Abstract
Foreword
The gaming sectors in Greece and Cyprus are developing rapidly. The market is changing in both countries with licenses being issued in Cyprus for betting operators and with the video lottery terminal (VLT) market opening in Greece by OPAP SA (Organisation of Football Prognostics, the leading company in land-based betting in both Greece and Cyprus). Moreover, Cyprus is opening its first land-based casino. A new era has begun for both EU member states and developments including daily fantasy sports (DFS) are currently in progress.
Cyprus
Online betting license status in Cyprus
The Betting Act 2012 (Law 106(I)/2012, as amended by Law 108(I)/2012 and Law 212(I)/2012), drew a line between gambling and betting, whereby gambling is linked with casino games and VLT machines, and betting is linked with sports betting, events, etc. Betting is allowed, while gambling is prohibited.
The term “bet” is defined as any type of bet carried out on sporting or other events, under the condition that a player's winnings are determined by the operator organizing the bet, prior to or at the time of processing the bet, with reference, not only to the participation fee, but also the fixed yield of the particular bet.
Prohibition of gambling services is applicable under Article 12 § 2 § b of the Act where operators providing services related to “VLT machines, on-line casino games of chance provided with a direct link” are excluded from licensing and pursuant to Article 79, anyone possessing or operating machines providing online casino services is guilty of a crime punishable with a term of imprisonment not exceeding five years or a fine not exceeding €300,000.
Online bookmakers are allowed to offer their services in Cyprus if they obtain a license. In the Preliminary Provisions (Article 2) of the Betting Act, the term “bookmaker's license” is defined as the license to provide betting services issued in accordance with the provisions of the Law. No online bet can be carried out without a license for a Class B bet established in the Act.
Article 3 of the Betting Act sets up the National Betting Authority (NBA); its members, pursuant to Article 4, are prohibited from having any financial or other interest, in relation to exercising the Authority's powers. Article 11 stipulates the Authority's powers and describes them in detail.
Online betting services can be provided by a person holding a Class B bookmaker's license, issued, following the submission of a relevant application, by the Authority in line with Article 12 of the Act. Pursuant to Articles 15 § 2 § a and 15 § 2 § b, the NBA, when examining an application, also examines the financial standing of the applicant, and if the criminal record is not clean, it will further examine the nature of previous convictions and the type and level of the sentence imposed.
Pursuant to Article 19, a Class B license cannot be transferred or assigned in any manner to any other person. According to Article 24 § 1 of the Act, a Class B license may be valid for one or two years from the date of issuance or renewal, depending on the time specified in the application.
According to Article 58 § 2, the processing of a Class B bet is only permitted by using credit cards, debit cards, electronic transfer, and electronic money, while it is prohibited for the licensee to accept the process of a bet in cash. Moreover, under Article 80 § 1, processing betting exchanges is prohibited.
Pursuant to Article 28 of the Act, applications for a Class B license may only be submitted by a company with shares, established in Cyprus or abroad. An overseas company must have a branch in Cyprus and its main activity must be to carry on bets. The company's issued and paid up share capital must be at least €500,000. Under Article 29, an application for a Class B license is accompanied by a bank guarantee from a commercial bank conducting banking business in Cyprus or in a member state of the EU or a cooperative bank, for €550,000 which expires six months after the expiry of the license. Moreover, a license fee for a one-year license costs €30,000 and a license fee for two years costs €45,000.
In line with Article 64, the Class B licensed bookmaker is obliged to maintain a specialized website, accessible only through Internet addresses ending in “.com.cy.” However, the gaming system server does not have to be located in Cyprus, as one backup server may suffice if the NBA can accomplish real time oversight of any operation.
Article 71 § 2 of the Act indicates that betting tax in every accounting period (i.e., within twelve months), amounts to 10% on the net proceeds from the licensed Class B bookmaker's bets for the corresponding period. The total may add up to 13%, i.e., 10% gaming tax and 3% NBA contribution, of which 2% is distributed between local Sport Federations and 1% is offered for protection programs of problem gamblers and minor gamblers.
