Gabor Helembai -Hungary- Interview – (EEGReport – Magazine – Issue2 – February – May 2016)

EEGReport Magazine: The Hungarian online gambling sector has been subject to debate for quite some time now. What are the recent developments, and are foreign operators likely to be able to apply for licensing in the next few years?

Gabor Helembai: The Hungarian regulatory environment has not been a success story in recent years. Following some unexpected changes of the Act XXXIV of 1991 on the Organisation of Gambling (the “Gambling Act“), we have finally arrived at a relatively still period, which to be honest does not project a bright future for the regulated online gambling market in Hungary at present.

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What makes the situation controversial is that the Hungarian licensing procedure remains a two-step system: a private (i.e. non-State owned) operator is awarded a concession right first by the Minister for National Economy, and once the gambling organiser has obtained such concession right, he/she may then apply for a licence for the actual operation from the Gambling Supervisory Department of the National Tax and Customs Authority (the “GSD“). The main concern is that the Minister for National Economy has discretionary power to decide on who should be awarded either a land-based casino, or an online casino concession right.

In practice, however, the Gambling Act does not stipulate that private operators are not allowed to enter the market and set up a business in Hungary, it is a fact that currently only Szerencsejáték Zrt., the 100% State-owned gambling organiser, is the one and only operator with an online gambling license in Hungary. In addition, presumably this is also the reason why only three concessionaires operate 8 (eight) casinos throughout the entire country. Taking into account the current state of affairs, we do not expect that such very exclusive club of concessionaires will expand in the near future.

The number of land-based concessionaires is also important for online business, as under a recently introduced requirement a remote gambling operator should first have a land based casino concession to be entitled to apply for an online casino concession (and an operation license afterwards). As a result of the above legal regulations and facts, there is not much opportunity left for potential online operators considering opening a business here, apart from finding a way to somehow co-operate with the land based casino concessionaires.

The Gambling Act does not regulate how the land-based casino concessionaires should offer online gambling services. Accordingly, in theory it is possible to “outsource” the operation to a third party, which opens up the possibility to online gambling operators to enter the Hungarian market by means of co-operation with the land-based casino concessionaire. Due to the lack of relevant regulation so far, the parties may agree on the terms and conditions relatively freely.

Last year, there were several rumours how land-based casino concessionaires – who are of course in a very privileged position – are planning to exploit the advantages they have, but a formal obstacle prevented all parties from proceeding with this matter: no implementation rules were adopted by the competent Ministry. Thus, the GSD literally could not assess and make a decision on any application. The problem were solved at the very end of 2015 when the Ministry for National Economy adopted and published secondary legislation, which provides detailed personal, financial and technical requirements for online casinos. Accordingly, we expect significant developments on the regulated market this year, and to soon find out what was happening behind the scenes last year.

EEGReport Magazine: Why are you always mentioning online casinos?

Gabor Helembai: Following a recent amendment to the Gambling Act, online betting has been monopolised by Szerencsejáték Zrt., the State gambling organiser company, while other competitors from the private sector are excluded from Hungary in this respect. This means that in practice only casino games may be offered legally to Hungarian customers via the Internet, of course which makes the Hungarian market even less attractive. We will see how much lobbying influence the concessionaires have, and whether the legislator would change this highly restrictive measurement in the near future.

EEGReport Magazine: What about the operators having no concession/license in Hungary?

Gabor Helembai: As discussed above, basically the regulator did not leave open much opportunity to start and pursue online gambling organiser activity in a legal way. This means that operators who are still committed to the Hungarian market have to face the sanctions of the GSD. In the past two years, the GSD has been constantly trying to block the websites of unlicensed operators. Moreover, they have started to impose fines on them as well, stating that they could enforce the resolutions even beyond the Hungarian borders. There is no doubt that serious/lengthy legal disputes could be anticipated in these matters. Allegedly several operators have already challenged resolutions of the GSD.

Another minor chance could be that, according to the latest information available, the European Commission has prepared detailed opinions on the latest draft amendments to the Gambling Act twice during the compulsory notification procedure under Directive (EU) 2015/1535 in 2015. Taking into account that neither the detailed opinion, nor the communication with the Member State is public, we are not aware of what the problem was with the then draft, and now effective regulations. Hopefully, the European Commission may have some influence on the Hungarian government in this respect to achieve a more liberalised regulation, but anyway, we cannot see the results at the moment, if any.

EEGReport Magazine: As we know it’s all political, however there is huge interest coming from the operators. What is the size of the Hungarian market based on niches? Sports betting, casino, poker?

Gabor Helembai: Regarding the figures of the Hungarian online gambling market, we have only very limited information available, due to the fact that currently all of the remote gambling operators are operating illegally in Hungary, and therefore no recorded data is published. What can help us to orientate ourselves, is that it has turned out that Szerencsejáték Zrt. had a revenue of HUF 110 billion (approx. EUR 350 million) from sports betting in 2014, which includes both the online and the land based versions. Furthermore, from this amount online betting alone generated more than HUF 11 billion (approx. EUR 35 million), and this number has most probably been growing. Allegedly, this legal way of sports betting is only the smaller part of the entire market, but there is no available information on the actual figures, unlicensed operators’ data is not registered. Taking into account that Szerencsejáték Zrt. does not deal with online casino games, no indicative figures are available regarding the potential market size.

EEGReport Magazine: Who are the key operators at the moment?

Gabor Helembai: The one and only legally operating online gambling organiser is Szerencsejáték Zrt. Certainly, other operators are also available. However, the number of them is changing constantly, but steadily decreasing. There are truly committed ones, e.g. Unibet, whose commercial ads can still be seen in the television regularly, as well, presumably subject to continuous confrontation with the Hungarian authorities. Although, it is rather typical that the blocked and/or fined operators leave the market and waiting for better times.

EEGReport Magazine: How important is the presence of affiliates are in the Hungarian market (i.e. what percentage of operators’ acquisitions or of marketing budgets do they command)?

Gabor Helembai: Due to the above detailed situation, there is no information available. Taking into account that there are no licensed online gambling organisers currently operating in Hungary, it is also illegal to pursue any activity aiming at the organization, promotion, soliciting, etc. of the unlicensed gambling in Hungary.

EEGReport Magazine: If regulated, what advice would you give to potential new entrants considering Hungary (operators, affiliates, suppliers etc.)?

Gabor Helembai: As currently there is hardly any opportunity to legally operate in Hungary, no useful or promising advice exists for new entrants. Having seen the recent practice of the GSD, it would be worth noting that operators providing services in the territory of Hungary could expect procedures to be launched by the GSD against them. For those wishing to avoid such a legal procedure, it would be advisable to close the website to Hungarian customers immediately. The GSD continues its strict practice in this matter: the mere fact that the website is available from the territory of Hungary may be grounds for an authority procedure here.

EEGReport Magazine: Looking further afield, where are the major emerging opportunities in Eastern Europe for operators at this moment?

Gabor Helembai: As far as I know, Bulgaria and Romania are the hot spots in the region nowadays providing the most advantageous opportunity for operators looking to operate in a regulated market. These countries have taken a different approach compared to Hungary or other countries in the neighbourhood, i.e. they liberalised their markets. I truly hope that they will become a success story, because this may convince the Hungarian decision makers to change their attitude and realize that letting the competitors in would be better for all players in the game: the State, the operators, and last but not least the customers.