were due to take place in January 2015, but these have so far failed to material-ise. During this time-consuming legislative process the market has been developing rapidly (for example through online poker websites, sports betting websites and apps) and the Dutch legisla-tive framework is falling further behind.
The last amendments made to the legislative proposal for the regulation of remote gambling re-lated to the tax rates. The Dutch government initially proposed a rate of 20% for online gambling but the Dutch Lower House did not agree, forcing the proposal to be amended. Current pro-posals are for a 29% tax rate on online gambling (which is the same as for casino gambling in the Netherlands). Expectations are that the proposed legislation will enter into force on 1 January 2017.
Recent developments and discussion in sports regarding sponsor agreements
In anticipation of new legislation, Unibet and KNWU announced in January 2016, that they had entered into a sponsor agreement making Unibet the main sponsor of the KNWU from 1 January 2017. The four year deal is worth 7 million Euros but is subject to the new legislation entering into force and the tax rate on online gambling being set at 20% rather than the currently proposed 29%. This was a daring move from both KNWU and Unibet against the background of the current closed system in the Netherlands and the fact that Lotto is (or at least will be) a competitor of Unibet.
Lotto immediately voiced its disapproval of the deal between KNWU and Unibet which is unsur-prising given it is also very active in Dutch cycling, for example, sponsoring the UCI WorldTour team LottoNL-Jumbo. In a press release, Lotto urged other national sports associations not to miss opportunities to generate revenues for NOC*NSF by entering into agreements with foreign and future competitors of Lotto, which are not yet allowed to operate in the Dutch market. According to Lotto, KNWU is being used for political lobbing purposes by Unibet and it went so far as to imply that Unibet and KNWU are putting improper pressure on Dutch government to opt for a lower tax rate.
Whatever Lotto's views, its monopoly position and its influence on NOC*NSF as the main finan-cial sponsor, are becoming increasingly controversial and, according to some, outdated. NOC*NSF should, critics argue, be allowing sponsorship deals with competing gambling compa-nies. There are also accusations that Lotto has failed to adapt to the new online gambling market.
Given that Lotto's sponsorship of NOC*NSF has markedly decreased over the last four years from 50 to 38 million Euros, the call to allow other players into the market and to impose competi-tive tax rates (the current proposed rate of 29% in the Netherlands is much higher than in sur-rounding countries) is growing. Of course, other potential competitors of Lotto are also in favour of lowering the taxes on online gambling to 20% and point out that margins are otherwise too low to invest in the Dutch market.
Several sports marketing professionals have already warned against too strict a regime on the grounds that that without sensible legalisation and competitive tax rates, gamblers will not be protected, the income for the Dutch treasury will be reduced and Dutch sports will have to face a further decrease of sponsorship money. We are also of the opinion that new parties entering the market - when properly regulated - would bring much needed financial support of sport in the Netherlands. Just as it is in sports, competition should be a basic principle in the sponsorship markets to create the highest possible standards.
Recent developments regarding advertising for online betting services
In anticipation of the new remote gambling legislation, the Dutch Gaming Authority (the supervi-sory authority for compliance monitoring of the Betting and Gaming Act) already tolerates Unit's offering of online betting services on its website. Conversely, the Dutch Gaming Authority an-nounced on 11 May 2016, that it is preparing enforcement actions against businesses behind gambling apps offered to the Dutch public. Both companies that currently offer gambling apps in the Netherlands have been told to withdraw their apps from the Dutch market. If they fail to com-ply with these requests the Dutch Gaming Authority can impose administrative fines. Dutch con-sumers have also been warned to withdraw their credit balances to avoid losing them if the illegal apps are forced to go offline.
In February 2016, the Dutch Gaming Authority (Kansspelautoriteit) published its guidelines on advertising for gambling services. The guidelines rely on the general rule that advertising for betting and gaming services is only allowed by licensed gambling providers on condition that betting and gaming is not actively promoted.
Only advertising that will lead to a legal and licensed offer of gambling and betting services is permitted. Concealed offering and advertising leading to non-licensed (and therefore prohibited) services is not acceptable according to the Dutch Gaming Authority. The Dutch Gaming Authority published a practical example of a prohibited form of advertising: "...a press release concerning a closed sponsor agreement promoting an online gaming company is considered to be a form of advertising." Furthermore, the guidelines explicitly mention, referring to case law, that depicting part of a company logo can be considered as advertising gambling services.
Interestingly - and to come back to the KNWU-Unibet deal - during the press conference to an-nounce the sponsorship agreement, the different banners and (possible) future cycling clothing showed six green balls in a row without the UNIBET letters. As most of the public will know, and as was obvious at the press conference, the six green balls in a row represent the logo of Unibet. Although KNWU and Unibet ostensibly attempted to avoid advertising gambling services in the Netherlands, this use of part of the Unibet logo would, strictly speaking, be considered as advertising for (as yet illegal) online gambling services in the Netherlands. Because of all the commotion, Unibet has though arguably gained significant publicity and has probably already achieved (part of) its commercial objective in the Netherlands.
As legislative change remains on the horizon, the Dutch Gaming Authority, incumbents and future players are all very active in the lobby game which is still far from over. We have to wait and see who is declared the victor.
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