“This is a translated document. The Dutch version of the document is the only applicable and authentic version" 1 Explanatory Memorandum I. General 1. Introduction 2. Current situation and the need for regulation of remote games of chance 3. Vision on remote games of chance 3.1. General policy vision on games of chance 3.2. Preventing gambling addiction 3.3. Consumer protection 3.4. Fight fraud and crime 3.5. Suitable and attractive offer 3.6. The relationship with existing licensing 4. Measures based on the remote games of chance bill 4.1. Remote games of chance reach 4.2. Licensing 4.3. Measures to prevent gambling addiction 4.4. Measures to protect the consumer 4.5. Measures to protect fraud and crime 4.6. Measures for the purpose of suitability and reliability 4.7. Measures for the purpose of the supervision 5. Central Register of Exclusions in order to fight gambling addiction 6. Supervision and Enforcement 7. Financial aspects of the bill 7.1. General 7.2. Tax on games of chance 7.3. Other taxes for licence holders 8. Fundamental rights 9. EU legal framework 10. Feasibility, enforceability, administrative expenses and compliance costs 11. Financial consequences central government 12. Development bill II. Article by article. 2 Article I 1. Introduction This bill amends the Betting and Gaming Act (Betting and Gaming Act), the Betting and Gaming Tax Act (KSB) and some other acts concerning the regulation of remote games of chance. This is in implementation of the coalition agreement of the Rutte-Asscher government, which includes the modernisation of the games of chance policy and the strict regulation of online games of chance.1 After the establishment of the Games of Chance Authority2, this bill is the second phase in the modernisation process of the games of chance policy, which aims to prevent gambling addiction, protect the consumer and discourage illegality and crime. Remote games of chance are games of chance in which the player takes part with electronic means of communication and without physical contact with (the personnel of the) the organiser of the games of chance or a third party which provides a room and resources for the participation in the games of chance. Because of the lack of direct contact between the player and the games of chance provider, these games involve different and bigger risks of fraud and gambling addiction than the traditional physical (“land based”) games of chance. Hundreds of thousands of Dutch people have however been participating online in such games of chance for years, without the objectives of the Dutch games of chance policy being guaranteed. The closed system of the Betting and Gaming Act does not allow remote games of chance yet. With this bill, the government intends to lead the existing and future need for games of chance via internet and other future electronic means of communication to a responsible, reliable and checkable offer, leading the player to a regulated offer with guarantees against gambling addiction and crime with a suitable and attractive offer. Proper and strict regulation of remote games of chance involves among other things that additional measures are set to prevent gambling addiction, including a central register for the exclusion of games of chance3, as well as additional supervision and enforcement powers for the Games of Chance Authority and amendment of the games of chance legislation. 2. Current situation and the need for regulation of remote games of chance The rise of internet The technological developments since the nineties have led to the Netherlands being part of a global communication society in which consumers have the possibility to buy a large number of products and services via internet. Internet use in the Netherlands is virtually comprehensive. 96% of all 12 to 75 year old people used an internet connection in 2012. Well over 60% of them are also on mobile internet and the growth of mobile internet is expected to continue. Also the offer of remote games of chance has grown strongly. After the rise of online poker, online casinos and online sports betting followed. Technological developments enable 1 Building bridges. Coalition agreement VVD-PvdA. 29 October 2012. 2 Parliamentary Papers II 2012/13, 33 410, nr. 15, p. 26 3 Parliamentary Papers II 2010/11, 32 264, nr. 15; Parliamentary Papers II 2011/12, 32 264, nr. 25, p. 7. 3 additional new types of games of chance. The communication speed of internet for instance enables betting also during a sports match, even though the match takes place at the other end of the world: the so called live betting. Because of the borderless nature of internet, many Dutch players have come in touch with remote games of chance rapidly because of these developments. According to the investigation of the Research and Documentation Centre (WODC) "Gokken in kaart” (Gambling mapped out)4, about 257,500 consumers took part in games of chance via internet in 2011. These were only 130,500 in 2005. Other investigations give even higher estimates of the number of participants. A Regioplan investigation estimates the number of Dutch participants of games of chance via internet at 565,000.5 The estimates of the size of the online market in the Netherlands vary between 140 million euros6 to 800 million euros7. This turnover is expressed in gross gaming revenue or the difference between the stake and the prize money paid. For comparison: The Holland Casino gross gaming revenue is about 500 million euros (2012) and the gaming machine sector in the Netherlands has a comparable size. Another comparison may be made to the Danish market, which has been legalised since 2012. Although Denmark has half the number of inhabitants, the remote games of chance market is about 250 million euros. The online market is expected to continue to grow. The European Commission's Green Book of March 2011 indicates that the online offer is the fastest growing segment of the games of chance market with a 2008 share (EU-27) of 7.5% of the annual revenues of the total games of chance market. This offer is expected to have doubled in size in 2013.8 The rise of regulation The characteristic of these remote games of chance is that there is no physical contact between the provider and the player and that the remote game is offered via electronic means of communication. Because the player does not need to be physically present and many European governments did not license such games of chance, the providers established themselves in countries where favourable conditions were created for them, such as Antigua and Costa Rica. As the European clientele grew, the companies with their multi language customer services departments also established themselves in Europe, especially in Malta, the Channel Islands (Alderney, Jersey and Guernsey) and Gibraltar. Many legal procedures followed over the past years, in which these companies claimed that the free movement of services in Europe involves that they are allowed to offer remote games of chance in all other European member states, based on a licence from another member state, such as for instance Malta. This is not the case as appears from the established case law of the EU Court of Justice.9 Many large providers of games of chance have adapted their strategy. They ask national governments to offer a licence for offering remote games of chance so that they can offer their services in a regulated environment. Many European 4 Intraval, Gokken in kaart. Second measuring nature and size games of chance in the Netherlands, 2011. 5 Nature and size of illegal games of chance in the Netherlands, 2009. 6 BCG, Online Market Games of Chance Investigation, 2011. 7 H2 Gambling Capital. 8 European Commission, Green Book: Online gambling on the internal market, COM(2011) 128, blz. 8. 9 Case C-42/07, Liga Portuguesa de Futebol Profissional, Jurispr. 2009, p. I-10447, 69. 4 countries, such as the United Kingdom, Italy, France, Germany, Spain, Denmark and Belgium, now have established such a regulation for offering remote games of chance. Under the Betting and Gaming Act it is forbidden to offer games of chance unlicensed. The Betting and Gaming Act does not provide an explicit licence option for remote games of chance. An earlier bill to regulate games of chance via internet was submitted in 2005. As a test, it was suggested to license one provider, Holland Casino, to offer games of chance via internet. The bill was rejected by the Senate on 1 April 2008. The first reason was the fear of increased gambling addiction. A second reason was that offering games of chance via internet was not a government task and that also other parties besides Holland Casino should be able to join. Regulation necessity Because of the borderless nature of internet, the constant need of the Dutch consumer for remote games of chance, the fast technological developments and the wide offer directed to the Netherlands via hundreds of websites, sound enforcement of the ban on illegal offering is not possible without a responsible, reliable and checkable alternative. As the Betting and Gaming Act does not provide for the possibility to obtain a licence to offer remote games of chance, Dutch players depend on the way illegal providers curb the risks of games of chance themselves and they are not protected by government regulation and supervision. It is clear from the 2011 investigation of gambling addiction "Gokken in kaart" that the number of problem players went down compared to 200510 and that the group of risk players has increased (although not statistically significantly). It is in this group of risk players that the playing of games of chance via internet takes place more and more often instead of in the group of recreational players.