Current Status & Future of Gaming in Italy

From Gaming & Leisure Magazine

www.gamingandleisuremagazine.com

Winter 2012

Interview with Giulio Coraggio

Technology & Gaming Lawyer in Milan, Italy

Though world-renown for its romantic reputation and the many waterways which criss-cross through it, Venice had also made its mark on the casino gaming industry.   “Il Ridotto” was opened in the Italian city in 1638 as the world’s first government-sanctioned casino.

Gaming & Leisure Magazine
Winter 2012

In exploring the current status and future of gaming in Italy, we’re fortunate to be joined by Giulio Coraggio, a highly experienced technology & gaming lawyer based in Milan.  (a short bio of Mr. Coraggio follows the interview).

[G&L] Italy’s Gaming Authority, Amministrazione Autonoma dei Monopoli di Stato (AAMS) was established in 2002 to monitor and regulate the national gaming industry.   AAMS also publishes regular reports on the status of the casino industry. What do recent AAMS statistics indicate for the health of the Italian gaming industry?

[GIULIO] The last data published by AAMS shows an amazing growth of the Italian videolottery market in the first 5 months of 2012 with a turnover of € 8,772 million which is more than the double of the turnover generated in the same period during year 2011 and is accompanied by an aggregate growth of the land-based market generating € 20,607 million from January to May 2012. It is worth it to mention that such data is on the top of those generated by the Italian four "real" casinos and refer only to machines located outside of them, mainly in the so called "mini-casinos" where AWPs and VLTs can be located.  

This market represents a massive opportunity for experienced casino operators which might bring their experience in a market where so far only 4 casinos are allowed and local operators struggle in creating the look and feel of real  casinos. Indeed, we recently saw some joint ventures between local operators which can bring their know-how on local regulations and foreign casino companies that are able to contribute with their experience in running casinos and results achieved by such joint ventures.

For this purpose, it may be useful to mention that the management of a VLT casino does not require a local gaming license, but just an agreement with the 10 licensed entities (which will become shortly 13) managing the network connecting the machines to the servers of AAMS.

This makes an easier entrance into the market but the timing might be crucial as obviously a number of foreign casino operators are currently looking at Italy.

As per the online market, the launch of cash poker games and casino table games in July 2011 gave a massive boost to the sector if it is considered that the turnover of the Italian online gaming market was of € 9,849 million in the entire 2011 and has already reached € 6,842 million in just the first 5 months of 2012. Also, the fact that some of the new entrants in the market obtained a relevant market share in  short term shows that there is still room for new entrants as far as they are able to distinguish their products and services from those of competitors consolidated in the market.

[G&L] 3rd December 2012 is an important date for the Italian online gaming market.  What will the AAMS decree allow starting this December?

[GIULIO] The 3rd December 2012 is an important date as from that date Italian licensed gaming operators will be entitled to launch online slot games. Indeed, the regulations governing the kind of games were already in place from mid-2011 as they were part of the package of regulations introducing poker card games and casino table games, but the lobby of land-based video lottery operators had pushed for a delay in the launch of online slot games since such games have features similar to those of land-based video lotteries but are subject to a better tax regime.

Given that online slots represent at least 50%- 60% of the turnover for most of the online casino operators, it does not seem too optimistic to foresee that the turnover of casino games will reach the same results achieved by cash card games which was  € 3,808 million in just the first 5 months of 2012 and represents together with skill games, poker tournament games and nonslot casino games 65.4% of the entire Italian online gaming market.

[G&L] The Politecnico di Milano monitors the Italian gaming market.  Recent reports show that the online gaming market grows faster than any other type of e-commerce.  How do statistics compare between traditional games and newer online games?

[GIULIO] There is no doubt that the launch of cash poker games has led on  one hand to a considerable increase in the turnover of the online gaming market, but on the other hand has hampered traditional games such as sports betting and bingo. Indeed, card games and casino games now represent 66.8% while sports betting and bingo games saw a reduction in their turnover higher than 20%.

