Gaming Law 2020 Comparisons

Last Updated November 24, 2020

Contributed By NJORD Law Firm

Law and Practice

Authors



NJORD Law Firm is the only law firm in Estonia with a clear Nordic focus and coverage. It is strong on technology law and regulatory matters, including fintech, IT and gaming. The team for handling gaming clients consists of four lawyers and one assistant. For clients in the gaming industry, the firm starts from identifying the needs, creates tailored GAP analysis and considers gambling taxation structures, corporate matters, privacy policies, terms and conditions, AML/KYC compliance, and other parts of licensing. For already up-and-running gaming businesses, the firm provides day-to-day legal assistance within AML, marketing and consumer protection. Its compliance and AML expertise are on a very high level as it serves many clients in the banking and fintech sector, too. Among its gaming clients are well-known online providers on various platforms. The firm also serves land-based casino providers, as well as all kinds of different service providers to the gaming sector.

Operators in the Estonian Market

Currently there are 20 licensed gambling operators in the Estonian market (both online and land-based). This number is not impressive but it needs to be seen in the context that Estonia is a small country (1.3 million inhabitants). Out of the 20 licensed operators, there are some with a stable local presence (including land-based facilities), such as the listed Olympic Entertainment Group and Fenikss, but also some regional operators – such as Paf, Åland’s (a partly self-governed part of Finland) publicly held organisation, NinjaCasino and CoolBet – with a strong focus on the Nordics and then, of course, the big international players. Out of the total of 16 online licences, five have been issued to foreign legal entities.

Sector Developments

The authors have noticed an increase in interest in Estonian licences, both in land-based and online. The Estonian digital landscape attracts international companies due to the convenience of the e-residency programme, which allows for companies to be managed digitally from wherever there is an internet connection, and the wide range of digital services offered by the public authorities, as well as co-operation partners, including the regulator. The COVID-19 crisis hit the land-based business hard for a couple of weeks in the spring and during the same period the online market grew more than the offline declined.

Professional advisers expect an increase in the online market in the upcoming years, following international trends. The land-based market is expected to remain the same, mainly due to the difficulties in achieving consent from the local municipalities.

Receipt of Gambling Tax

According to the 2021 Estonian state budget, an increase of approximately 11% in gambling tax receipts is planned. So the growing trend is also noticed from the state’s side.

Operators Returning to the Estonian Market

The number of issued licences in Estonia has varied greatly over the years. The reason has little to do with Estonian legislation but rather the legislation of competing jurisdictions. Some ten years ago, most operators located to Malta and left Estonia. Some of them are now looking into possibilities to return. The Nordic approach (straightforward and little fuss) of the Estonian regulator seems to be one important reason. International operators with Estonian licences are not only interested in the rather small market of Estonian players but foremost in the players from other EU countries where there is no local regulation in place yet, as well as unregulated markets. The Estonian digital level is also a factor that supports the attractiveness.

A New Type of Show Did Not Stay on the Market

In 2019 a new type of game show was introduced on daytime TV but the operator decided to withdraw from the market due to difficulties in handling the negative media surrounding underage playing.

Increase in Sports Betting

During recent years an increase in sports betting has been noticed. Of course, due to COVID-19, this line of business was on hold for a period of time, but it has revived. If, earlier, the main operating permit that was applied for was for games of chance, then now almost all operators in this market also have toto licences (sports betting).

AML and Compliance Are Growing

Estonian banks are increasingly rigid in their KYC work and the gaming sector is looked upon with some level of suspicion. As the AML laws and regulations become more and more strict, both for gambling operators and for banks, the compliance work at the operators requires more and more resources.

Cryptogaming

Estonia is also known to be a crypto-friendly jurisdiction and there is an increasing international trend in cryptogaming. As long as the banking sector does not want to take part in the crypto business, the authors see no immediate development towards cryptogaming with Estonian licences. See also 12.5 Blockchain.

In Estonia the following sectors are regulated and permitted: sports betting (defined as toto), bingo, casino, lotteries and poker. Please also see 3.2 Definition of Gambling for types of gaming.