Moreover, in line with Article 74, anyone providing betting services without holding a Class B license is guilty of an offense and is punishable with a term of imprisonment not exceeding five years or a fine not exceeding €300,000. Further, under Article 76, anyone placing a bet processed contrary to any of the provisions of the law, is guilty of an offense and is punishable with a term of imprisonment not exceeding one year or a fine not exceeding €50,000.
NBA started granting permanent licenses
Applications for Class B licenses became available on October 1, 2016. The president of NBA, Ioanna Fiakkou, announced that the Authority would accept applications on October 3, 2016. According to the Cypriot finance minister, Harris Georgiades, the opening of the online betting market was part of a governmental approach to increase tax revenue.
For several years, Cyprus had stopped issuing any licenses whatsoever until that date, however, on October 3, 2016 the NBA began accepting applications for the first online betting licenses and local banks were expected to provide gaming accounts to companies. Several licenses have been issued since then: in 2017, Hillside (New Media Cyprus) Limited, Bet On Alfa Limited, Gambling Malta Limited, Betfair International PLC, Meridian Gaming (CY) Limited, U.B.E.T. Ultimate Bet Entertainment Technologies Ltd, Cleverpath Holdings Limited, and WM Interactive Limited were licensed, thus they are now able to legally offer betting services in Cyprus. 1
As of the time of this writing, the NBA had not yet issued any relevant license to OPAP, a major sports betting operator in land-based betting not only in Cyprus, but also in Greece. The Greek State is no longer a major shareholder of OPAP and several critics claim that its monopoly over the land-based betting market in Cyprus should end. Moreover, OPAP has been asked to give access to its accounts and for the moment it has not complied. The Interstate Agreement between Greece and Cyprus as it concerns OPAP may be over in a few years if OPAP does not improve its relations with the Cypriot government.
It seems that a new era may begin in Cyprus, with the potential termination of OPAP's monopoly, which is no longer backed by the Greek State, and with a new mentality aiming to increase the issuance of more Class B online betting licenses in the following months.
Land-based casino in Cyprus
Cyprus' plan to increase tax revenues may further be established with the building of the first land-based casino on the island.
In 2015, Law 124(Ι)/2015 came into effect to regulate casino gambling. The National Gaming and Casino Supervision Commission was established under Article 5 of the law, consisting of seven members (Article 6). Article 15 § 1 stipulates that only one casino will open in a period not exceeding 15 years from the date of issuance of the first casino resort license. Under Article 17 § 1 § I, with the prior written approval of the Commission, the shareholder of the integrated casino resort operator company will be able to transfer, dispose of, or convert any part of his stake if the stake proposed to be transferred is equal to or greater than 10% of the equity and/or total votes attached to all voting shares in the operator. Under Article 18 § 2, a person operating a casino without a casino license by the Commission shall be guilty of an offense.
Article 23 § 1 stipulates that the integrated casino resort license granted shall be to develop, operate, and maintain an integrated casino resort as a whole and not for the casino alone, under conditions which the Commission considers necessary to impose. Under Article 24, the license lasts for 30 years. Moreover, Article 26 § 3 determines the annual license fee due each year for the first four years following the date of the granting of the license at €2,500,000 and after the first four years and until the eighth year the annual license fee amounts to €5,000,000.
It is possible that VLTs may also be licensed and the state lottery may be privatized. Under Article 48 § 1, a person can supply gaming machines or gaming test services to the casino and the operator is permitted to be supplied with gaming machines or gaming test services, if the supplier of gaming equipment or gaming test services holds a valid gaming supplier license from the Commission or is exempted from this requirement by the Commission.
It is clear by now that one land-based casino will open and table games will be allowed. However, under Article 16 § 1, the casino resort operator shall be permitted to develop and operate up to four satellite casino premises apart from the casino resort, with a maximum of 50 gaming machines in each and five gaming tables in one of them. Under Article 16 § 2, the satellite casinos will be placed in different districts of Cyprus selected by the operator and at locations different to the district where the casino resort is located. Moreover, the satellite casino premises will be operated in support of the operation of the integrated casino resort.
