Reign in Spain: How the DGOJ has changed the Spanish gambling industry

In a time when Europe is, at least perceptibly closing its doors and making it tougher to operate, Spain stands out as a jurisdiction that has made it easier for operators to expand operations. This is never more obvious than in its decision to reduce gambling taxation to 20% of gross gambling revenue. While only a reduction of 5%, it accomplishes far more than that and is a welcome tonic for the European industry.

The Directorate General for the Regulation of Gambling (DGOJ) 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. It has overseen the gambling market in Spain since 2010, when it was first incorporated.

However, there will never be a more pivotal point in the life of the Spanish gambling market than over the next 24 months as the DGOJ refines its regulatory process and attempts to ensure a robust, mature market which can sustain Spain for decades to come.

In a very marked contrast to other European regulators, the DGOJ has over 21 distinct regulatory functions extending into very diverse parts of the industry, but at its heart the regulator is underpinned by three things: sustaining the Spanish market through ongoing regulation, protecting consumers from the negative effects of gambling and the licensing of new operators entering the market.

But for director general Juan Espinosa García, assigning the most important objective is difficult, as they all relate to “keeping the activity of gaming socially sustainable” for players. Qualifying this statement, adds that “at this particular point in time, beyond the licensing procedures coming from the last window, the priorities at the regulatory and operational stages will be reinforcing player protection and responsible gaming and upping the ante on fighting fraud.”

It has been more than eight years since Spain began its regulated gambling market, eight years which have marked profound changes in the way that the industry works, its interaction with the operators it serves and most notably the consumers it protects.

Although Espinosa was only appointed to the post of director general in 2017, he arrived at the regulator in 2013, serving as deputy-director in charge of regulation. Prior to this, he worked at Spain’s competition authority for over nine years, most notably during the time that the Spanish Gambling Act was being passed, so has both external experiences of the Spanish regulatory process and internal experiences during his tenure.

Reflecting on this process up to this point, Espinosa believes the DGOJ has met its regulatory objectives “more than reasonably”, citing the notable Spanish channelisation rate, the reduction in number of unlicensed international sites targeting citizens and the resultant market growth in line with estimates as evidence of this success. “There are always particular incidents and issues that might have gone better –for one, the regulation of gambling advertising which is still lacking-, but all in all we are satisfied with the results,” Espinosa adds.

One of the key aims of regulation is to develop a sustainable market, and you would have to say that based on the evidence the DGOJ is on the right track to achieving that aim. Many regulators will see this success and think, what practices can I transplant into my own jurisdiction? Addressing this question, Espinosa says that while the Spanish market may be on the up, it is still some way before it can be held up as a shining example of regulation.

However, he offers four markers of the DGOJ approach which may be transplanted to other jurisdictions. Firstly, reconciling the very existence and economic sustainability of a regulated online betting and gambling market with the need for that market to be protective of society. Secondly, being flexible on how to articulate the solutions to problems. Thirdly, do not be afraid to copy someone else, if successful. And lastly, be mindful of the context of the market and what it requires to set out general priorities.

Staying in the sun

One of the most recent success stories of  the maturing Spanish market has been the aforementioned decision to switch the taxation of all games from a turnover basis to a gross gaming revenue basis, while also dropping the tax rate to 20%. As Espinosa explains, the decision to switch was taken for three reasons: firstly to motivate those operators who had been taxed on turnover to grow economically, including those which “had registered little or no performance” throughout the previous period. The second aim was to further reinforce channelisation towards the regulated market and increasing competition between operators, while the third reason was to provide a unified platform on which regulatory changes in marketing, advertising and responsible gambling could be introduced.

The other great success has been the shared poker liquidity network between Spain, France and Portugal in which prize pots are pooled between the three european neighbours. Aside from the economic benefits, the network has led to a strengthening of co-operation between the three countries, primarily due to what Espinosa calls “common interest” in making it work from a regulatory perspective.

As part of Spain’s maturation process as an egaming market, the DGOJ has recently instituted several steps, including the publication of its management structures and regulatory processes. A principal objective of this move is to provide clarity to both operators and consumers alike about the regulator’s role at all steps of the process, but on a practical level how important is it that a regulator be transparent?

For both Espinosa and the DGOJ being transparent is essential to the immediate and future success of the regulator. Pursuing what he terms a “holistic” approach to regulation, Espinosa believes it is reflected in not only its activities but its “yearly report, the public list of events and the like, to the economic data we disclose: we publish all kinds market and player profile data” which most recently debuted improved interactivity.

Looking ahead, the DGOJ will soon launch a new tool designed to enable users to follow the progress of its regulatory initiatives online together with an amendment of the existing Gambling Act to allow the publication of sanction decisions against operators for the first time. Espinosa believes these twin steps will “reinforce a very important dimension of our activity and the reputational aspect of non-compliance for operators”.

