As change is the only constant in the gambling world, so do things seem to remain the same within certain parameters according to specific goals and ambitions. When a regulator decides to protect its citizens from harm by outside forces, especially when that regulator happens to be a member of the European Union – but generally as well – quite often what is really going on is an attempt to capture the flight of capital and feed the state coffers with money flowing offshore.

It doesn’t take a “jaundiced eye” or even a cynical outlook to see through the fog most times. It’s unclear precisely what is really going on here.

Moving Toward Privatization Hefty Fines Await Violators

Last week, the Dutch Minister of Finance revisited an idea we have been following off and on for about a decade – privatizing the state-controlled monopoly on some forms of gambling. The Netherlands lottery Nederlandse Loterij (NLO), is a state-owned enterprise as is Casino Holland with more than a dozen state-owned casinos spread throughout the country. See Lexology’s 2015 report titled Reform of the Dutch casino market and privatisation of Holland Casino: Dutch Ministry of Security and Justice announces public consultation (here).

This week we find that Holland’s gambling regulator, KSA (de Kansspelautoriteit), continues to take its duty to protect Nederlanders seriously (the sole reason many EU member states are allowed to violate free trade agreements and the right to open markets with gambling monopolies) with an m announcement that two licensed lottery operators there are allegedly breaking the law and subject to penalties up to €1m for serving denizens “games of chance” rather than approved games.

Postcode Loterij and VriendenLoterij have been served with notice of periodic penalties if they continue to offer unauthorized games specifically, Deal or no Deal and FriendsLottery Millionaires.

While lottery games like numbers drawings offer notoriously terrible odds and “theoretical” return to player percentages, – the regulator has determined that casino games of chance are more “risky” and breach the lottery providers’ agreements with the state. However, a little further into KSA’s statement, we find that it “simply” wants the two types of games to remain separate and distinct. Online lottery games are not permitted in the Netherlands, further complicating the thinking behind the potential adverse action.

“Legislation and regulations make a clear distinction between lotteries and more risky games of chance, including online games of chance,” said the KSA on the matter statement. “A different license is required for both games of chance.

“Lotteries may not be offered online; it is only permitted to sell participation tickets via the internet. The online offering of games that are linked to a lottery is prohibited. The law does not allow this. The KSA remains keen to ensure that lottery and online games of chance remain separate.”
According to the official Dutch Lottery website, “The chance of winning a prize higher than your own investment varies per draw and is 13.7% in 2023. This is an average across all 16 draws”.

Lottery Providers in Holland

The Dutch Lottery is a private limited company. It was created in 2016 by the merger of the State Lottery and Lotto. The official site currently lists 9 trusted brands including State Lottery, Lotto, Eurojackpot, Millionaire’s Play, Lucky Day, Scratch Cards, TOTO Shop, TOTO Casino, and TOTO Sport.

Postcode Loterij and VriendenLoterij intend to push back against the threat of €250,000 per week penalties, up to a maximum of €1m, through the appeals process but will stop offering the games by June 8, 2023, latest while the groups put up a legal defense.

Postcode Loterij and VriendenLoterij issued a joint statement declaring: “The KSA is of the opinion that these free lottery games do not fit within the lottery license. However, the games are a form of entertainment and fit within the safe nature of a non-profit lottery with only one goal: to raise funds for good causes.

“For the past 30 years, participants have always been able to participate in additional games in this way, whether or not via the mail, the internet, in special apps or live.

“Nothing is won by playing one of the games itself. In the games, like a traditional lottery, participants only receive a prize after a draw has taken place. With this, the games meet the requirements of the lottery license.”

Nearly €30M in fines levied in 2022

According to iGaming Business, KSA issued €29m in fines in 2022 and issued €9m in fines for “illegal gambling behavior”, based on the regulator’s Annual Report for 2022. Most of the findings are confirmed by CMS Law Now, a “Future Facing firm… with 79 offices in more than 40 countries and 5,000+ lawyers worldwide,” in an April report on gambling growth in the Netherlands.

According to these and other reports (official and summary), even larger fines have been levied against operators that do not possess a Dutch gambling license. “In late December 2022, the KSA imposed fines on Videoslots Limited (EUR 9,874,000), N1 Interactive Limited (EUR 12,640,000), Betpoint Group Limited (EUR 1,787,000), and Probe Investments Limited (EUR 1,128,000).

The KSA based the level of fines on its newly adopted fines policy from September 2021, which takes into account a company’s turnover in the Netherlands.”

While not directly relevant to any known case in the Netherlands, courts in Sweden recently ruled that basing fines on “turnover” (total betting volume) rather than gross gaming revenue (GGR) – the money a company actually takes in during a determinative base period, is an unfair and indefensible accounting practice by regulators there, according to March 2023 report by EGR Global.

 Source: Lottery groups face €1m penalty in the Netherlands over licence breaches, iGaming Business, May 30, 2023

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