On Monday, June 26, 2017, Cyprus signed a “landmark deal” 2 for the construction of what is perceived as “Europe's biggest casino.” 3 In order to accomplish this, Cyprus backed proposals from a consortium of Hong Kong-based Melco International, the U.S.' Hard Rock (initially), and local firm CNS Group in order to build the casino resort at Limassol. 4 Melco International Development Ltd. assumed the majority stake of 70.74% shareholding of the integrated casino resort project in Cyprus, with the agreement to purchase Hard Rock's interest in the project company. The remaining 29.26% belongs to CPZL. 5 The acquisition of Hard Rock's stake by Melco International Development Ltd. took place only a few hours after the agreement on the operation of the casino was signed. According to the consortium, the casino plans will not change and the completion of the project will be accelerated. 6
It seems that a new era has begun in Cyprus and even greater developments are to follow. If the new sector is profitable, current legislation prohibiting online gambling may be amended in the near future, especially if the Cypriot government truly wishes to expand its tax revenue. These recent developments establish that the Cypriot government seeks such expansion.
Greece
Developments in the Greek gaming legal framework
Online gambling is legal in Greece and is regulated by Law 4002/2011 as amended. Article 25 defines “games of chance” as games where the player risks money for potential profit and the result depends on luck even partially (mixed games are also considered “games of chance”). Article 27 § 1 of the law obliges operators to be licensed before offering games of chance online, and pursuant to Article 27 § 2 (added by Articles 34 § 5a and 34 § 5b of Law 4223/2013), the competent Authority, known as the Hellenic Gaming Commission (HGC), determines the supporting documents needed in order to obtain a license.
Most land-based games are controlled by OPAP, which retains a monopoly. However, OPAP's monopoly does not extend to online gambling. In March 2015, the Greek government envisaged to issue online gaming licenses in order to raise €500,000,000, with each license expected to cost €3,000,000. However, this did not happen and only 24 operators provide online services with temporary licenses issued back in 2011.
In 2016, the Greek government announced that it would issue online gaming licenses. This has not happened yet, although it is expected to happen soon. Moreover, the gaming tax was raised from 30% to 35%, although it is not yet clear as to what games would be allowed to be offered online by private operators.
No tender has been announced for permanent online gambling licenses yet, however, the current harsh economic environment will eventually force the Greek government to seek additional resources and online gambling will soon appear as a tempting solution to increase tax revenues.
Establishment and operation of VLTs in OPAP venues
Article 39 of Law 4002/2011 determines the licensing procedure for VLTs. Under this article, 35,000 gaming machines are licensed to operate and private operators interested in buying a license will have to do so by contacting OPAP. 18,500 VLTs may operate by sublicenses; 16,500 remain under OPAP's control. However, VLT licenses have not been sold yet to private operators, nor has OPAP utilized its own VLTs yet.
Nonetheless, the VLT market is considered as the means that would guarantee OPAP's growth in the near future and OPAP is considering proceeding with the VLTs in 2017. So far, from the total of 16,500 VLTs available to OPAP SA, 2,700 were launched, of which 1,800 are in 72 PLAY stores (special OPAP stores), while the remaining 900 are being promoted to OPAP's agencies. At the end of June, the PLAY OPAP network was estimated as having 100 stores and 250 agencies operating VLTs. 7
According to OPAP's CEO, Damian Cope, “virtual gaming has already been introduced to the entire network of agencies with the first results being encouraging; the development of VLTs is in full development, the program for upgrading the role of technology is proceeding rapidly and the new structure with regard to the agency commissions is in place since April.” 8
OPAP has already paid €560,000,000 to the Greek government to obtain the VLT license, thus it seems eager to see its investment paying off. Consequently, it is reasonably expected that within 2017, it will proceed in sublicensing the 18,500 VLTs to private operators. Suffice it to say that OPAP estimated earnings of €1,000,000,000 per year.
The HGC issued a new VLTs regulation (225/2/25.10.2016) and OPAP is now ready to proceed with the operation of VLTs in the Greek market. According to OPAP, the new regulation protects the public interest but also makes the whole enterprise financially viable. OPAP believes that this new regulatory framework for VLTs “takes advantage of the latest gaming technology and wholly leverages all available restrictive measures in order to protect players, in line with international best practices for responsible gaming.” 9 According to an announcement on November 2, 2016, OPAP decided that all of the appropriate conditions were in place to allow it to restart plans for the operation of VLT products in Greece.
