Chile and Mexico: against the tide?
Chile and Mexico analysis, Chile regulation progress, Puerto Rico sports-betting, Brazil AML +Mas
Good morning. On this week’s agenda:
Analysis: Chile and Mexico against the tide?
Chile: regulation of online gambling moves forward.
Sports betting on the rise in Puerto Rico.
Brazil: Gambling bill will increase AML supervision.
Against the tide
Chile and Mexico are still trying to fight progress in gambling.
Chimes at midnight: On Wednesday of last week, at midnight, the Chilean Supreme Court of Justice decreed that telecoms provider Mundo Pacifico must begin blocking twenty-three betting websites that had been operating without a license. Many of the 23 had commercial sponsorship agreements with organizations such as the National Professional Football Association and many of its clubs.
On September 1, the Ministry of Justice and Human Rights issued an ultimatum to the latter: either terminate their commercial relations with the online bookmakers within 30 days or risk losing their legal status.
This second measure prompted Congressman Marco Sulantay to send a letter to the head of the ministry, Luis Cordero. The letter declares that in January of this year, six days before becoming minister and as an independent lawyer, he had prepared a legal document for the Chilean Association of Gaming Casinos (ACCJ), an organization that is opposed to the entry of digital platforms.
Sulantay is from the Independent Democratic Union, a right-wing party with strong links to big business.
He was promoting a rule that sought to prohibit the advertising of gambling houses on the shirts of sports clubs, including professional soccer clubs.
Dreams can come true: Analysts point out that legal gambling in Chile is concentrated in the casinos operated by the companies Dreams and Enjoy. For a long time they have applied pressure to prevent or delay the legal and formal entry of digital gambling operators in Chile.
Notably, online participation intensified during the pandemic.
There are no official numbers but it is estimated that, if they were allowed to enter formality, the tax contribution of these platforms would far exceed that of the established casinos and their subsidiaries.
The pressure from the established casino operators has succeeded not only in terminating the soccer clubs' contracts. According to the Chilean Supreme Court's ruling it has also led to the prosecuting of the Internet providers and payment providers.
The ACCJ has welcomed the Supreme Court's ruling. Cecilia Valdés, its president, said: "We see an arbitrariness and unfair competition from these betting houses, both with us, the physical casinos, as well as with the lottery, Polla and the racetracks.
“All of us are legally authorized to operate, but we have been strongly affected by the eruption of these platforms,” she added.
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Mexican wave
Meanwhile in Mexico, President Andrés Manuel López Obrador (AMLO) intends to ban all slot machines in the country. The machines were legalized by his predecessor, former President Felipe Calderón.
The Ministry of the Interior has published a draft modification of the Regulation of the Federal Law of Gaming and Lotteries that eliminates "number or symbol drawing machines", i.e. slot machines.
The last time the Mexican Congress modified the law was in 1947.
From now on, only games such as dominoes, chess, checkers, bowling, billiards, dice, and raffles will be allowed.
The more than 440 casinos that operate slot machines will be able to continue to do so until the expiration of their current licenses.
The 408 casinos awaiting government authorization to operate will no longer be able to operate these machines.
This is not the first time that the Mexican President has spoken out against the gambling industry. In May of this year, AMLO said:
"Casinos should not be opened. We are not giving permits to open casinos, that started with (Vicente) Fox (period 2000-2006), when Santiago Creel was Secretary of the Interior, and I am going to ask the Secretary of the Interior (Adán Augusto López) for a report because if there is a new license it will be canceled because the instruction is not to issue any license.”
According to the Mexican government, the entire sports betting industry – which includes influencers, media, specialized channels and even professional soccer and baseball teams sponsored by bookmakers – “encourages compulsive gambling” and increases the mental health problems of Mexicans.
The undisputed leader of the Mexican betting market is Caliente, which sponsors the soccer and baseball leagues and is also the largest operator of slot machines in the country.
Same, same but different: And although it seems that the governments of Chile and Mexico are going in opposite directions with their public policy measures on the gaming and gambling industry, they will have remarkably similar effects in reality.
In Chile, the status quo is defended against competition from online platforms, while in Mexico, the issuance of licenses is suspended, and it seems that the aim is to combat the dominant position of a certain player.
Prohibitions favor the emergence of gray or illegal markets.
Mexico suffers from a severe problem of illegal industries that seek various mechanisms to launder their dirty money.
