Curaçao has no choice: They won’t get any more Dutch money without reforming online gambling!
About the expert:
Ilya is a senior partner of the 4H agency, which advises gambling companies and government agencies around the world. At the age of 15, he entered the law faculty of Moscow State University, from which he successfully graduated. Today he moderates international professional discussions and longs for the live events.
There has been a huge uproar recently because the Dutch government has announced that they’d like to influence the Curaçao gambling legislature. The professional online gambling community reacted to the news because of two factors. The first one is that most of the main gambling brands have a Curaçao license to accept gamblers from the countries where they either can’t obtain a local license or they don’t want to do it due to the costs involved. With a Curacao licence in many countries, they can accept deposits without having a local license. One more reason why this license is so popular is that licensing requirements may be met relatively easily. It allows operating almost without paying attention to compliance (certification, procedures conformity), responsible gambling etc.
The second factor is that seemingly very few people outside the industry have tried to understand what changes the Dutch government proposed and what is really happening. I’ll try to make it clear (as clear as I can anyway).
Let’s start with the main information. Companies now use two types of licenses in the countries that either don’t have local licensing (but don't prohibit gambling) or for those who prohibit gambling but have no tools to affect foreign operators. There is the Maltese license, which is used for Europe where you can work on the basis of European free trade provisions within EU legislation. The Curaçao license is used for the rest of the world. Using this license an operator can connect a payment system, a gambling product, and accept a gambler from different jurisdictions like Africa or the CIS.
All professionals know the reality of the situation, which is that when we talk about Curaçao license, we talk about a sub-license. If I remember correctly there are four main licensees which grant the right to work in the gambling industry. These four organisations work as master licensees and issue sub-licenses.
It’s hard to say how many sub-licensees exist now. I can say for sure that there are many of them, hundreds of them, I guess. The Curaçao license is the simplest solution to start a gambling project because it’s the simplest way to start operating.
What are the proposed changes?
It’s important to note that the proposed changes that have attracted so much attention are not a Curaçao gambling sector reform as such. It is a part of an agreement between Curaçao and the Netherlands on financial support for the island. This is connected to many local economic sectors and industries.
In a document prepared by the Dutch government four global directions were highlighted. The island should make reforms following those directions. Gambling is not one of the targeted directions. Gambling is effected because of the direction they want to take which has the aim of securing the supremacy of the law on Curaçao. The local government wants to reform the gambling sector alongside changing the judicial system and some other things of that kind.
The current regulation governing Curaçao licenses is pretty old. So the reform was probably actually only a matter of time. There are two tasks Curaçao has to perform according to the new “Financial support agreement”:
1. To perform research on the need for a reform of the online and offline gambling regulation.
2. To prepare a step by step plan for reforming the online sector legislature.
I would like to emphasize here that the agreement directly says that the stepwise plan should include the measures that will be taken to make the operators with a Curaçao license comply with the laws of the other countries.
I think that this is the key point. If the reform is performed in this way, a sub-licensee operator will have to comply with the laws of the countries where they accept the gamblers from. It means that if a sub-licensee operator accepts gamblers from a country with local regulation or where they ban gambling altogether, the operator will violate the terms and conditions of working with the Curaçao license.
Now the warnings from regulators of such countries that say that an operator can work within their jurisdictions only with the local license, rarely affect the companies with the Curaçao license. If the new reform is carried out in the way that it’s supposed to be, the situation will drastically change.
Neither master licensees, nor the Curaçao government has the authority to watch over compliance with the laws of other countries. Although they can now oblige the operators to do it which means that it will become a serious headache for a gambling company. This in itself will mean the iGaming industry will drastically change.
No reform = No Dutch money
The Curaçao government has promised to reform online gambling before in 2016 and 2018. Not a huge amount happened but now everything is way more serious. I communicated with our local colleagues, and it seems that the island has no choice now. If they don’t meet the requirements of the Netherlands, they won’t get any new financial support. As far as I know, the Curaçao regulator has started to review this issue and is trying to determine the research perimeter and beginning to prepare the stepwise plan of the online legislature reform.
I believe that it is not just Curaçao who we need to pay attention to in this situation. The thing is that each and every country should create and introduce a clear and transparent way of licensing gambling in their jurisdiction. I don’t think that fighting the black or the grey market only by punishing is a wrong way. There’s no doubt that a government can take such a position if it wants to, especially if the gambling is banned due to religious or similar reasons. However, even in this case, a simple ban doesn’t solve the problem. The gamblers will find a way to get access to offshore products anyway.
I believe that there is only one way, certainly the most effective way, of fighting illegal gambling by everyone: governments, gamblers, operators. It is by creating an adequate set of licensing and other working requirements for the operators, creating a possibility to obtain a local license and start paying taxes and fees.
What operators should do
Globally operators should move to obtain local licenses. But before doing that they’d better take a deep breath and pay attention to the fact that there is no particular date for implementing the proposed reform for now, but it will be happening soon.
The Curaçao regulator has to perform research before March 1st, 2021. The stepwise plan should be developed before September 1st, 2021.
I’d like to emphasize that the stepwise plan of online sector reforms should be developed before September 1st. However, the plan may contain 25 more steps that will be accomplished only by 2025. It’s still a bit early to start making rash decisions, we only have to observe what is happening.
Will anybody need the Curaçao licenses in the future? I doubt it because I see that there is a trend towards accepting local rules and creating local licensing systems. I believe that in the future an operator’s portfolio will consist of several local licenses for the markets that they feel are promising to them.