The agreement on financial support signed by the Governments of Curacao and the Netherlands promises large-scale changes in the entire regulation of gambling operators’ activity

Previously, Curacao was considered one of the most comfortable jurisdictions for online gambling in terms of simplicity in obtaining the licence there, minimal taxation, lack of overwhelming control by the regulator and opportunities to operate under Curacao gambling licence in various parts of the world.

Agency’s CEO and Senior Partner Ilya Machavariani along with the Head of their Ukrainian Office Dmitri Bezruchko have analyzed the agreement to figure out what changes should companies operating under the Curacao gambling licence expect to happen when the document enters into force.

Key Reforms

The government of Curacao needs to carry out a full-scale reform of the island’s legislation, which, in particular, should lead to the creation of the transparent regulation of the gambling activity.

What’s important to understand is that according to the Agreement the obligation of Curacao to reform gambling legislation is based on the need to ensure the Rule of Law (this is one of the four global goals of all reforms that are coming).

The Agreement introduces two main measures to be taken by the Curacao Government in relation to the gambling regulation:

1. Conducting a study to determine whether there is a need to reform the regulation of both offline and online gambling businesses. The ultimate purpose of such reform is to increase the state’s revenues from the gambling business.
2. Drafting a step-by-step plan in order to reform the legislation governing the online gambling business sector.

It’s worth noting that the Agreement directly points out the necessity to reform the online gambling sector only, meanwhile the regulation of the offline sector is yet to be thoroughly researched in order to determine whether there is a need for a reform there.

A step-by-step plan to reform the online sector should, ‘at least’ (as quoted from the Agreement), include the following:

• a legislation providing for the creation of an independent regulatory body for the online sector that will issue licences, execute the measures of control and prosecution (including the licence revocation as a “last resort” measure);
• measures to ensure the compliance of the licence holders with the requirements of the legislation of other countries;
• measures to ensure the collectability of the licence fees and taxes.

According to the Agreement the first task (conducting a study to determine the need for the reform) must be completed by March 1, 2021, and the second task (drafting a plan for reforming the online sector) — by September 1, 2021. Experts went through pages of the Agreement to see if it offers any details on the nature of these tasks only to find out that the Agreement simply refers to ‘Part 1’ and ‘Part 2’ without specifying what exactly should be done within each part.

Potential Outcomes

The biggest issue may arise from the provision in the Agreement where it clearly states that the Curacao gambling licence holder should comply with the legislation of other countries where it operates: giving the formal interpretation of this provision, the conclusion can be made that if the operator accepts players from a country in which online gambling is prohibited by law (i.e., Poland, where an online casino is a state monopoly and, as a result, operating under the Curacao licence is illegal), then such an operator will violate not only the legislation of such a country, but also the legislation of Curacao.

Companies that are currently operating under the Curacao gambling licence, should at least check whether it’s even legal to offer gambling products and services in a geo in which they are already carrying out their operation. And, of course, it is necessary to carefully follow the situation in Curacao as it develops to understand the level of responsibility for violating the new law.

Way forward for the Curacao licence holder

If the gambling regulation in Curacao becomes significantly stricter and the jurisdiction ceases to be one of the most favorable, then the operators will not have much choice.

For operators, who, in fact, have built their business exclusively on working under the Curacao gambling licence, there will be only one way out: to move towards obtaining local licences in the most successful markets for them.

In the event of the situation becoming critical and the new requirements prove to be tough or impossible to comply with, the operators will certainly have time to assess their risks and develop a plan for further action. It is highly unlikely that the new requirements will come into force immediately after the completion of their development with no transitional period.

Once again it should be noted the deadlines outlined by the Agreement (March 1, 2021 and September 1, 2021 respectively) are not the dates on which the new regulation should come into force, but the deadlines for conducting research and developing a roadmap for the reform. There should be enough time and leeway for operators to assess the risks and devise the plan for moving forward.

Recent news about the reform facing the Curacao online gambling sector clearly reflects the global trend towards tightening the regulations of the gambling industry in general and the online sector in particular. Given the general trend towards a safer and more regulated gambling market, a full-scale reform of the island’s gambling regulations was only a matter of time.

It remains an open question as for what these reforms may lead to. Much will depend on the actual changes awaiting the operators after the reform is complete. Any effort to legalize or reform gambling is always a search for the middle ground between control over this business and creation of opportunities for its further development, so that it can bring income to the state.

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