The fresh overview of the iGaming markets in Europe

Slotegrator has released an interesting update about the iGaming markets in Europe. Let’s find out more!

Recently regulated markets, growing economies, and established powerhouses:

Central Europe is a fertile land for iGaming, offering investment opportunities of all sorts. Keep reading for an overview of the licensing requirements and regulatory frameworks in place in the region.

Central Europe is an exciting region for the iGaming industry.

Dominated by Germany in terms of overall revenues, it is home to a handful of small but fast-growing markets, including two sleeping giants: Switzerland and Poland.

Switzerland, the second most prosperous country in the world in terms of nominal GDP per capita, has only recently regulated its online gambling market, which is now open for the taking. Poland is the sixth-largest economy in the European Union and has a population comparable to that of the Western giants, making it likely to turn into a blazing iGaming market in the coming years.

In this article, we’ll take you on a tour of Mitteleuropa to discover the status of its online gambling markets and all the opportunities it offers.

Germany

Germany is without a doubt the largest market in the Central European region. 

In 2019, the gambling industry recorded revenues in excess of €16 billion. The gross gaming revenue (GGR) for the same year amounted to €2.2 billion, and it is predicted to grow by at least a third by 2024.

As individual German states retain regulatory authority, the legislative framework is quite complex. Other than the federal acts on gaming, the primary reference text regulating the industry is the Interstate Treaty on Gambling (GlüStV).

This contains a set of provisions agreed upon by the heads of all 16 German states, each of which can introduce further regulations building upon it. A new version of the GlüStV is expected to come into force in July 2021;

it will be upheld by a newly created interstate regulatory authority, the Gambling Committee.

Currently, sports betting and horse race betting can be offered online by operators licensed at the state level, while lotteries are subject to state monopolies. All other forms of gambling are banned.

This will partially change thanks to the new GlüStV, which will allow operators to provide online casino games, including slot machines and poker, but not tables like roulette and blackjack. Games will be pre-approved by the Gambling Committee, and operators will not be allowed to make significant changes.

Under the new framework, online slot licenses will be issued at the federal level, while other types of games will be licensed by individual states.

Until the summer of 2021, operators will be able to take advantage of a transitional regime. As long as they respect the provisions listed in the new GlüStV, operators will be able to offer online slots and poker games.

The number of licenses available for online casinos will be equal to the number of permits issued in each state for land-based casinos. As for sports and horse race betting, the number of licenses is unlimited.

Annual licensing fees depend on the operator’s expected yearly turnover. They range from a minimum of 0.1% of revenues to a maximum of €71,000 plus 0.03% of revenues for companies with a turnover exceeding the €100 million mark. Operators are also required to provide a security of up to €25 million.

A hike of 0.3% was approved in March 2021, bringing the tax rate for all forms of online gambling to 5.3% of the turnover. Online casino games are also subject to VAT.

Switzerland

The Swiss gambling market was reshaped by the Gaming Act of 2017 and the related ordinances that followed it in 2018, which legalised and regulated the offering of online casinos.

Swiss online casinos generated a GGR in excess of €21 million in the first six months since the first ones opened in July 2019. The sector is likely to have grown exponentially during 2020, in part thanks to the establishment of more casinos and in part due to the effects of Covid-19 on land-based gambling.

The Swiss market is as rich as tricky to enter for foreign operators. The right to offer online betting products and lottery products is exclusive to two public entities, Swisslos and Loterie Romand. To make things more complicated, licenses to operate online casinos can only be acquired by already established land-based casinos. This, however, shouldn’t necessarily discourage iGaming firms interested in entering the market.

There are currently 21 land-based casinos in Switzerland; only eight of these currently operate online. As most land-based casinos lack the know-how to run an online service, they are allowed by law to establish partnerships with external iGaming firms.

This harsh barrier to entry makes the market extremely interesting for iGaming operators willing to enter an agreement with local casinos: the number of possible competitors is hard-capped, and they all face the same constraints.

The sector is regulated by the Swiss Federal Gaming Board (ESBK), while the Inter-cantonal Lottery and Betting Commission (Comlot) regulates lotteries and betting.

Licensing fees are not fixed. The cost depends on the time necessary for the ESBK to assess the application, at a rate ranging between approximately €90 and €320 per hour.

Land-based casino licenses are valid for 20 years, and online permits are, in principle, tied to these. However, authorities can decide to issue licenses with a different duration if deemed appropriate.

Online casinos are subject to a progressive tax rate ranging between 20% and 80% of the GGR. The basic rate applies to GGR up to €2.7 million, with marginal increases above that amount.

Liechtenstein

At present, Liechtenstein doesn’t regulate online gaming nor issue licenses for operating within the Principality’s territory. Land-based casinos, on the other hand, have been allowed since mid-2017. In their first full year of operation, these raked in just under €50 million.

Liechtensteiner casinos capitalise on players travelling from Switzerland, Austria, and Germany. Crucially, player exclusion lists aren’t shared with these countries, leaving the door open to gamblers that would be otherwise unable to play.

While online gaming isn’t a thing there nowadays, Liechtenstein hosted the world’s first internet lottery, Interlotto (later renamed PLUS Lotto). Interlotto was licensed by the government in 1995 and ran until 2011. During this time, the charitable organisation charged with its operation, the International Lottery in Liechtenstein Foundation (ILLF), also offered instant win games and scratch cards.