Cope said:
Bearing in mind that the new approved regulation is among the strictest on an international level, the HGC's decision will now enable the legal development of VLTs and its fully regulated operation can create a new landscape in the gaming market in Greece. It will deliver benefits to the overall economy and contribute to tackling illegal gaming activity, bringing significant financial and social benefits for the state. Having remained absolutely focused on the VLTs project, OPAP will now enter the implementation phase of this investment and intensively work for the full deployment of the VLTs, which is a company priority for 2017.
10
Several international suppliers of VLTs have announced that they would provide OPAP with the necessary gaming machines. Inspired Gaming, one of OPAP's suppliers, will provide it with almost 4,000 VLTs that are expected to operate in 2017. According to Inspired Gaming CEO Luke Alvarez, the procedures are about to begin soon since a fully regulated VLT operation will be in place in Greece: “This news will enable us to commence the rollout of our VLT cabinets in 2017; a significant and exciting moment both for the landscape of the gaming market in Greece, and for Inspired … We are proud to be one of only four suppliers to OPAP, one of Europe's most established and respected operators, and look forward to a successful and long-term business partnership.” 11
IGT is expected to provide OPAP with 5,500 gaming machines while Scientific Games and Synot Group, who also supply OPAP, are expected to begin the exploitation of the VLTs in March 2017 at newly set-up outlets.
From all the above, it appears that OPAP is reasonably expected in the near future to sublicense by tender the remaining VLTs to private operators in order to further increase its profit.
Daily Fantasy Sports (DFS) As a New Promising Entrant to the EU Gaming Market
In fantasy sports games, players compete against other players by creating a team of real professional athletes. DFS is similar to general fantasy sports games with the players earning points based on the actual performance of the athletes in real championships and other competitions. Moreover, based on the athletes' statistical performance, the players may earn points and a cash payout.
It is debated whether or not DFS is “gambling” or not, given that people bet real money on statistical probabilities, however, unlike traditional betting where players may bet on the outcome of a single event (e.g., who is going to score), in DFS, the players have a whole imaginary team and they get more chances to win if they are competent. DFS may be compared with the stock market where, in a sense, people buy stocks hoping that their price will rise so that they can sell it and gain profit. Others see similarities between DFS and poker. In the U.S. however, the DFS games are surrounded by controversy, as it is not certain whether or not they can be classified as gambling.
For now, DFS are expanding in Europe. In the US, 2 million users play DFS on a daily basis and their number is growing. Two major companies, FanDuel and DraftKings, dominate the U.S. market and according to Eilers Research, DFS are expected to generate a profit of €5,000,000,000 in 2020. 12
In Europe, the DFS market is smaller but it is also growing. In the UK, it is estimated that 5 million players are playing DFS during an entire season. However, DraftKings is also expanding to Germany with a gaming license granted by Malta (Controlled Skill Games License). Thus, it is expected that DraftKings will also provide its services in other EU member states. Co-founder and CEO Jason Robins said, “We are excited to embark on this important phase of our international expansion.” 13
Several EU member states have begun to regulate DFS; however, Greece and Cyprus do not yet think that the DFS constitute gambling, thus there is no applicable regulation today. Moreover, DFS is currently relatively unknown in both countries. At the moment, DFS games are unregulated in Cyprus but they are not prohibited either, so interested users will need to visit websites located abroad in order to play. In Greece, DFS is also unregulated at the moment and OPAP's monopoly may complicate things, however the DFS games have not been deemed illegal.
There are reasons to believe, however, that in the near future, DFS may be regulated in both Greece and Cyprus. The Greek and the Cypriot markets are relatively unexplored and they await further developments in that field. It would seem that the first operator who will enter these two markets will establish its name in the sector and even if the market is regulated, this operator may continue to provide its services in markets that will continue to grow.
Final Note
From all the above, it becomes evident that better days are yet to come and things are changing for the better in both Greece and Cyprus, with new markets emerging. It seems that there is no better time for an interested party to prepare, plan, and act; after considering all the above-mentioned developments, it has to be admitted that nothing could be closer to the truth.