Contributed By Forgó, Damjanovic & Partners
In 2018, a relevant judgment was made on the Hungarian Gambling regulation, in which the Court of Justice of the European Union (the “Curia”) examined whether Hungarian Gambling regulations comply with the freedom to provide services. The procedure was initiated by a British betting company, based on its legal dispute with the Hungarian Central Directorate of the National Tax and Customs Administration. The subject of the original legal dispute was the enforcement of a penalty imposed by the authority on the British betting company on the basis of unlawful gambling activity. The Curia ruled that the Hungarian legislation failed to comply with EU regulation as the Hungarian system of awarding concessions for online gambling is discriminative, non-transparent and against the principle of the free movement of services.
Subsequently, in compliance with the decision of the Curia, the Administrative and Labour Court of Budapest rejected the enforcement of the penalty.
However, neither the ruling of the Curia nor the ruling of the Administrative and Labour Court of Budapest has a direct effect on the present gambling regulations or the operation of gambling operators, although they might affect the amendment of the Hungarian gambling regulations. For the time being, there is no planned reform in the sector, as far as is known.
There have been no recent changes on the merits of the regulation.
Restricted: Online sports betting, which is called distance gambling in the Hungarian regulation, can be operated exclusively by Szerencsejáték Zrt., which is a company fully owned by the Hungarian State.
Restricted: Online bingo is not explicitly regulated, but can only be provided by operators that have a licence for online gambling, and only operators that operate land-based casinos can obtain such licences.
Restricted:It can be provided by operators that have a licence for online gambling. Only operators that operate land-based casinos can obtain such licences.
Restricted: It can be provided by state-owned operators.
Permitted: It is not regulated in Hungary.
Permitted: To the extent it does not qualify as a game of chance, it is not regulated in Hungary.
Restricted:It can be provided by operators that have a licence for online gambling. Only those operators that operate land-based casinos can obtain such licences.
Restricted: In the case of totaliser-type betting, only a state-owned operator shall be allowed to organise it, while bookmaking type betting can be operated with a concession granted by the Hungarian State and a licence issued by the Gambling Supervisory Authority.
Restricted:If it is carried out in casinos, then the same conditions apply as in the case of casinos.In the case of card rooms, only the licence of the Gambling Supervisory Authority is necessary.
Restricted:Only the licence of the Gambling Supervisory Authority is necessary.
Restricted:Casinos can be operated with a concession granted by the Hungarian State and a licence issued by the Gambling Supervisory Authority.
Restricted: Slot machines can be installed and operated only in casinos. Other types of gaming machines can be operated, in which case operators shall notify the Gambling Supervisory Authority of the machines they intend to operate, for the purpose of registration.
Restricted: It can only be conducted by state-owned gambling operators.
The Hungarian gambling/game of chance regulations consist of the following major pieces of legislation:
The Gambling Act is the main act regulating gambling/games of chance in Hungary and applies to both land-based and online gambling, while the Decree provides the implementing rules for the Gambling Act.
Pursuant to the Gambling Act, a game of chance is any contest or game in which the player agrees to pay cash or another form of consideration for the chance to participate and to receive a cash prize/payout or something of value in the event of a certain outcome or a future contingent event. Winning or losing depends exclusively or in a material degree upon an element of chance. Under the Gambling Act, betting is also considered to be a game of chance.
There is no specific definition of land-based gambling in the Hungarian regulations; instead, the general definition set out under 3.2 Definition of Gambling is used.
Similar to land-based gambling, the Hungarian legislation also lacks a specific definition of online gambling, although there is a distinction made between distance gambling operations and online casino games. Distance gambling covers only sports betting offered through communication equipment and networks, while online casino games are any form of casino games offered through communication equipment and networks.
The Hungarian Criminal Code criminalises the following forms of unlawful gambling:
Those who act in the abovementioned manner are guilty of a felony punishable by imprisonment not exceeding three years.
In addition to the criminal sanctions, the Gambling Act also contains provisions that authorise the Gambling Supervisory Authority to impose sanctions on operators of gambling activities or any organisation or person engaged in gambling that violates the gambling regulations in force. No gambling-related sales, organisation and intermediary activities shall be pursued in Hungary, in another country or within the framework of international co-operation, if the Gambling Supervisory Authority has not granted authorisation for the game of chance in question. In practice, this means that it is not permitted to “approach” a user in Hungary (in other words, to direct the game of chance to users in Hungary) and to make a game of chance that is not authorised by the Gambling Supervisory Authority available to said user.
