An Online Gaming Update in Latin America

As previously reported in my article, “Online Gaming in Latin America,” in the April 2012 issue of CEM, there is an increasing number of offshore e-gaming operators looking to get involved in the Latin American market, and there could be some major changes in the way local governments regulate the sector. Casinos, bingo halls and slot parlors are increasingly commonplace in most jurisdictions, and gambling is becoming more widely socially acceptable. In countries such as Chile, the 17 new casinos are part of much larger leisure and hotel facilities that have gone a long way to improve the image of gambling in the region, and governments have been quick to realize the potential of tax revenue generated by the industry.

However, the region has been slow in addressing the issue of online gambling. This is understandable, given the lack of such regulation in some jurisdictions such as Bolivia and Peru, where significant inroads have been made in recent years in terms of creating a well-regulated gaming landscape. Now that the land-based sector is finally in order in many countries, and gaming is, as a whole, much more efficiently regulated and monitored by local governments, gambling boards are now finally turning their attention to the issue of online gaming.

With or without government regulation, there has been growth in the region, thanks to the growing popularity of gaming, access to fast and cheaper Internet and the popularity of smartphones. In fact, in Latin America, mobile broadband subscriptions are now more popular than fixed broadband subscriptions and are estimated to grow by 50 percent over the coming years. And with the regulatory road still uncertain in a number of countries in Europe—which, in many cases, continue to protect long-established government monopolies—offshore operators are now looking to emerging markets in Latin America. Here we highlight what we think could be some of the most important developments on the way in Latin America’s growing e-gaming industry.

Argentina

Access to Broadband and Smartphones
Mobile broadband is now more popular than fixed broadband in Argentina, as there are now 4.5 million fixed broadband subscribers and 5.3 million mobile broadband subscribers. In Argentina, 24 percent of the population owns a smartphone.

Current Legal Status
Online gambling is permitted, but only under special conditions, and it is restricted to a small handful of licensed operators. These operators may only offer their services in the state where they have been granted a license or they face prosecution. On a national level, there is no law in place that specifically covers the issue of online gaming. However, offshore operators are targeting the market and, in a great number of cases, accept players from Argentina. They are also increasingly present in local media, advertising their services on television, especially via sporting events and sports news bulletins.

Recent Developments
In May 2012, the Buenos Aires Lottery officially questioned bwin’s activities in the province by responding in writing to a legal question put forward by the ombudsman’s office regarding its activities. bwin operates in Argentina under a license granted to it by the state of Missiones, but has accepted players outside of that state in the past. In August 2012, a federal court supported the claims put forward by the Buenos Aires Lottery, arguing that only the lottery was permitted to offer sports betting in the province. It is believed that this could mark the beginning of a wider challenge to offshore gambling companies offering their services to locals in Argentina. For now it would seem that offshore operators will continue to operate in the gray market, with the province of Buenos Aires increasingly vigilant when it comes to protecting its monopoly over sports betting.

Chile

Access to Broadband and Smartphones
There are 2.21 million broadband subscribers in Chile and 27 million mobile phone subscribers. In 2012, mobile broadband connections in Chile grew by 105 percent to reach 2.96 million and surpassed fixed broadband connections. There are about 1.83 million smartphone users. According to some estimates, as many as 75 percent of the mobile phones sold in Chile will be smartphones by the end of 2013.

Current Legal Status
Online gambling is illegal in Chile, according to Chile’s gaming laws. However, the government does not actively move against offshore operators offering their services to Chileans, nor does it target players. It is estimated that Chileans gamble around $10 million per year on online casinos.

Recent Developments
In 2011 and early 2012, it appeared that the government was looking toward Europe to gauge the outcome of the liberalization of the market, particularly in countries such as Spain and France, and it was believed that in the future, the gambling control board could begin to offer licenses to offshore companies looking to offer their services to Chileans. Since then, there have been important developments that point to a shift in direction with online gaming being permitted, but only by locally based operators.

In September 2012, the Chilean State Lottery requested that the government grant it licenses to run an online casino. According to lottery officials, this would help the lottery adapt to current market conditions and would also curb illegal betting via unlicensed offshore betting sites. In June 2012, Sens. Antonio Horvath and Ricardo Lagos submitted legislation that would grant a limited number of online licenses to casinos that are already licensed to operate in Chile. While legislation is at an early stage, it is still unclear exactly how e-gaming will be regulated in the future, but it is becoming an increasingly pressing issue. It is believed that the government could well rule on online gaming sometime in 2013.

Brazil

Access to Broadband and Smartphones
At present, 13.5 million Brazilians have access to fixed broadband. The government is actively involved in expanding the broadband network nationwide so that those living in some of the more remote parts of Brazil have access. Under current plans, mobile broadband coverage is set to reach 88 percent of Brazilians by the end of 2014. Brazil is also leading the way in terms of mobile phone usage and the use of 3G technologies. There are more than 260 million active mobile phone connections and 60 million mobile broadband connections. By the end of 2016, it is estimated that there will be 75 million smartphone users in Brazil.

