Will Mexico Finally Pass a New Gaming Act?

It has been a long time coming, but Mexico seems finally poised to pass new legislation that would do away with the Betting and Raffles Law of 1947 and replace it with a new act. The news comes amid growing speculation that a wide sweeping new act could be a reality by the end of the year. The new law aims to regulate the gaming industry in the country, safeguard the rights of players and make the licensing process more transparent.

While in the past much of the impetus has been to permit casinos in tourist hotspots, which would be attached to five-star casinos, the renewed push is more focused on regulating an industry that has seen rapid expansion over recent years. Lawmakers also have been keen to put an end to the so-called umbrella licenses whereby operators have been able to operate a number of slot parlors and sports betting shops under a single license.

The new law has been the result of many months of work by the special committee first convened to look into the issue back in April 2013. The committee, made up of 11 deputies, was charged with looking into how licenses had been granted by the Interior Ministry (SEGOB) after growing reports of corruption and allegations that former members of SEGOB had trafficked licenses.

While the committee has been looking into the issue, the Interior Ministry has of late closed a number of establishments in the states of Nuevo Leon, Coahuila and Chiapas, with the government suspending around 50 casino licenses over the last year alone. While this has caused revenue to decline to around 30 percent over the last year, long term it is believed that revenues could begin to rise again once a new gaming act is in place. Gaming revenues will also benefit on the back of Mexico’s strengthening economy where GDP is expected to grow by approximately 3.7 percent in 2015.

The investigation into licenses has been particularity thorough. As well as closures, the committee has also asked for and received documentation from the Interior Ministry regarding all licenses granted in the past and looked into how operators have used local courts to appeal for stays of closure. In Mexico licenses were first handed out under a 2005 amendment to the 1947 law, and casinos in Mexico, while they may not house table games, can be large-scale as Class III slot machines were given the green light in August 2010.

The committee was also given the additional responsibility of suggesting any changes to Mexico’s 1947 gaming laws on the back of its findings. The need for change has become increasingly apparent ever since the Casino Royale Tragedy when armed men set fire to a casino in the northern province of Monterrey in 2011 and left 52 dead in its wake.

Although the Mexican government is once again considering new gaming legislation, this is by no means the first time it has done so, and legislation designed to do away with the 1947 act has often failed—and often at the very last hurdle. Crucially, however, the new act has found universal consensus from across all parties in the Lower House and has been developed closely with industry experts, including major players in the industry as well the Mexican Gaming Association (AIEJA). Momentum also began to build especially after the Head of Mexico’s Interior Ministry Miguel Ángel Osorio Chong called for urgent change to Mexico’s gaming laws before the Senate in May this year—a  call that was reiterated by the head of investigating the gaming industry in Mexico, Fernando Zárate Salgado.

It also comes at a time when the government is initiating a crackdown on illegal gaming nationwide, and the new measures will also cover slot machines found to be operating illegally in chemists, shops and other small businesses. Illegal slot machines have been on the rise of late and according to some estimates there could be as many as 200,000 illegal slot machines located throughout Mexico.

Under present proposals, operators currently operating a license under the terms of the old 1947 Raffles and Gambling Act will be allowed to operate until their licenses expire but will then have to reapply for a new license and meet the requirements stated by the new act.

For now, not all of the details are yet known as the bill has to be passed by the Lower House, but it is believed that the new bill could allow for table games and could also allow for an expansion of the online market. According to local press reports and industry experts, it is believed that:
•    Each casino or gaming establishment will be issued a single license per gaming establishment.
•    Licenses will be valid for 10, 12 or 15 years and will be renewable only once for the same period.
•    The minimum entry age will be raised from 18 to 21.
•    Anti-money-laundering measures will include provisions requiring that all bets made must be registered electronically and that operators must also report any suspicious activities to the newly appointed gaming board.
•    Slot parlors and sports betting shops will no longer be able to rely on stays of closure and protection from local courts if they are found to be in contravention of their licenses.

The new bill also creates a new gaming control board. Speculation has been growing, especially since the tragedy in Monterrey, that a new gaming board would be made up from members from a number of government departments and that it would no longer be in the hands of the Interior Ministry.

However, in a shocking move considering how closely the body has been tied to corruption scandals in the past, it is SEGOB that will remain firmly at the helm, and it will be the head of the Interior Ministry who will appoint the head of a newly created gaming board called the National Institute of Gaming and Raffles (Instituto Nacional de Juegos y Sorteos). Meanwhile, the Interior Ministry will also retain control over the opening and closing of all casinos and other gaming establishments, including sports betting centers and race tracks. It will also be responsible for onsite inspections of all gaming establishments and the number of inspectors could under present plans increase from 62 to 120.

The new act also gives operators already active in the marketplace the opportunity to expand their businesses for two years as it gives operators permission to make use of any licenses they have not yet made use of for that period. At present there are now a total of 340 casinos, which are registered with SEGOB. However, if operators decide to expand their operations and make use of all of the licenses currently granted to them, then this could more than double to 800.

This and the fact that SEGOB still retains control of the industry have sparked some early warning signs that the bill may not be quite enough to create a level playing field for operators. However time will tell exactly how far the government is willing to go to change Mexico’s antiquated gaming law. Either way the new act, if passed, will undoubtedly have a profound change on Mexico’s landscape for years to come.

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