No payment service providers can take part in any transaction connected to unlawful gambling activity. However, the specific legislation to determine the possible sanction on the payment service provider has not yet been adopted.
One of the main sanctions of the Gambling Supervisory Authority is that it is authorised to impose a fine on those who infringe the gambling regulations. The amount of the fine shall vary, depending on the type of the game of chance and on the severity of the infringement or breach. Moreover, when determining the amount of the fine, the Gambling Supervisory Authority takes into account whether a penalty was imposed on the infringer within a period of two years before the infringement for a similar offence. In the case of unlawful gambling, the amount of the fine can be between HUF500,000 and HUF100 million forints (approximately EUR1,500 – EUR303,000).
The suspension of a gambling operator’s licence is also possible in certain cases. As an example, the gambling operator’s licence is suspended if it fails to comply with the Gambling Supervisory Authority’s request and/or official measure to eliminate any infringement of the law.
The Gambling Supervisory Authority is entitled to order the rendering of any information in connection with unlawful gambling operations that is published by way of an electronic communications network temporarily inaccessible. Practically speaking, the Gambling Supervisory Authority has the power to temporarily block any access to the infringing content (ie, to the website of the unauthorised gambling operators). This period can be extended to 365 days. The National Media and Infocommunication Authority is entitled to carry out the blocking of the infringing information. However, based on the announcement of the Gambling Supervisory Authority, it is unable to block such websites in many cases, for unknown technical reasons.
Finally, the Gambling Supervisory Authority can confiscate any asset that was used in connection with unlawful gambling activity, such as a prize in unauthorised gambling operations.
There is no pending legislation.
In Hungary, the key regulatory authority is the Gambling Supervisory Authority, which is responsible for multiple actions in relation to gambling, including licensing, supervision, penalising, and registry maintenance. Issues related to the gambling legislation and concessions are handled by the Ministry for National Economy. As noted above, the National Media and Infocommunication Authority is in charge of supporting the Gambling Supervisory Authority in the execution of blocking of infringing information.
The Hungarian regulatory regime leans towards being prescriptive. Whenever an unregulated issue arises, the legislator typically attempts to provide new, detailed rules adapted to the new issue.
As a general overview, in order to provide gambling services in Hungary, one shall obtain a concession from the Hungarian state and a licence from the Gambling Supervisory Authority.
Lottery and betting, excluding horse race betting, remote gambling and bookmaking, can only be conducted by state-owned gambling operators.
Distance gambling operations may be conducted, with the exception of horse-race betting, exclusively by Szerencsejáték Zrt., which is a company fully owned by the Hungarian State. Horse-race betting can be organised exclusively by Magyar Lóversenyfogadást-szervező Kft., which is also fully owned by the Hungarian State.
There are two types of casino licences, as the Gambling Supervisory Authority categorises casinos as belonging to Class I or Class II. Class I casinos comprise at least 100 game and/or card tables, and at least 1,000 coin-activated gaming devices; Class II casinos are all other casinos. Only operators with a concession are allowed to apply for a licence for the operation of a casino, regardless of the class of the casino.
According to the Gambling Act currently in effect, only those gambling operators who are licensed to operate a land-based casino in the territory of Hungary can provide online gambling.
The following gambling activities can be conducted without a licence:
As another exception, a card room can be operated without a concession, solely on the basis of the licence of the Gambling Supervisory Authority.
For land-based casinos, the number of possible concessions is limited as only one casino may be authorised for every 500,000 inhabitants. However, there are certain exceptions, such as in Budapest and Pest County, where no more than five casinos can be authorised in total.
With respect to bookmaking operations, there can be no more than two concessions issued at any given time; the same is true for horse race betting.
Otherwise, there is no statutory limit on the number of concessions. Nevertheless, there is no concession procedure in progress, as far as is known.
The minister in charge of gambling is entitled to conclude a concession agreement with a gambling operator in good standing without publishing a tender notice. In practice, this means that anyone who qualifies as a gambling operator in good standing can apply for a concession at any time. However, as only companies that have been involved in the operation of gambling activities in Hungary for at least ten years continuously can meet these requirements, this provision does not make it possible for new operators to apply for a concession without the publication of a tender.
The duration of a concession shall be limited to 20 years for Class I casinos and ten years for Class II casinos. As a licence for online gambling can only be granted to those operators that already have a land-based licence, the maximum term of the online gambling licence is consistent with the term of land-based casinos.
With respect to bookmaking operations and horse race betting, the duration of the concession shall be limited to 20 years.