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Austria

Until September 2027, the online offering of lotteries and casino games in Austria will be subject to monopolies, held respectively by Austrian Lotteries, and a joint venture between the same company and Casinos Austria. The tendering process that awarded these licenses has been heavily debated; however, the status quo is likely to hold at least until the end of the current licenses’ validity period.

At the time of the tendering (2012), the application for a license cost €10,000, to which operators had to add €100,000 in case of a positive outcome.

The Austrian online betting market, on the other hand, is open. Licenses for online betting operators are issued by individual states, with no regulations applying at a federal level.

In most states, regulations only cover sporting events, but some jurisdictions allow bets on other types of events (e.g., political or cultural). Live betting is explicitly prohibited in some states.

Technically, state laws only regulate land-based betting. Nonetheless, operators holding a license are de facto allowed to offer their services online as well. The cost of a license depends on the state in which the operator is based. Betting-specific taxes amount to 2% of the turnover, plus additional charges depending on the jurisdiction.

Recently, the Austrian Ministry of Finance announced the intention to implement sweeping reforms to the gambling regulatory framework, following the German model. The proposal includes raising taxation on gambling revenues and creating a dedicated authority tasked with issuing licenses and enforcing regulations. 

Hungary

The Hungarian gambling market is subject to prohibitively tight restrictions.

The state retains a monopoly over lotteries, sports betting, and horse race betting via its controlled operators, both offline and online.

Online casino games can only be offered by operators that already hold a license to run a land-based casino in Hungary. By law, only 11 casinos can operate on the national territory, and all of the permits are already taken. Only a few, however, currently have an online presence.

Much like in Switzerland, this context makes it tricky for new firms to enter the Hungarian market. While it’s entirely possible to strike partnership deals with local land-based casinos, online operators have to evaluate all pros and cons carefully: Hungary is a relatively untapped market, but the ceiling is much lower than in Switzerland.

In 2018, the European Union Court of Justice declared this licensing system incompatible with EU legislation. While a re-regulation by the Gambling Supervision Authority is likely to happen at some point in the future, the fact that no further action was taken at the European level markedly reduces the chances of a prompt reform.

Slovakia

The Slovakian regulated online gambling market opened as recently as March 2019, when the Gambling Act came into force.

While some forms of gambling – namely lotto and other types of lottery games – remain under state monopoly, private operators now have the opportunity to offer online betting services, slots, and tables. The rules set forth by the regulatory authority, the Office for the Regulation of Gambling, are fairly strict, but mostly in line with European standards.

The number of available licenses is not limited, and the cost depends on the specific type of game covered. At the lower end of the spectrum, a license for fixed odd betting services will set operators back €3 million; permits that also include the option to offer casino games cost €5 million.

Licenses that only cover one type of gaming (online or land-based, betting or casino) are valid for 10 years from the date of issuing. Combined licenses (either for both online and land-based services or for both betting and casino gaming) are only valid for five years, with an option for renewal.

Tax rates vary depending on the type of game. Tables, slots, and other casino games are taxed at 22% of the GGR, bingo at 5%. The taxation on betting operations is calculated against the turnover, with totalisator and fixed-odds betting being taxed at 6% and horse race betting at 1%.

Czech Republic

The Czech gambling market is extensively regulated by the Gambling Act, which entered into force on January 1, 2017. This contains provisions covering every aspect of the industry except for fantasy sports, which are currently prohibited.

After a dull year in 2018, the market has started growing again, registering a 16% year-on-year growth in 2019, with revenues of €1.36 billion.

The two major drivers of growth are slots and sports betting. The revenue from slots amounted to €690 million, of which €109 million coming from online gambling. Proportions are flipped when it comes to sports betting, the second-biggest product in the local market, with revenues of €316.6 million, of which a stunning €297.4 can be ascribed to online betting.

With a blanket ban on physical slot machines in the capital looming on the horizon, this might very well change in the near future. Following a model already implemented in other Czech cities, Prague officials intend to enforce the ban from 2024. Once slots are gone from land-based casinos, many players will likely turn to online gambling to scratch their itch.

Currently, the number of licenses available to operators is unlimited. The cost to obtain one is meager, at only about €190, but operators are required to put down a security deposit of about €1.15 million for each type of game they intend to offer.

Taxation is set at 35% of the GGR for “technical games” – games like slots and single-player versions of blackjack, roulette, or poker. All other products are taxed at 23% of the GGR.

Poland

The Polish gambling market is by far one of the most interesting in the region.

The industry is regulated by the 2009 Act on Gambling Games. To deal with an imposing black market, in 2017 the Act was subject to a major overhaul, which gave the Ministry of Finance power to blacklist websites offering unlicensed products. The result was exponential growth for the legal market, which rose from an estimated worth of €0.11 billion in 2015 to €1.82 billion in 2018, and all the way to an impressive €5 billion in 2020.

Regulations are among the strictest in Europe. In terms of online products, licensed operators can only offer betting services. A license covers both sports and race betting rights. The size of the online betting market is estimated to be €1.6 billion.

Other products, like slots and card games, are under state monopoly. Totalizator Sportowy runs the country’s only legal online casino, Total Casino, launched in December 2018.

Poland has suffered from high numbers of problem gamblers, which explains the strictness of the regulatory framework. The problem is being tackled successfully: in the last five years, the number of pathological players is estimated to have dropped by nearly 20%.

Applications for online betting licenses are not limited in number and are valid for six years since the date of issuing. The cost of a permit is calculated on the base of economic indicators. Currently, operators are charged about €100,000.

Taxation is set at 12% of the turnover, except for bets placed on sporting competitions involving animals, which are taxed at only 2,5%.