The evolution of the Spanish gambling market

Over the last few years, the online gambling community in Spain has transformed. With more players than ever registering their interest, sports betting, slots, roulette and poker are increasing revenue year-on-year. This has had an impact on the regulation of gaming, as well as taxation. Paula González de Castejón and Elisa Lorenzo Sanchez provide a review of the current situation.

The Spanish online gambling market has proven to be an attractive sector for stakeholders in the market. Six years after the first gambling licences were granted in Spain, data shows that this is a market which is continually evolving, in terms of growth and with improvements continuing to be made. Figures have continued to improve (not only in terms of number of players but also in terms of gross gaming revenue (‘GGR’), which is obtained by operators. New demanded products such as slots or exchange betting have been regulated (with other new products soon to be available); new ways of playing, such international liquidity for poker are around, so the offers for Spanish players have become more complex and striking, meaning that every year the Spanish online gambling market becomes a more advantageous and attractive environment.

Figures published last July by Spanish regulator, the Directorate General for the Regulation of Gambling (‘DGOJ’) confirm something that is well known in the sector: Spain is ahead of all expectations. In terms of profit, all gambling sectors have increased in the last year, with the exception of poker, which has maintained its stability (but is expected to increase with the international liquidity regulation). Contests have also decreased significantly. The products which have a higher participation in GGR are fixed-odds sport betting, slots, roulette and poker. Also, in terms of GGR, the Spanish gambling sector has increased in €560 million, which implies a 30.9% of increase from 2016.

One of the main reasons for the success of the Spanish gambling market is the supportive approach adopted by the Spanish regulator. As a matter of fact, the DGOJ has always been committed with encouraging an attractive and business orientated offer of online gambling activities, making sure that the responsible gaming principles are well preserved (preventing minors and self-excluded gamblers from playing, as preventing fraudulent and money laundering activities are key for the Spanish authorities). Accordingly, and in order to offer players and also operators a safe competitive environment, the Spanish authorities implemented a licensed based regulated system in 2011, in which only operators which have obtained the license can offer online gambling activities in Spain. This system is based in the need of first obtaining a so-called general licence (only available when the Spanish gambling authority launches a formal call for tender) to later on apply for the corresponding singular licence covering the offer of a specific gambling activity (such as poker, sports betting or slots).

The Spanish market has significantly evolved since 2011, and online gambling operators obtaining their licences in Spain are now operating a mature sector which offers wide opportunities. As a matter of fact, online gambling operators in Spain have continued expanding their offering: in 2017, while a call for tender for applying new licences was not open yet, the DGOJ granted 17 new singular licences relating to the most popular forms sport betting and other natures of betting. This has shown that operators who have already been well established in Spain continue to seek for new opportunities in the country.

The DGOJ is well aware of this, and in late 2017, to support the regulated offering, a new call for tender has been published in Spain. On the contrary to previous proceedings when one month was granted to operators to apply for the licenses, this time the DGOJ decided that the term to file new licence applications should extend to one year. This will allow interested operators who are analysing meticulously, the convenience to enter into the Spanish regulated gambling market.

Furthermore, and in order to ensure that the offering of the products in Spain will not lose its appeal, the DGOJ has also made significant developments on the regulatory and tax side - one being the reduction of the applicable gaming tax. In accordance with Article 48 of the Spanish Gaming Law1 (approving the gambling provisions), all gambling operators are required to pay the gaming tax at specific tax rates which have been traditionally tailored to each type of game. However, in July 2018 the Spanish Government finally published the 2018 Annual Budget Act in the Official Gazette, which was expected for some months, contains a provision for a significant reduction of the gambling tax rate. Such reduction - which came into effect on 1 July 2018 - implies a reduction to the tax rate to be applied to online gambling operators developing their business in the Spanish market from 25% to 20% of the taxable base, both for betting and other games.

In addition to this, a reduction of 50% of the gambling tax rate for any gambling company established in certain Spanish territories has been implemented. This new regime allows obtaining a benefit of half of the tax rate applied to online gambling activities, to those companies ‘effectively established’ in Ceuta and Melilla, resulting in a 10% tax rate to be applied to both betting and other games. The aim of the Spanish government is to make the territories of Ceuta and Melilla more attractive to online gambling operators that may have to leave Gibraltar if it finally falls out the EU (it is a regulatory requirement to apply for a licence in Spain to be a company established in an EU country). However, in order to obtain said benefit, an effective establishment in Ceuta or Melilla should be made by those companies, meaning that the operator should also allocate in said territory, the human and technical resources to carry out its gambling activities and a formal re-domiciliation would not be sufficient.

A possible investment?

Another relevant outcome approved this year and which clearly shows the commitment of the Spanish regulator with this market, is the approval of the shared liquidity for poker. While Spain has always been a ring-fenced market, after the agreement reached with the authorities of Italy, France and Portugal for creating a shared liquidity platform for poker, Spanish players are now allowed to play against others who are located in different jurisdictions. Some of the most relevant poker operators in Spain have already launched poker games on this shared environment, proving the attractiveness of this product. While this has - up to date - only been implemented for poker activities, it is expected that in the short-term, this option will also be extended to other games.

Further to the amendments already approved during this past year and previously discussed, and in order to maintain the attractiveness of this market, new improvements are expected, such as:

1. Introducing new modalities for existing games, such as the regulation of new live variants. Currently this is only allowed for roulette games, but it seems that the DGOJ aims to extend the live offering for other casino games, such as blackjack or baccarat, as long as the games are broadcasted from an authorised casino located in Spain.

2. Reducing restrictions currently in force consisting of the limitation to offering the game exclusively on those variants that are expressly regulated under the applicable regulation. This restriction is in force with regards to blackjack and poker games, which can only be offered under the modalities expressly approved and regulated in the corresponding ministerial order. This limitation was removed some years ago for bingo, and the DGOJ aims to permit the offering of any variant of poker and blackjack as long as this is based on the essential features of the games as defined in the Spanish regulations.

3. Approving the regulation of new games. Although a draft regulation has not been yet approved by the DGOJ, it is likely that skill games (particularly fantasy sports leagues), which are a very successful product in other European regulated markets are regulated in the short-term.

Whilst other European countries such as Italy, have adopted a restrictive approach to the gambling regulated market by implementing measures such as the prohibition of the advertising on gambling activities, the Spanish market seems to be in a very active moment as the regulator is showing its commitment with the regulated environment.

Therefore, now that a call for tender is open until December 2018, it seems to be a good moment to think about investing in the Spanish online gambling market.

Paula González de Castejón Legal Director

Elisa Lorenzo Sanchez Senior Associate Lawyer

DLA Piper LLP, Madrid

1. Act 13/2011, 27 May 2011.

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