However, AAMS' recent moves might help such products because of the decree recently notified to the European Commission allowing the placing of bets that are not included in the official AAMS schedule (the "palinsesto"), the decrees just approved by the European Commission for betting exchange and bets on virtual events and the upcoming decree allowing operators to offer bingo variations.

These new regulations might help traditional games to recover after the launch of casino and cash card games, but everything will depend on whether AAMS will switch also for bingo and sports betting games (as already done for casino and cash card games) from a tax regime based on the turnover to a taxation based on GPT.

[G&L] Each year, the University of Milan holds a conference on gaming.  What are the ongoing discussions regarding non-Italian licensed websites that attract a relevant share of Italian players?  Are there considerations on controlling these non-licensed, black market sites?

[GIULI] The data show that the black market is still around 35% of the entire Italian online gaming market which is an indicator that the regulated market still has considerable potentials to grow. The launch of casino and cash card games led to a reduction of the black market since players found that licensed platforms have the same games available as the un-licensed websites, but stronger measures against non-licensed operators are in the pipeline.

Indeed, regulations were approved last year requiring the notification to AAMS by financial entities of transactions engaged by Italian players with websites in AAMS' blacklist which needs only an implementing decree to come into force. This measure might force both players (who can face criminal penalties themselves for playing on non-licensed websites) and operators (which might face a criminal proceeding if found offering games to Italians without a local license) to switch to the regulated market.

At the same time, AAMS recently published a bulletin circular clarifying that non-licensed operators offering games online or through betting shops (the so called "CTDs") to people located in Italy are obliged to pay Italian gaming taxes plus applicable penalties for lack of payment.  Such circular is likely to be followed by actions from AAMS and the Italian tax authority against operators for the recovery of retrospective taxes as recently occurred in Spain.

Such changes are likely to force operators to get an Italian online gaming license if they want to keep targeting Italian players.

[G&L] Will an online gaming company need to be established in Italy (or the servers located in Italy) to apply for an Italian gaming license?

[GIULIO] Absolutely not! This is a very common mistake, 2011 regulations entitle companies based in any country of the European Economic Area (including Gibraltar or Malta for instance) to hold an Italian license. Likewise, the servers of the company can be placed in any country of the EEA.

No regulation requires operators to have infrastructures or offices in Italy and this leads to a major tax saving as foreign operators will pay Italian gaming duties but will pay corporate taxes of their country of establishment.  

[G&L] Have foreign operators been encouraged to invest into the Italian gaming market?

[GIULIO] This is definitely the approach from AAMS. Foreign operators can bring their experience and knowledge of a market that is still in a start-up phase and they might contribute to its growth bringing value and a better service to players.

Traditionally Italy has always encouraged investments as far as new entrants accept to comply with local laws. Also the current economic crisis is likely to lead to regulations fostering the sector because of the considerable tax entries generated by the gaming market.

[G&L]  Is there anything further you’d like to add?

[GIULIO] My comments above are a mere snapshot of a market that is still in a start-up phase and this might be the right time for investors to enter into the market before it reaches a mature phase where investments will become more expensive.

[G&L]  We’d like to thank Mr. Coraggio for his vast insight into the Italian gaming industry.  A bit on his background:

Giulio Coraggio (giulio.coraggio@dlapiper.com) is a gambling and Internet lawyer qualified both in Italy and in England and Wales and is working for DLA Piper, one of the largest international law firms in the world.

From experience gained through assisting world leading online and landbased gambling, e-commerce, e-payment and search engine operators, Giulio has become among most distinguished lawyers in the Italian market in advising clients on gambling law, e-commerce and information technology matters.

In particular, Giulio advises many prominent foreign gambling operators on both their day-to-day matters and major regulatory issues, the acquisition of other gambling operators and suppliers, software/technology transfer and license agreements, payment and sponsorship deals, advertising and privacy issues as well as on disputes with other operators and players. 

Giulio has been a frequent speaker at many conferences on gambling and Internet law topics, and is the blogmaster of the blog www.gamingtechlaw.com on gambling and Internet law issues.