Market focus: Spain

Despite Spain’s long history of gambling, the activity was only decriminalised in 1977, and was largely ignored by the Spanish legal and governmental system for the next 20 years. Instead, they left land-based – along with online gambling regulations – to local governments. But with the rise of the online gambling over the past two decades, Spanish authorities could not ignore this issue any longer.

Moves to include the legalisation and regulation of online betting and gambling in Spain first found their voice in 2007, with the passing of the Law on Measures to Develop the Information Society (Ley 56/2007), which formally mandated the Spanish government to regulate the online betting and gaming industry, enshrining the principles that would later govern this market in the Gaming Act.

At the time, the Act was expected to pass quickly, however it took another three years of legal wrangling and the intervention of the state lotteries – Loterías y Apuestas del Estado (LAE) – which spearheaded the regulatory process in the initial years before the sixth version of the Gaming Act was approved in May 2011. Following the Act’s approval, the Dirección General de Ordenación del Juego (DGOJ) took up the mantle of regulator.

The basics

The Directorate General for the Regulation of Gambling is the Ministry of Finance and General Government body accountable to the State Secretary of the Treasury, which regulates, authorises, supervises, controls and, if necessary, penalises gambling activities in the Spanish State.

Operators can apply for both federal and regional licences, but in most cases they choose to apply for federal licences as both carry the authority to conduct online gaming activities. The federal licence covers every region, so an operator holding a federal licence does not need to apply for a regional one. To comply with these licences, operators must be incorporated in Spain or in the European Economic Area. If the operator is not based in Spain, it must have a permanent physical presence in some capacity in the country. In addition, the company must be solely focused on gaming/betting activities.

A single game, single licence system is in operation where operators can apply for individual licences on games like poker, roulette, bingo and several variations on sports betting, which depend on the type of betting being offered. An individual licence per game system seems a cumbersome way to work, but for Santiago Asensi, managing partner at Asensi Abogados, “the fact that the Spanish licensing regime is based on individual licences concludes in a different method and process, but in practical terms, there would be no major differences nor benefits if the regime was based on a single unified licence”.

Population

46m

GDP per capita

$36,500

Internet penetration

66.2%

Principal regulatory body

DGOJ[/box]

Keen to take on the challenge of the Spanish market, a total of 53 companies were granted 83 general licences in June 2012, becoming the first operators to enter the market. Following the regulation of slots and betting exchanges in 2014, a further 10 asked for licences, although six of those were already present in the market and just applying for additional licensed games. Operators are taxed at various rates, depending on the type of activity they conduct, with taxation rates varying from a minimum 15% tax on turnover levied on pooled bets on horseracing to a 25% GGR tax rate, which applies to fixed-odds sports betting and exchange betting.

Clamping down

At a state-wide level, online gambling is restricted to those online licensed operators which comply with the Act’s technical specifications. Infringements are severely punished, with fines of anywhere between €1m and €50m levied against those operators found to be in breach of regulations.

The Spanish authorities have been very active in this regard, launching 55 legal proceedings against firms operating without a licence and identifying 91 separate infringements during its first three years of operation.

So, are the Spanish regulations too restrictive towards operators? For Santiago, it may be a case of being cruel to be kind for the Spanish gambling industry: “The eligibility criteria for online gambling operators in Spain, which are based on accrediting legal, economic and technical solvency, although being extensive and in the case of the economic guarantee high, are considered necessary to have a solvent and healthy market.”

And the statistics seem to bare that theory out, with Spain reporting year-on-year growth in both its online casino and online betting markets over the last five years. In the final quarter of 2017, revenues from the online market totalled €173.3m, up 38% on the figures reported during the same period in 2016, with sports betting making up the largest chunk of that pot, contributing €103.6m.

Eduardo Morales Hermo, senior gambling and betting consultant at Ficom Leisure, strikes a note of optimism: “The existing regulations under a complete product and content offer, especially since the inclusion of slots mid-2015 and the strong growth of the live roulette vertical, has shown to be a very positive step in the Spanish market’s evolution.

This is allowing the market to experience a continued and exponential growth, which is expected to continue the growth trend.”

Spain is already in the midst of its third licence period, which began in December 2017 and is due to end in December of this year. It is perceived by many to be the country’s final licensing period for the foreseeable future and is expected to attract another 10 to 12 operators to the market.

Looking ahead

The first upcoming opportunity for expansion in the Spanish online gaming market is the forthcoming reduction in the online gaming tax from 25% to 20%. This will apply to all online gaming verticals in casino and betting segments, which are now paying a tax rate of more than 20%, and from 1 July 2018, will pay a maximum 20% tax rate on GGR.

The second, which is already bearing fruit, is the shared poker liquidity agreement currently in operation in Spain, France and Portugal, which, as Eduardo says, “is already impacting poker figures trend shown in the data of Q1 2018, starting from January 2018 with the shared liquidity with France through just one operator.

By the downfall and stagnation observed since 2015, it has changed to an increase of 41.89% versus the prior quarter on a year-on-year basis, and it is expected that with the inclusion of Portugal and Italy, it will further improve the volume come Q2 2018”.

One of the biggest advocates of further reform in the online gaming market is the Spanish Online Gaming Directorate, which has launched a draft amendment bill in which it hopes to add virtual games and virtual games betting to the existing sports betting segment of the Spanish market, opening new avenues and new markets to the Spanish punter.

At present, this is currently in a consultation period, in which it will receive scrutiny from both the public and existing online gaming and betting operators in the market.

However, if it passes muster and negotiates the perilous environment of the Spanish legal system, several new markets will inevitably be opened, allowing for greater growth in the Spanish market.
A potential fork in the road of further expansion may come with the new Spanish government, which is reportedly toying with replacing the DGOJ with a new regulatory body, but for now the challenge for regulators is to keep pace with what is an ever-maturing market.