Current Legal Status
Brazil’s gaming laws date back to 1946. The 1946 act banned not just casino gaming, but other games of chance as well, with the sole exception of horse racing. Consequently—although online gaming is, of course, not expressly covered by the 1946 act—online sports book betting, as well as online bingo and casinos, are banned in Brazil.

Recent Developments
Attempts to block access to offshore sites have found little support within the government, as have other attempts to expressly ban online gaming in new legislation. The most recent attempt to address the issue came in December 2012 when the Senate committee for science, technology, innovation, communication and computing looked into the issue of blocking credit card transactions to online gambling sites. A draft law was then put before the Senate for consideration. For now, it is unclear exactly when the Senate will rule on the issue. Meanwhile, despite the current ban, Brazilians continue to gamble via offshore operators in increasing numbers and a number of offshore betting sites advertise themselves quite openly in local media. According to Superdata, which provides data and intelligence on online games, the online games market in Brazil currently stands at $265 million and continues to grow at a fast rate.

Poker is becoming increasingly popular, with a number of both male and female players gaining worldwide recognition and an increasing number of players now playing online. Growth has been driven in part by the Brazilian Series of Poker (BSOP), the country’s biggest poker tour, which was sponsored by PokerStars in 2012, hailing the beginning of a large-scale marketing campaign in the region. For now, despite current proposals, the government has shown little signs that it is willing to address the issue head on. And despite the millions lost per year in gaming tax revenue, it would seem unlikely that a new law regulating the online sector will be on the table any time in the near future. This is because gambling remains a highly sensitive issue in Brazil, and illegal gambling has become the focal point once again for a corruption scandal involving high-ranking politicians and members of the Brazilian underworld.

Mexico

Access to Broadband and Smartphones
The broadband penetration rate in Mexico stands at 20.3 percent, including both fixed and mobile connections. There are 9.7 million mobile broadband connections and a total of 14.4 million fixed broadband connections. There are 23 million smartphone users in Mexico.

Current Legal Status
Online gaming has been permitted via special license in Mexico since 2004. Only local land-based operators are permitted to apply for an online license.

Recent Developments
Despite the ban, Mexicans continue to gamble via offshore betting sites rather than licensed operators, and with a value of $300 million a year, Mexico is the fastest-growing online gaming market in Latin America. Until recently, the government did very little to curb online gambling or make any significant inroads in more fully regulating the industry. In November 2012, Mexico’s Interior Ministry, which is the body responsible for gaming in Mexico, announced that it would be working closely with two of the most powerful Mexican gaming associations, as well as the Association of Mexican Banks, to identify, control and supervise sites targeting the Mexican market from offshore. The agreement is designed to pave the way for new government policy, which would restrict the activities of offshore operators in the Mexican market. In the future, the government could seek to block banking transactions with offshore operators, and Mexico’s Interior Ministry will keep a database of unlicensed offshore operators that continue to target the market.

Peru

Access to Broadband and Smartphones
There are currently 1.42 million broadband users in Peru and the broadband penetration rate stands at 4.7 percent. Although this is low, it is set to expand rapidly over the coming years so that it will stand at just above 9 percent by the end of 2016. The use of smartphones also looks likely to expand rapidly over the coming years. Smartphones are set to make up a total of 61 percent of all mobile phones in Peru by the end of 2016.

Current Legal Status
Although Peru is not one of the largest markets in Latin America, it is one of the most progressive in terms of e-gaming regulation. In 2007, Peru passed a new gaming act that created a gaming board with wide-ranging legal powers to make sure that casinos and slot parlors are paying tax and operating legally. The government continues to enhance its regulation of the sector with the passing of an amendment in 2011, which allows the government to monitor all gambling transactions by a central government-controlled server. Additionally, the Peruvian government has issued a number of licenses for offshore operators, having issued its first license in 2008.

Recent Developments
There are currently no restrictions in place on locals betting via offshore betting sites. The government has also awarded a number of licenses for offshore gaming companies looking to enter the Peruvian market. In 2008, Betsson launched its first online gambling site in Peru. The site offers poker, virtual instants, poker and sports betting, including betting on local football matches.

With 15 million active members, the leading lottery operator in Peru, INTRALOT, has also been active in offering its products both on the Internet and via mobile phones. Although growth in the sector has been slow, it is believed that gambling via these platforms will gradually become more popular and that the company could expand to other products, including an online casino. The most recent online operator to offer its products in Peru is Offsidegaming. In 2012, Offsidegaming launched Inkabet.pe, the first local online operator in the Peruvian market. The site offers sports betting, casino and slots games, and is the first online casino that caters specifically to the Peruvian market. The site will also launch a live casino and follow later with mobile games.

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