Social gaming and fantasy sports are not regulated by the law. Fantasy sports are mainly within a smaller group of friends for fun. There are no large platforms, such as those in the USA or the UK, where they can be played professionally for money.

Organising of gambling is prohibited if the prerequisite for determining the outcome of a game is to achieve a certain number of participants or bets, and the return of the full bet to the player is not guaranteed in case the prerequisite is not achieved.

See 2.1 Online.

In Estonia the following acts apply to the gambling sector:

  • the Gambling Act;
  • the Gambling Tax Act;
  • the Advertising Act; and
  • the Money Laundering and Terrorist Financing Prevention Act.       

According to the Gambling Act, § 2, section 1, gambling is a game that meets all the following criteria:

  • it is a precondition for participating in a game that the player makes a bet;
  • the player may win a prize as a result of the game; and
  • the outcome of the game is partly or fully determined by an activity based on chance or depends on the occurrence of a previously unknown event.

There are four types of games in Estonia.

  • Games of chance (games organised on gaming tables and gaming machines) – games in which the outcome depends on chance and that are played by means of a mechanical or electronic device or by mediation of the organiser of the game.
  • Lotteries (bingo, etc) – games in which the outcome depends on chance, the prize pool constitutes up to 80% of the selling price of the circulation of the lottery tickets, and the outcome of the game is not determined more than three times per 24 hours or it is determined by opening the ticket field on the lottery ticket.
  • Totos – games in which the outcome depends on the occurrence, non-occurrence or manner of the event predicted by the player, where the event on which the player is betting is beyond the control of the gambling operator. The winning of a prize depends on whether the bet turns out to be true or not and the amount of the prize depends on the amount of the bet and the winning coefficient determined before the making of the bet (betting) or percentage of the total amount of the bets as determined by the gambling operator, the number of people who bet correctly and the amount of their bets (totaliser).
  • Games of skill (poker, etc) – games in which the outcome depends predominantly on the physical skills or abilities, or knowledge of the player, and that are played by means of a mechanical or electronic device.

Land-based gambling is not specifically defined but this is the starting point of the legislation.

Online gambling is considered a way of organising gambling. According to the Gambling Act, § 5, Section 1, remote gambling (online gambling) is the organisation of gambling in a manner where the outcome of the game is determined by an electronic device and the player can participate in the game by electronic means of communication, including telephone, the internet and media services. Gambling is not considered remote gambling where electronic means of communication are used only for receiving bets, providing information about the outcome of the game or transferring a prize amount to the account of a player.

All offences are covered in Section 5 of the Gambling Act. The key offences and penalties are as follows (one fine unit is EUR4).

Violation of the Age Limit Established for Players of Gambling Games

A person under 21 years of age being present in a gaming location for games of chance or enabling a person under 21 years of age to play a game of chance or a game of skill organised as remote gambling; or enabling a person under 18 years of age to be present in a gaming location for a toto or enabling such person to play a toto; or enabling a person under 16 years of age to play the lottery is punishable by a fine of up to 200 fine units or detention. If committed by a legal person, the same act is punishable by a fine of up to EUR2,600.

Violation of the Requirement for Identification and Registration of Persons Entering a Gaming Location

Failure to identify or register persons entering a gaming location for games of chance by the organiser of the game of chance or violation of the requirements established for registration is punishable by a fine of up to 100 fine units. If committed by a legal person, the same act is punishable by a fine of up to EUR2,000.

Violation of the Rules of the Game and Deceit of a Player

Violation of the established rules of the game, deceit of a player and failure to submit the rules of the game to a player at the player’s request are punishable by a fine of up to 200 fine units or detention. If committed by a legal person, the same act is punishable by a fine of up to EUR2,600.

Violation of the Restrictions on the Participation of Persons under 21 Years of Age in Gambling

A person under 21 years of age is punished for playing a game of chance or a game of skill organised as remote gambling or for being present in a gaming location for games of chance by a fine of up to ten fine units.

The organisation of prohibited gambling is punishable by a fine of up to 200 fine units or detention. If committed by a legal person, the same act is punishable by a fine of up to EUR2,600.

