Europe's regulatory front-runner

On May 5 the new Spanish gaming law that will regulate remote gambling here passed in the Senate and is now ready to be confirmed by the main legislative chamber in the next few days. This means the law could be published before the end of this month.

Upon its publication the new regulation will still have to be subject to the EU’s blessing which is also expected this month. Furthermore, there are another three decree laws that set out the requirements, protocols and conditions to enable operators and providers to apply for licenses and go through the approval process. These are expected to be published before the end of June.

With the legal framework in place the new regulation will be ready to be implemented and the licensing procedure able to begin with operators starting to get the first licenses between the end of this year and the beginning of 2012. These will still be subject to the product and services technical approval.

Spanish online gaming law will allow the most popular online gambling content, with the exception of live betting, which has not been included, while it is unclear whether or not online bingo will be permitted. Live betting is allowed in existing retail outlets in regions including Madrid, Pais Vasco, Valencia, Navarra and Aragón, while bingo is also permitted in more than 400 land-based halls across the country, so it does not make much sense if these products are not included in the new online legislation.

It is expected the forthcoming decree will contain a full list of permitted game, and there is still a possibility that at bingo could be included.

During the legal process there have been some relevant changes from the original draft proposed by the government. These include:

All online gaming operators that have offered remote gambling to Spanish players in Spain and that are based in extraterritorial jurisdictions, will have to update their tax obligations with the Spanish Treasury if they want to apply and obtain a license for egaming within the new legal framework. This affects companies like Bwin, Betfair, Bet365, Unibet and a large number of online gaming operators that have been doing business in Spain for many years. They will have to settle and pay the relevant taxes for the five-year period prior to the new law.

There is also going to be a transitory period for advertising and sponsorship concerning operators that have sponsorship or advertising contracts here. They will be allowed to maintain their contracts with no penalty until 1 January 2012, while after that date no company can sponsor or advertise online gaming without a legal Spanish license.

Related to this issue, the new law was amended to exclude the responsibility of media companies on any tax default made by online gaming companies with whom they have an advertising agreement.

The companies that will obtain an online gaming licence in Spain within the new law will be allowed to locate their servers outside Spain and within the EU with real time access for the Spanish authorities.

One issue that is considered relevant in the new law which was not changed during the legislative process is taxation, which remains as it was proposed in the draft of the law delivered for approval. This leaves a high tax rate that will make the business model very weak for competition; even if it is not as bad as France it is worse than the Italian model. Spain will maintain 25% on GGR/GPT for the majority of its online gaming products.

All in all the new legislation will establish a very difficult scenario for operators to be profitable and it remains to be seen how quickly the authorities will be able to begin the licensing process bearing in mind the position of the land based gambling companies who still oppose the existing terms believing it to be discriminatory.