A massive industry (such as gambling) that is supervised, regulated, and formalized with many eyes on it is more difficult to use to launder assets than an industry that is sought to be suppressed, but will continue to exist in gray. And black.
In Chile, the market forces (the existing demand) will find a way to "bypass" the rule that prohibits gambling on unlicensed digital platforms to prevent them from competing with established casinos.
The percentage of Chileans who play on digital platforms will not disappear or turn to physical casinos and this will give rise to another gray and illegal market.
In fact, the Supreme Court ruling limits access to twenty-three gaming platforms, but between 300 and 500 operate in Chile.
Markets that are not taxed, markets without supervision, markets in which it is not possible to monitor the behavior of players or protect them from frauds or from falling into gambling addiction.
Establishing prohibitions and entry barriers to competition don’t seem to be a good decision because they will promote illegal gambling.
Chile regulation
Regulation of online gambling moves forward.
Exec moves: According to the executive, the proposals for online gambling aim to generate a competitive online gambling market, safeguard the public faith, protect the health and safety of players, and increase tax collection. Likewise, the regulation will ensure the transparency of the origin and destination of the resources obtained through these platforms.
The amendments to the law that establishes the bases for the authorization, operation and control of gaming casinos (Law 19.995) were discussed in two sessions.
Most of the observations were approved, defended by the undersecretary of finance, Heidi Berner and the superintendent of gaming casinos, Vivien Villagrán.
Any type of betting and gambling that is commercially exploited and that is not authorized or regulated by any law is prohibited.
Who benefits? The definition of final beneficiaries was also included, which may be natural persons, Chilean or foreign, with or without domicile in Chile, who own directly or indirectly, through companies or other entities with or without legal personality, a participation equal to or greater than 10% of the capital, contribution, right to profits, or have the right to vote or veto, with respect to an applicant or operating company.
The same applies to those who may elect, change, or remove the majority of the directors or administrators of such companies regardless of their participation in the capital. In addition, the definition of corporate group of the Securities Market Law (18,045) will be introduced:
The definition of a business group of the Securities Market Law (18.045) will be introduced.
It is noted that casino operators may only operate games of chance included in the games catalog defined by the Ministry of Finance.
The operating permit does not include online games of chance, except for the provisions regarding bets through platforms, which may be made through online terminals within the casino.
The operator, the entities of the business group or the final beneficiaries of the activity may not grant credit to the players under any circumstances.
Subsequently, several regulations regarding operating permits were approved. Among them, the Superintendency may request and examine the commercial, tax, financial and other background information that the law establishes on the individuals and legal entities that are part of the ownership or the board of directors of the operating companies, their related companies, and their final beneficiaries.
Puerto Rico OSB
Sports betting on the rise in Puerto Rico.
Next please: In the framework of the "NEXT: Puerto Rico Tourism Summit" conference, actors involved in the island's gaming industry spoke about the importance of the gaming industry in the economic development of Puerto Rico.
One of the guest speakers was Juan C. Santaella, deputy director of the Puerto Rico Gaming Commission.
Also present were the general manager of Casino Metro, Ismael Vega and the vice president of Camarero Racetrack, María Cristina Mari García, who participated in the talk called ‘Casinos, Sport Betting and Online Gaming’ at the Puerto Rico Convention Center.
Ismael Vega stated: "The arrival of sports betting has been incredible" and explained that, in addition to machine and table games, the casino became an entertainment center, which, likewise, generates substantial income through tourism.
In the case of Casino Metro, the Puerto Rico Gaming Commission authorized its license for face-to-face sports betting in December 2022 and in July of this year authorized the possibility for players to place their bets online through the Caesars platform.
In June, the Puerto Rico Gaming Commission authorized the free application that Casino del Mar developed at La Concha Resort together with BetMGM, and later it was learned that they also gave the green light to two other centers: Casino Metro, which will operate in alliance with Caesars Entertainment, and Stadium (DBA Winning), which will use IGT's betting platform.
The law requires people who are going to gamble online to register in person before they can download the app and play.
"We have a gaming division that regulates us. There is no clash with overseeing well and being a facilitator," Vega added, in turn, about the transparency of the gaming system.
For her part, the vice-president of Camarero Racetrack, María Cristina Mari García, took the floor and informed that around the island approximately six hundred equestrian agencies have been established.
"Equestrianism gives the opportunity to small merchants, to those who do not have the capital to create a large gaming hall, to generate income in a regulated and legal environment," Mari García said.