The organisation of gambling by a gambling operator holding an activity licence without an operating permit or at a location not indicated in the decision on the issue of the operating permit, as well as organisation of gambling not indicated in the decision on the issue of the operating permit are punishable by a fine of up to 300 fine units. If committed by a legal person, the same act is punishable by a fine of up to EUR2,600.

The Gambling Act entered into force on 1 January 2009 and there have been only minor changes made to it. There are no pending amendments to the legislation.

State supervision over the organisation of gambling is exercised by the Tax and Customs Board, which decides on issuing, refusing and revoking activity licences for the organisation of gambling and operating permits for gambling.

The Estonian regulator, the Tax and Customs Board, is approachable and co-operative.

In Estonia, licensing is a two-step process: first, the intended operator will be scrutinised when applying for the activity licence and then follows the application for an operating permit, whereby the actual organising of the gambling will be examined and assessed. The activity licence and operating permit must be applied for each type of gambling separately. See the types of gambling in 3.2 Definition of Gambling.

Gambling must be the sole activity of the gambling operator. The organiser of gambling may engage in ancillary activities related to the organisation of gambling at the gaming site, including catering, currency exchange and the organisation of leisure and cultural events (only for land-based).

Both licences are issued by the Tax and Customs Board and are readily available after complying with the requirements of the law and submitting the documents and information necessary.

Activity licences are issued for an unspecified term and are not transferable.

An operating permit is issued for up to 20 years and it is not transferable. Operating permits for remote (online) gambling are issued for five years.       

The key application requirements are as follows.

  • Activity licence – the purpose of the activity licence is to ensure that the company and the people related to the company are experienced in this field and have the funding needed to organise gambling. Documents proving the reliability and competence of the persons involved must be submitted (shareholders, management board members, supervisory board members, etc). All shareholders who own at least 10% in the gambling operator must disclose additional information and documents.
  • Operating permit – the purpose is to assess whether the games to be provided are in compliance, all the necessary systems are up and running, and the documents comply with the provisions set by the law. This includes AML/KYC procedures, consumer protection, gaming rules, etc, as well as the technical solution. A gambling operator must ensure that it has access to the list of persons that have self-restricted their playing of games, with the help of the Tax and Customs Board. Also, an electronic record-keeping and control system must be adapted to the gaming operator system.

The electronic record-keeping and control system is an electronic communications network connecting the gaming machines of the gambling operator or additional games of chance, or gaming equipment used for the organisation of remote gambling or toto. The gambling operator shall ensure the possibility of connecting the electronic record-keeping and control system with the information system of the Tax and Customs Board. This system shall ensure the registration and recording of data in a manner that enables calculation of the turnover of the gambling operator and the percentage of the distributions made to players in the total amount of all bets for each gaming machine, each gaming table connected with the system and remote gambling at any moment of time. This is important from a gambling tax perspective.

The decision to issue an activity licence, or refuse to, must be made within four months of the receipt of all the necessary documents and information but not later than six months after receipt of the application. From the authors' practice, a well-prepared application may secure the licence within one month only.

As to step two, the operating permit, the decision shall be made within two months but not later than four months after receipt of the application for the operating permit. Again, a well-prepared application will result in a fast process.

The state fee for applying for an activity licence is set at EUR47,940 (games of chance), EUR31,960 (toto/sports betting) and EUR3,200 (games of skill).

The state fee for an operating licence is EUR3,200 (regardless of type).

The state fee for reviewing a lottery operating permit is EUR640.

There are no annual fees. Once the licence needs to be renewed, the same fees apply as for a new one.

For a land-based casino, you must obtain the written consent of the local municipality government for opening at a certain location. Such a location may not be situated together with preschools and childcare institutions, schools, youth organisations, etc. A gaming location for games of chance may only be situated in a separate building, a hotel, conference centre or recreational establishment, or in a business building or shopping centre and if there are no residential parts in the same building.

The consent for opening a gaming location for a game of skill is granted for up to 20 years, and the consent for opening a gaming location for a game of chance or toto is granted for 5 to 20 years.

As the local government must give its consent to the location, it is vitally important to have competent local advisers who know how to approach them in the best way. This topic can be sensitive and needs to be handled diligently.

Estonia does not distinguish between B2C and B2B licences. A gambling operator is engaged in the organisation of gambling and needs a licence in order to engage in its activities.