Keeping an eye on the horizon

The issue of responsible gambling and how to address this from a regulatory perspective has occupied the thoughts of many EU regulators over the last two years. Rising problem gambling rates all over Europe have escalated this issue from the back of many regulators minds right to the front of their thinking.

But as we have seen, differing approaches can yield a myriad of different results but a principled, well thought out approach to this issue can yield a more productive end. Using the experiences of other regulators as a guide, the DGOJ has responded to the issue of responsible gambling in a two-pronged approach, the first part of which was to formalise the role of its responsible gambling board in regulation.

A necessary by-product of Spanish market growth, taking the informal Advisory Council on Responsible Gaming and essentially reconstituting it in a formal environment, for Espinosa will make “a hell of a difference” to how the DGOJ will work. This is primarily because of what he calls a “major overhaul” in the way the board functions, which Espinosa is hopeful will prove “that often conflicting views and sensitivities in the gambling field can work together for a common interest on specific outcomes”. The key will be to have “a well worked out programme of attainable deliverables” which will form the main part of the board’s focus over the next 12 months.

The second approach to addressing problem gambling utilises mobile technology to give Spanish gamblers the ability to use their smartphone or tablet to sign up to The General Registry of Gambling Access Interdictions (RGIAJ) to limit access to betting and gaming sites.  This move represents a crucial step forward for responsible gambling in Spain as it replaces the perceptibly flawed system where the only way to self-exclude was physically at authorised registry offices or at the electronic headquarters of the DGOJ.

For Espinosa, embracing new technology in addressing problem gambling is an “opportunity to develop corporate and regulatory policies to better protect players” as the key to sustainability and a renewed social acceptance of gambling.  Indeed, the fact that consumers showing signs or on the verge of developing a problem can now be identified is “a huge weapon” in the regulator’s problem gambling arsenal as Espinosa explains. “Identification procedures can be improved; limits can be set; behaviours can be trailed; personalised feedback can be sent. This is a battle that can be won with the appropriate technological mindset and toolkit.”

Crystalball gazing about what this might mean for the future industry, he adds: “Think of a gaming environment less focused on player spending and more on customer loyalty based on that very protection, less aggressive games and the like. An operator with a take-no-prisoners, real protection-targeted business model may be a game changer and so a winner.”

Dark clouds?

2018 was perhaps the year in which the advertising of gambling and its links with problem gambling really came to the fore, as regulators worldwide began the imposition of wide-ranging curbs on what was deemed by many observers as one of the key factors in the spread of gambling addiction. Far from sitting on their hands, the Spanish government has been active in this regard, introducing new regulations that would prohibit or severely restrict the advertising of gambling and state-wide online betting, bringing it into line with current restrictions placed on tobacco advertising.

Under current tobacco advertising rules, tobacco adverts on TV, radio, and print media are prohibited,  while ads on the internet are heavily restricted to “limited enumerated advertising and promotional practices” only. The new stance, the details of which were included in Spain’s 2019 budget proposals, would also allow the regulator to compel operators to cease sporting sponsorships and all advertising of gambling related services. Fortunately for the industry, these rules have yet to be rubber stamped by the government thanks to the European Commission’s continued veto and political infighting in Spain.

For Espinosa, gambling is no longer on the sidelines of commercial activity and as a result new stances are inevitable. Addressing this, he describes the DGOJ’s stance on ad restrictions as maintaining a balance between “strict but viable” regulation but that the new rules respond to the evolving needs of the Spanish market. This is due to a “perception” of increased marketing towards vulnerable sectors of society which can be “overly aggressive in its presentation and content.”

As with its counterparts in Italy and the UK the governmental regulations have arisen out of a public need to address escalating problem gambling rates. For Espinosa, this reflects a “shift in perception and sensitiveness” to the effects of gambling on society. “In most jurisdictions the level of exposure to advertising and gambling in general is more than it has ever been and so it is natural that the wider society raises its awareness of its potentially negative effects” Espinosa continues.

However, in a market at a crucial stage of its development like Spain, these regulations could be highly damaging to the long-term growth of the Spanish market if they are indeed implemented. For Espinosa there is no choice for the industry and regulators “either we make the activity socially sustainable in the context of high awareness and prominence of responsible gambling messages or it will suffer.”

As the DGOJ moves into 2019, its objectives haven’t greatly changed since its creation, with consumer protection, licensing and the development of the Spanish market still central to its ongoing regulatory mission objectives. Moving beyond these key areas, Espinosa believes the DGOJ should work to ensure that society has a better grasp of its activites, that consumers trust its work, feel safe and protected and that “both the reality and perception of online gambling correspond to a sustainable enviroment.”