Francois Peglau, senior advisor at WH Partners, recently had an article published in the Autumn issue of the European Gaming Lawyer. The article address the potential of Latin America for internet gambling and the changes in many of LATAM’s main markets.
Since I first got involved in the e-gaming business, industry observers have always given me cautious opinions on the potential of Latin America for internet gambling. “Too early”, “not mature enough”, “too many regulatory barriers”, were some of answers I received. However, it seems that this negative trend is now changing and operators have a more favourable view on the prospects of this market.
Currently, there are an increasing number of online gambling operators targeting LATAM countries. One only needs to have a look at “ESPN en Español”, the sport cable TV channel that covers all Latin America, to view adverts in Spanish for Bet365 or Pokerstars. Many operators are considering that Latin America could be the next “big thing” for online gambling.
So what has changed in the last five years? First of all, internet penetration has increased significantly in the region. Most importantly, access to mobile smart phones has changed the dynamics of the market as today young consumers prefer to buy services using their phones rather than using their desktops or laptops.
The biggest barrier for the industry right now is the lack of clear regulation. Latin American public authorities have been slow in addressing the challenges presented by internet gaming. Consequently, most Latin American jurisdictions have not yet adopted legislation dealing with this type of activity.
Nevertheless, it is clear that the “do nothing” strategy cannot continue any longer. It is therefore expected that most Latin American jurisdictions will start moving towards regulating remote gambling in the short term. Reasons for this include:
a) As access to the internet and mobile communication increases in the region, consumers will start migrating to remote gambling, especially the young population
b) Payment solutions in the region have improved significantly in the last five years, which will also increase the demand for internet betting
c) As the demand of online gambling increases, local stakeholders (gambling regulators, land based casinos, and state controlled lotteries) will feel the need to regulate the market in order to (i) control the access of foreign competition and (ii) levy tax revenue from this new activity
d) The US and Europe are already in the process of regulating internet gambling, an example that could be followed by Latin American jurisdictions.
We are already seeing changes in many of LATAM´s main markets.
Mexico is a typical example. Gambling activities in Mexico are regulated by a Law enacted in 1947 which is clearly outdated to deal with e-gaming. The government has been able to grant a number of internet licences to local operators which are supported by secondary regulation, but the legality of these licences has often been challenged. Also, the current regulation has several grey areas relating to key aspects of this activity, such as the scope of the products that can be offered online and the technical requirements applicable to the games.
The authorities in Mexico are currently working on a new gambling law that would replace the 1947 Law and which will deal expressly with online gambling. The new law will establish fresh licensing requirements for companies that want to operate an online gambling business in the country. Industry experts appear to be optimistic that the new legislation will be implemented in 2015.
Brazil has also seen some important developments. Brazil currently bans almost all gambling activities. However, there are rumours that Caixa Economica Federal (the state controlled monopoly) will eventually launch a sport betting product for the 2016 Olympic Games and may consider the participation of foreign software suppliers. A positive step taken in Brazil earlier this year was a conference on e-gaming which was organised for the first time and which wasattended by many important stake-holders, including Brazilian government officials.
Officials in Colombia are also looking into regulating internet gambling. The Colombian regulator has confirmed a research programme in order to develop specific internet gaming regulation. A licence to operate internet pool betting has already been granted and it is expected that licences for other products will be issued shortly.
Similary, authorities in Argentina and Peru are also looking into regulating internet gambling soon. Whereas in Chile and Uruguay, first drafts of legislation dealing with these activities, have already been publicised.
In view of the above, the current regulatory trend in the LATAM region seems to be irreversible. An important aspect will be for LATAM governments to establish competitive legislative frameworks that help the industry to grow, but also to secure the protection of consumers, a major concern for local authorities. Major stakeholders must look into cooperating with local authorities in order to develop a competitive, properly regulated, yet not overly restrictive, regulatory framework for remote gambling in the region.