A gambling operator may transfer its activities aimed at organising gambling to another person only upon the written consent of the regulator. The Tax and Customs Board shall decide upon granting the consent or refusing to grant the consent within 30 working days after receipt of an application.

Please see 6.1 B2C Licences.

Please see 6.1 B2C Licences.

The company that is organising the gambling and offering it to the Estonian market is the one that needs licensing. In the case of white labels operating under the licence of the white-label provider, there is no additional licensing; however, the licensee needs to keep the regulator informed regarding the trade marks and websites used by the operator.

There are no recent or upcoming changes.

For gambling operators that have no activity licence or operating permit in Estonia, the Estonian Tax and Customs Board implements measures to restrict gaming. There is a list of domain names for blocked illegal remote gambling servers (HAMPI). As there are over 1600 sites listed and the list is constantly updated.

HAMPI contains a list of persons that have self-restricted their playing of games. The purpose of maintaining the list is to provide persons with an opportunity to limit their gambling in order to mitigate the potential negative social and economic consequences of gambling to the persons themselves and to society. A person may choose which type of game he or she is going to restrict. It is not possible to file a request for setting restrictions for others; for example, a family member or a friend. It is possible to set restrictions on games of chance (land-based and online), toto and classical lotteries. The restrictions do not apply to instant lottery (ie, scratch lottery tickets). The holder of the list of persons with restrictions on gambling is the Estonian Tax and Customs Board.

Before allowing a player to play a game for the first time, the gambling operator shall conspicuously present the opportunity to set an upper limit for the amount that the player will be ready to lose as a result of gambling with the given operator during a week or month. An operator is prohibited from accepting bets that may increase the loss of a player beyond the limit set by the player.

The gambling operator must ensure that a clear warning is presented to the player regarding the addictive nature of gambling and that a reference is made to the contact details of organisations that assist gambling addicts.

The player must be constantly shown clear information about how long he or she has been playing and must be able to see the details of his or her bets and winnings.

In addition to HAMPI (see 7.1 RG Requirements), the gaming operators may also propose precautionary measures. Some of the key management tools used by the gambling operators are as follows:

  • timers;
  • reality checks;
  • timeouts;
  • self-assessment tests; and
  • supportive insurance (developed to prevent problem gaming by helping customers to get the professional counselling they need).

The relevant legislation is the Estonian Money Laundering and Terrorist Prevention Act from 2017 with amendments. The legislation has implemented the Fifth Anti-Money Laundering Directive.

The supervisory authority in this respect is the Financial Intelligence Unit of the Estonian Police and Border Guard Board. As from 2021, this unit will be allocated to the Ministry of Finance. There are no guidelines issued specifically for the gambling sector.

The Financial Intelligence Unit has the right to forward data that it has registered, as well as analyses and assessments to the Tax and Customs Board for proceedings related to a gambling activity licence.

Following the Fifth Anti-Money Laundering Directive, the Estonian AML law requires gaming operators as obligated entities to be diligent, to know the identity of their customers, to identify politically exposed persons (PEPs), to map their own risk appetite and implement procedural rules for KYC and AML, including monitoring obligations and to report suspicions or unusual transactions.

In addition to the general rules, a gambling operator is required to apply due diligence measures at least upon the payment of winnings, the making of a bet or on both occasions where the sum given or receivable by the customer is at least EUR2,000.

The supervisory agency is the Estonian Consumer Protection and Technical Regulatory Authority.

Advertising means information that is made public in any generally perceived form for a charge or without charge for the purpose of increasing the provision of services or the sale of goods, promoting an event or directing the conduct of a person in the public interest (Advertising Act, § 2 (1), Subsection 3).

Following the Advertising Act, § 292:

  • the advertising of gambling shall not contain an incitement to participate in gambling or visit a gaming location or information that may suggest that gambling contributes towards social success; and
  • the advertising of gambling shall include the textual warning (in Estonian): "Tähelepanu! Tegemist on hasartmängu reklaamiga. Hasartmäng pole sobiv viis rahaliste probleemide lahendamiseks. Tutvuge reeglitega ja käituge vastutustundlikult!" ("Attention! This is advertising of gambling. Gambling is not a suitable means for solving financial problems. Examine the rules and behave responsibly!") The warning shall, given ordinary attention, be noticeable, understandable and clearly distinguishable from other information.