As a general rule, the Gambling Supervisory Authority grants a licence only if the applicant meets all of the necessary conditions in terms of personnel, equipment and financial background for the safe and proper operation of gambling activities.
The applicant’s application is rejected if – among others – the activity intended to be pursued is deemed immoral or indecent, or is likely to breach public safety, or is deemed harmful to children and to the youth. There are also specific rules regarding voting rights and criminal records that can be grounds for rejection.
In the case of land-based casinos, all devices used in a casino must be certified and approved by the official body of legal metrology for the purposes of gambling. The authorisation procedure for online gambling is in line with the authorisation of land-based gambling, although operators of online gambling must meet additional technical and IT requirements.
Those who wish to provide gambling services or who hold a senior position at a company that wishes to do so have to meet several requirements to obtain a licence. Cases when the application shall be rejected with respect to the applicants, the members and/or the directors include the following:
The members, executive officers, members of the supervisory board, and employees of the gambling operator, as well as their relatives, may not play in the casino operated by the gambling operator in question.
The timescale for licence applications is as follows:
The following administrative service fees are paid for the licence:
The fee cannot exceed HUF40 million for Class I casinos, and HUF1 million for Class II casinos.
In general terms, the ongoing annual fees include three types of fees: ad hoc fees, gaming supervision fee and concession fees.
In the case of ad hoc fees, the gambling operator pays an administrative service fee if there are certain type of amendments to be authorised by the Gambling Supervisory Authority, such as the authorisation of any amendment of the game plan.
The amount of the concession fee, the method of payment and the compensation shall be specified in the concession agreement.
In the case of land-based casinos, card rooms and bingo games, the building and premises are specified in the licence issued by the Gambling Supervisory Authority. This means that, as a general rule, the gambling activity can be carried out only in the building and/or premises determined in the licence. However, on an ad hoc basis, it is possible to provide services outside of such premises if the Gambling Supervisory Authority so authorises.
Those who plan to operate a casino shall possess a document evidencing lawful tenancy/title to the building or premises. Casinos must be installed in buildings that are used exclusively for gambling purposes, or in a part of a building that is completely enclosed and comprises a separate unit from all other activities. The Gambling Supervisory Authority examines the suitability of the building or premises in the framework of the authorisation procedure for a licence.
Slot machines can be installed and operated only in casinos.
There are no recent or forthcoming changes to the land-based gambling sector, as far as is known.
There are no specific requirements for online B2C licences.
There are no specific requirements for online B2B licences.
There are no specific measures in place to regulate the use of affiliates, as far as is known.
There are no specific requirements for the use of white-label providers.
There are no specific amendments or proposals, as far as is known.
As mentioned above, the Gambling Supervisory Authority is entitled to order the rendering of any information in connection with unlawful gambling operations that is published by way of an electronic communications network temporarily inaccessible. This blocking can be extended to 365 days. The National Media and Infocommunication Authority enforces the blocking of the infringing information. However, based on an announcement of the Gambling Supervisory Authority, it is unable to block such websites in many cases, for unknown technical reasons.
All operators must comply with the key requirements of responsible gambling. Generally speaking, the gambling operator must supply a warning of the effects of compulsive gambling and the dangers of developing addiction while carrying out gambling activities and during the commercial communication of such activity. The gambling operator supplies a warning regarding the limitation of sensitive individuals’ access to gambling, and draws players' attention to the possibility of self-restriction and self-exclusion.
Gambling operators utilise the following tools in order to carry out gambling activity under the principle of responsible gaming:
Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing is applicable to the gambling sector in Hungary. The Act is in compliance with Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and applies to operators of casinos or card rooms, and providers of gambling services (other than distance gambling), distance gambling services or online casino games.
AML requirements comply with the requirements of the EU Directive.
AML regulations include actions such as carrying out proper customer due diligence at the following stages:
This measure also inherently implies granted access to personal data and address records. Operators of casinos and card rooms are empowered to record photographic images of natural person customers and to make video recordings of activities carried out in the casino or card room, and to keep such photographic images in storage in their electronic registers, if the data was obtained while carrying out customer due diligence measures.
Furthermore, a report shall be filed on any person who is suspected of money laundering or terrorist financing suggested by information, circumstance, fact or evidence found out by the directors, managers or employees of service providers and their participating family members.
The National Consumer Protection Authority is the supervisory agency.
