Mexico’s President Goes All In With Casino Decree

In an Oct. 23, 2013, Casino Reform Decree, Mexico President Enrique Peña Nieto (@EPN) added and repealed various provisions of the Regulations to the Federal Gambling and Drawings Law. It is clear this was the first step toward moving Mexico’s gaming business out of the shadows and into the international mainstream. The time is now to clean house and stimulate stated gaming expansion interests by both foreign and domestic corporations to develop the jurisdiction into a major worldwide gaming destination.

This action sent crystal-clear messages to the members of the National Action Party (PAN) (@AccionNacional) that their past decisions were wrong regarding casinos and that the laws that govern the industry need to be crafted in such a way that they are coherent and there can be no misinterpretation as to exactly what they mean. In addition, the action makes it clear that there can be no illegal activity outside of the federal laws and the law must be enforced. Amends must be made for all the past mistakes by the previous administration. However, to date, efforts have proven to be difficult, even agonizing at times, but President Peña Nieto is determined that what must be done will be done.

Multiple media outlets have taken this news event and simplified a very complex issue by addressing only one important point—the prohibition of illegal slot machines. Of course there are many other very important issues involved that would ideally move Mexico into an internationally recognized and regulated gaming jurisdiction.

The Casino Decree has two intentions in respect to this president and his political objectives. The first is to repeal any past and regrettable decisions on the subject made by the former President Calderón. The second is to change the direction as to the public policy of gaming championed by the PAN of 2004 to 2012. Unfortunately the end result of those misguided efforts has created chaos, corruption and a business landscape filled with legal uncertainties.

Legal operators must compete on an uneven playing field against a huge illegal slot base, as well as the proliferation of illegal casinos that can run restricted games because of no deterrence. The old saying goes, “When the cat’s away, the rats will play.” But now the hammer must come down, and “El Gato,” the cat, must go to work.

The Prohibition of Slot Machines

There is no doubt that the topic of illegal slot machines is an important fact that negatively affects all legally established casinos in the industry. In Mexico, an estimated 250,000 illegal machines operate in various establishments, such as illegal casinos, bars, pharmacies, bus stops and convenience stores. Not long ago a high-level source within the gaming industry told me that all this illegal activity was a significant problem for them, considered by all to be an unfair practice. Furthermore, the activity is believed to be in the hands of a well-organized mafia supporting certain political parties, and this has afforded complete immunity.

Thus, the prohibition of illegal slot machines ordered by President Peña Nieto is now on the table to be enforced. However, we shall see if state and municipal governments coordinate to combat this blatant disregard of the law and get down to the bottom of exactly who the beneficiaries are in this illegal business. Will some big-shot heads roll or just a few small fries take the fall? Will the president’s orders be ignored, and will it be monkey business as usual? Only time will tell.

It is not my intention to give a boring legal explanation on the text of the decree; however, I give a brief overview of the relevant issues. These are significant changes in the law that will impact Mexico’s gaming industry.

The president’s message is to centralize gaming and lotteries @SEGOB_mx all of which fall under regulatory control of the Ministry of the Interior. He was branded for interaction with the gaming industry and is the federal authority regarding anything to do with gaming.

1. Slots: All slots in any location are illegal unless federally licensed.

2. SEGOB_mx: This is the competent authority to authorize, control, monitor, process and resolve issues related to gaming and lotteries.

3. Permits: The General Office of Gambling and Drawings @SEGOB_mx will issue all correspondence regarding issuance, amendments and termination of permits gambling and lotteries, as well as monitoring and enforcing the terms and conditions set forth therein and removing the nonbinding opinions of the Advisory Board AKA Technical Consulting Agency referred to in Article 39 Bis that was repealed.

4. Advertising and Marketing Campaigns: Basic guidelines used anywhere in the world are authorized.

5. Sweepstakes Numbers or Symbols Through Machines: The mere inclusion of the word “Symbol” opens the possibility that eventually all those appliances or devices—read machines, tablets and smartphones—the Internet can offer all kinds of casino games, such as bingo, slots, poker, blackjack, etc., and operate seamlessly without factional interpretation.

6. The “Operation” for Third-party Permits: Under the amendment to Article 30 in Section III, Subsection c, operators are expressly prohibited from entering into any agreement that would allow a third-party operation of a licensed gambling establishment without federal government approval and licensing of the third party.

7. The Bottom Line: These new laws and regulations with the full support of the federal administration are to be implemented not only as a way to stop all illegal gaming activities but also as a way to quell any corruption in Mexico’s gaming industry.

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