RG assurances: The deputy director of the Gaming Commission, Juan C. Santaella, added: "The commission ensures that there is responsible gaming, that the laws and regulations are complied with. Being an extremely large economic development model, we are supervising so that people have the confidence to feel in a calm and safe environment".
During the conference, José Julio Aparicio, founder of the Our House space in the San Patricio shopping center in Guaynabo, said that from now on people will be able to place sports bets in shopping malls.
"By leaving the casinos, leaving the four walls, we have created an economy, thanks also to the fact that we have a geographic advantage," Aparicio said at the conference, while highlighting the creation of Law 81, which allowed sports betting on the island, and which he said was created by the people dedicated to the subject.
Brazilian measures
Gambling bill will increase anti-money laundering supervision.
Bill 3626/23 imposes rules on betting sites and financial institutions contracted to hold players' accounts at such sites, the Chamber of Deputies reported. Betting sites will be required to keep a record of all operations performed, including bets and prizes, withdrawals, and deposits in such accounts.
The operator must perform an analysis of the bets to determine whether they are suspicious of money laundering or terrorist financing. Those found to be suspicious must be reported to the Financial Activities Control Board (Coaf).
The agents of the Ministry of Finance must have unrestricted, continuous, and real time access to the auditable systems that operate the bets.
The operator must have an administrative structure capable of responding promptly to requests and inquiries from government agencies in charge of regulating, supervising, and conducting investigations.
Administrative process: Before or during the administrative sanctioning process for non-compliance with the regulations, the Ministry of Finance may adopt precautionary measures to avoid losses to bettors and the Tax Authorities when there is a risk of delay in the process. Among such measures are:
The temporary deactivation of equipment, systems and other components destined to the operation of the modality.
The temporary suspension of the payment of premiums; the collection of tickets issued.
Other measures to protect the protected legal asset.
When there is evidence of manipulation of results or similar fraud, the Ministry of Finance may determine, as a precautionary measure.
The immediate suspension of betting and the withholding of payment of prizes related to the suspected event.
Suspend or prohibit bets on specific events occurring during the race, match, or dispute, except on the final result.
If the bookmaker fails to comply with the precautionary measures imposed, it may be fined between USD 2,000 (R$ 10,000) and USD 40,000 (R$ 200,000) per day. The fine may also be applied if the company refuses to provide information or documents to the inspection or falsifies them.
Violations: Both individuals and companies may be sanctioned for non-compliance with the regulations, with emphasis on operating sports betting lotteries without prior authorization, obstructing inspection or failing to provide documents or data or participating in practices that undermine the integrity of sports, the uncertainty of sports results and any other form of fraud.
For infractions, the text lists several sanctions that can be applied to both legal entities and individuals, such as a warning, partial or total suspension of activities for up to 180 days, revocation of authorization, prohibition on obtaining a new authorization for a maximum period of ten years, prohibition on participating, for a period of no less than five years, in bidding processes aimed at granting or permitting public services in the federal public administration, directly or indirectly.
The fines will take two forms: a fine for legal entities equivalent to 0.1% to 20% of the collection of the year prior to the opening of the process an a fine for legal entities or individuals who do not conduct business activities.
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At a glance
Match-fixing arrests: Interpol has announced that further arrests are expected in the so-called ‘Operation Conifer’ which led to the arrest in Spain of forty people who were part of a soccer match-fixing and sports betting fraud ring. According to the international police agency, its agents are working to identify more members of the group, as well as sportsmen who accepted bribes.
It added that a purple alert was published through internal channels informing of the network's modus operandi.
Members of the organization in Spain exploited that advantage and placed online bets on a large scale.
The operation began in 2020, when Spanish law enforcement detected a series of suspicious online bets placed on international table tennis competitions and from there identified a criminal network of Romanian and Bulgarian origin.
In the first phase, a further twenty-one people were arrested and forty-seven bank accounts and twenty-eight payment gateways in various countries were blocked.
BGaming Latin American expansion: BGaming has signed an agreement with Peruvian online casino operator Betara to strengthen its prospects in the Latin American market. Under the terms of the agreement, more than one hundred titles from BGaming's portfolio will be integrated into Betara's platform, a suite of products that includes AI-generated features and on-demand mechanics.
Calendar
Sep 25-28: SIGMA Americas, Curaçao
Oct 31-Nov 2: SBC Summit Latinoamérica
Publishing schedule
This is the English version of the LosIngresos+Mas newsletter published yesterday (21 September).
An +More Media publication.
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