The following restrictions stipulated in the Advertising Act are relevant.

Advertising of gambling, a gaming location or an organiser of gambling ("advertising of gambling") is prohibited if the organiser of gambling has no operating permit required under the Gambling Act.

Advertising of games of chance is prohibited except:

  • on the premises where a game of chance is organised;
  • on board a water craft or aircraft used for international carriage of passengers;
  • in the building of a passenger terminal of an airport or port that provides regular international services;
  • in a hotel where gaming premises for games of chance are located;
  • on the website of an organiser of games of chance; and
  • advertising communicated by post, email or phone, provided that the client has subscribed to it, it is communicated only to the client's own postal or email address, or the telephone number used by the client and the client is able to terminate the communication of advertising at any time by notifying the organiser of the games of chance of one's wish.

Advertising of toto is prohibited:

  • in and on the buildings and territories in the use of preschool childcare institutions, basic schools, upper secondary schools, vocational educational institutions, hobby schools, permanent youth camps and youth project camps, and in close proximity thereof; on websites directed at children; and at a place and during the time of holding an event that is mostly directed at children, and on the tickets for such event;
  • on television and radio programmes;
  • on the front and back covers of newspapers or magazines, unless published together with the sponsor's announcement; and
  • as outdoor advertising, unless published together with the sponsor's announcement.

Advertising of games of skill is prohibited:

  • in and on the buildings and territories in the use of preschool childcare institutions, basic schools, upper secondary schools, vocational educational institutions, hobby schools, permanent youth camps and youth project camps, and in close proximity thereof; on websites directed at children; and before or during television and radio programmes that are mostly directed at children;
  • on the front and back covers of newspapers or magazines, unless published together with the sponsor's announcement; and
  • as outdoor advertising, unless published together with the sponsor's announcement.

Advertising of lotteries is prohibited in and on the buildings and territories in the use of preschool childcare institutions, basic schools, upper secondary schools, vocational educational institutions, hobby schools, permanent youth camps and youth project camps, and in close proximity thereof; on websites directed at children; before or during television and radio programmes that are mostly directed at children; and at a place and during the time of holding an event that is mostly directed at children, and on the tickets for such event.

Advertising Act, § 33 – Violation of General Requirements for Advertising

The placing, producing or publicising of advertising that violates the general requirements for advertising is punishable by a fine of up to 300 fine units. If committed by a legal person, the same act is punishable by a fine of up to EUR10,000.

Advertising Act, § 34 – Violation of Prohibition on Advertising of Goods and Services

The placing, producing or publicising of advertising that ignores the prohibition on advertising of goods and services is punishable by a fine of up to 300 fine units. If committed by a legal person, the same act is punishable by a fine of up to EUR50,000.

A qualifying holding in a gambling operator is any direct or indirect holding in the share capital of a company organising gambling that represents 10% or more of the share capital of the company, or all rights related thereto, or of the voting rights in the company or that makes it possible to exercise a significant influence over the management of the company in which that holding subsists. Before acquiring a qualifying holding in a gambling operator, or increasing such holding so that its proportion in the share capital of the gambling operator, or all rights related thereto, or votes represented by shares will exceed 20, 30 or 50%, a person shall submit to the Tax and Customs Board data about the size of the holding to be acquired and additional information and documents regarding the acquirer.

Please see 10.1 Disclosure Requirements.

Passive investors are treated the same way as active ones.

The Tax and Customs Board may revoke the activity licence given if the gambling operator and its platform do not meet the requirements set by the law. For example:

  • the holder of the activity licence has organised gambling without an operating permit for organising gambling;
  • the holder of the activity licence has committed an intentional violation of tax law; or
  • incorrect information has been knowingly submitted upon the application for the activity licence.

The invalidity of an activity licence renders all the operating permits, issued to the same gambling operator for organising gambling of the same type, invalid. The person whose activity licence has been revoked shall close down all gaming locations of the same type of gambling and stop making the same type of gambling available within three days after the day of revocation of the activity licence.

An operating permit can be revoked if, for example:

  • the gambling operator has not engaged in organising gambling at the location indicated in the decision for over a whole running year without good reason; or
  • the gambling operator has repeatedly violated the regulation governing the advertising of gambling or the gaming location.

Please see 11.1 Powers, 3.5 Key Offences and 3.6 Penalties for Unlawful Gaming.

Please see 3.5 Key Offences and 3.6 Penalties for Unlawful Gambling.

More and more companies are organising consumer games online, mainly on Facebook. Consumer games are aimed at promoting the goods and/or services of a company and usually a prize or a certain type of credit can be won by the consumer. Consumer games are not regarded as gambling. However, compliance with consumer protection and advertising legislation is important, as the Estonian Consumer Protection and Technical Regulatory Authority exercises supervision over this. Special attention should be paid to when consumer games are directed at children, elderly people or other more vulnerable groups of people. So far, the supervisory authority has not been very active in curbing abuse.

Esports are trending among Estonian players. Since this area is not clearly regulated (esports are regarded mainly as games of skill), there have been discussions as to whether it needs separate legislation, and if esports should be considered as games at all or rather as sport. This is therefore a new and interesting industry where the authors expect changes in the legislation in the near future.

Betting on fantasy sports has become very popular in recent years and continues to grow rapidly. It is expected that more operators will offer this service and therefore there will be changes to the regulation as well.

No response has been provided in this jurisdiction.

Cryptogaming is growing internationally and probably also on the Estonian market; however, there is no gaming operator licensed in Estonia that offers cryptogaming. The reason being that the Estonian banks are very reluctant to onboard companies with crypto in their business model. As Estonia is considered a crypto-friendly market and there are many fintech start-ups that have identified these problems, the market should soon be able to handle AML/KYC with crypto players so that the AML laws can be upheld and thereby allow for licensed cryptogaming in Estonia.

The market is working well and there are no reforms in sight.

Estonian gambling tax is paid by the gambling organiser. The period of taxation is a calendar month. The tax rates of gambling tax are the following:

  • EUR300 per gaming machine used for the organisation of games of chance and 10% of the amount received from the bets made on the gaming machines used by the gaming operator for the organisation of games of chance, less winnings;
  • EUR1,278.23 per gaming table and EUR31.95 per gaming machine of skill;
  • when organising a lottery, the gambling tax rate is 18% of the amount received from the sale of lottery tickets;
  • when organising a commercial lottery, 18% of the prize fund of the commercial lottery, if the value of the prize fund exceeds EUR10,000;
  • in the case of remote gambling, toto and games of chance and skill, the rate of the gambling tax is 5% of the amount received from the bets made, less any winnings;
  • when organising a gambling tournament as a tournament, the gambling fee rate is 5% of the amount received from the participation fees of the gambling tournament, from which the part of the prize fund received has been deducted;
  • when organising a gambling tournament as a round game, the gambling tax rate is 5% of the amount received from the participation fees of the gambling tournament; and
  • when organising a gambling tournament as a tournament and a round as a remote gambling tournament, the gambling tax rate is 5% of the amount received from the participation fees of the gambling tournament.

Gambling tax is paid into the state budget, where it is distributed among ministries in accordance with the Gambling Tax Act. Declarations are submitted electronically.

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Law and Practice in Estonia

Authors



NJORD Law Firm is the only law firm in Estonia with a clear Nordic focus and coverage. It is strong on technology law and regulatory matters, including fintech, IT and gaming. The team for handling gaming clients consists of four lawyers and one assistant. For clients in the gaming industry, the firm starts from identifying the needs, creates tailored GAP analysis and considers gambling taxation structures, corporate matters, privacy policies, terms and conditions, AML/KYC compliance, and other parts of licensing. For already up-and-running gaming businesses, the firm provides day-to-day legal assistance within AML, marketing and consumer protection. Its compliance and AML expertise are on a very high level as it serves many clients in the banking and fintech sector, too. Among its gaming clients are well-known online providers on various platforms. The firm also serves land-based casino providers, as well as all kinds of different service providers to the gaming sector.