There is no specific definition of advertising in the Gambling Act, but Act XLVIII of 2008 on the Basic Requirements and Certain Restrictions of Commercial Advertising Activities defines advertising as “any form of communication, information or the making of a representation in any form with the aim or having the direct or indirect effect of promoting services and goods, or in connection with this objective, the representation of the name, the trade mark or the activities of a producer of goods or a provider of services.”
Advertisements for the promotion of gambling may be published in Hungary only in accordance with Act XLVIII of 2008 on the Basic Requirements and Certain Restrictions of Commercial Advertising Activities, according to which a gambling organiser must inform the advertising service provider of the following in order to place an advertisement:
The following prohibitions apply to advertisements related to gambling:
In the event of unlawful advertising, the authority imposes a fine upon the advertiser, the advertising service provider, the publisher of the advertisement and the person who participates in the advertisement collectively, of up to ten times the financial advantage acquired by the unlawful advertising – at least HUF10 million.
If the advertiser, the advertising service provider or the person who participates in the advertisement cannot be identified, the authority shall impose the fine upon the publisher of the advertising.
The licence shall pertain exclusively to the gambling operator defined in the licence, or to the one consisting of the members defined therein, and the licence shall not be assigned to other operators.
As a general rule, the Gambling Supervisory Authority shall be notified within 30 days of any changes in the facts or circumstances related to the operation of gambling activities that were taken into consideration in the licensing procedure.
As mentioned above, the licence shall not be assigned to other operators.
There are no specific requirements for passive investors in acquisitions or changes of control.
There are three authorities (not including criminal authorities) that have power of enforcement regarding gambling: the Gambling Supervisory Authority, the National Media and Infocommunication Authority, and the National Tax and Customs Administration.
The Gambling Supervisory Authority has the right to enforce its final decisions if they are made in connection with an action that can be carried out directly by the authority (such as the withdrawal of a licence).
A specific form of enforcement is website blocking, whereby the Gambling Supervisory Authority orders the blocking of unlawful gambling operations. The National Media and Infocommunication Authority shall organise and monitor the execution of rendering electronic information temporarily inaccessible, in accordance with the Act on Electronic Communications.
The enforcement of the National Tax and Customs Administration is carried out on the basis of Act CLIII of 2017 on Enforcement Proceedings to be Implemented by the Tax Authority, and includes the enforcement of both penalties and specific acts.
As noted in 11.1 Powers, the sanctions imposed by the Gambling Supervisory Authority shall be enforced by the Gambling Supervisory Authority, the National Media and Infocommunication Authority and the National Tax and Customs Administration, depending on the type of the sanction.
As a basic principle of any enforcement, those enforcement acts that result in achieving the objective of the enforcement in the most effective manner and at the same time cause the least restriction to the judgment debtor with a view to the principle of proportionality shall be implemented.
If the decision to be enforced has several alternatives, the authority shall implement the act entailing probably the lowest costs.
As a general rule, the right of enforcement shall lapse three years after the effective date of the decision. The term of limitation of a right of enforcement shall be interrupted by any act of enforcement. When discontinued, the term of limitation shall begin to run anew.
The Gambling Supervisory Authority is authorised to impose a fine on those who infringe the gambling regulations. However, the National Tax and Customs Administration is the competent authority to take both intra-territorial and extra-territorial enforcement actions against the infringers in the case of penalties.
To enforce a penalty in the territory of Hungary, the National Tax and Customs Administration shall notify the infringing party to pay and, in the event of an unsuccessful notification, shall commence enforcement against the infringing party.
To take extra-territorial enforcement actions, the application of Directive 2010/24/EU concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures supports the work of the authority. The scope of the Directive was extended by the practice of the European tax offices, and includes such public law debts that can be recovered as taxes, duties and other measures. In accordance with the relevant Hungarian law, a gambling fine is treated as a public law debt. If the requested authority accepts the request, it shall be treated as if it were a claim of the requested Member State. The request for recovery is accompanied by a uniform instrument permitting enforcement, which is not to be subject to any act of recognition, supplementing or replacement in the requested Member State.
Social games do not qualify as gambling under the Hungarian Gambling Act, and there is no direct regulatory oversight for social games, but both the Hungarian Consumer Protection Authority and the Data Protection Authority can supervise social games from a consumer and data protection point of view.
There is currently no legislation concerning eSports.
There is currently no legislation concerning fantasy sports.
There is currently no legislation concerning skill gaming.
There is currently no legislation concerning blockchain.
No reforms are anticipated in the gaming sector.
The Hungarian legislation differentiates the tax rates depending on the type of gambling: