I. Introduction Online Games and Gambling in Italy As the number of remote users of online games and betting services increases, the presence of foreign bookmakers operating in Italy, either directly or through local affiliates, has made it necessary to implement legislation capable of preventing illegal gambling without prejudice to the possibility to operate under the Freedom of Services ( FOS ) principle. In several occasions, the European Court of Justice ( ECJ ) has reprimanded Italy for its laws on online games and betting that hinder the possibility for bookmakers, duly authorized in another EU Member State, to operate in Italy, thus exposing them to fines and criminal liability for not operating under the umbrella of Italian law (see: Stanleybet, Placanica; see also ECJ IP/06/436 and IP/06/1362). Specifically, the ECJ has held that Italian legislation of online games and betting violates the FOS principle established under articles 43 and 49 of the EC Treaty and has urged for amendments capable of creating a market accessible to foreign betting agencies. Italian lawmakers have adopted landmark pieces of legislation on games and gambling throughout the years that have opened the path to the legalization of new technologies in the betting industry. The first step in this direction was taken under Presidential Decree 169/98 that envisaged online betting on horse races for the first time while Ministerial Decree 156 of 15 February 2001 issued by the Ministry of Finance extended online betting to all games. However, the process leading to the possibility for authorized foreign bookmakers to operate in Italy was not as quick. It was not until 2009, and under the boost of the ECJ, that Italy amended its laws on online PG Legal 2013
games and gambling making it possible for foreign bookmakers to access the highly regulated Italian market. This memorandum shall examine the rules on online games and gambling as in force to date and the authorizations, licenses and permits that are required to operate on the Italian market. III. Italian laws on games and betting The Civil Code establishes that, if a game or betting are lawful, gambling debts are not enforceable however, if the debtor has voluntarily honored his gambling debt he cannot recover the amount paid. However, the creditor may enforce gambling debts if they refer to sporting events or national lotteries. No recourse or action is envisaged for unlawful games or gambling. II. AAMS Prior to analyzing the applicable rules on online games and gambling activities, it appears appropriate to briefly address the Italian regulatory authority in the field. Games and lotteries were originally organized and managed by a Special State Monopoly Service (Monopolio di Stato) under the control of the Ministry of Finance. Within the scope of a general reorganization duties, powers and responsibilities, under Law 357/88 the State Monopoly Independent Administration (Amministrazione Autonoma dei Monopoli di Stato AAMS ) took over the management of national lotteries and lotto. AAMS became progressively responsible for the management of other games, such as instant lottery games, bingo and skill and chance games, and is now the regulatory authority of public games and gambling activities in Italy. AAMS has taken over State functions in the field, primarily with regards to the collection of applicable takes on gaming activities, and its mission is to promote a legal and responsible gaming environment. With a view at securing the lawfulness of games and betting within the context of public policy, Italy has adopted a stringent legislation regulating such activities. Precisely, in pursuance to Article 4 of Law 401/89, a concession is required to organize games and gather bets. Instead, as far as bookmaking and gathering bets are concerned, concession holders or other authorized parties are required to hold a license, issued in accordance with Article 88 of the Unified Code on Public Security (Testo Unico delle Leggi sulla Pubblica Sicurezza TULPS ) is required to perform and this activity may be lawfully performed subject to. The concession and license requirements applies also to online games and betting and shall be examined below. Page 2 of 7
IV. Concessions h) lotto and lotteries. Concessions for online games and betting are governed by the provisions contained in Article 24 of Law 88/09 on the compliance with obligations related to EU Membership. As a preliminary matter it is noteworthy to point out that Law 88/09 has seized the ECJ s recommendations to grant access to EU Member State operators in pursuance to the FOS principle. In this regards, as opposed to previous legislation, Law 88/09 expressly provides that a concession may be granted to a person that operates games or betting activities in an EU Member State, thus overcoming any violations of the FOS principle. Concessions granted in accordance with Law 88/09 cover wide variety of games such as sporting events, lotto, bingo, skill games (including online poker and card games), and lotteries. Precisely, concession granted under Law 88/09 may authorize the following activities: a) betting on sports events b) prediction of sports and horse racing c) national horse racing d) skill games e) fixed odds betting f) bingo g) totalizer games According to Article 24, para. 15, an applicant for a concession must possess the following requirements: a) Manage gaming and gambling activities on the basis of a valid authorization granted in an EU Member State or in a State belonging to the EEA where it shall have its registered office, and have yielded a turnover for the of at least Euro 1.500.000 from said activities in the two years preceding the application; b) If letter a) does not apply, technical know-how and infrastructures to be verified by an independent expert and release of a first demand guarantee to AAMS in the amount of Euro 1.500.000; c) be incorporated as a corporation with registered offices in an EU or EEA Member State; d) the chairman of the board, directors and officers must meet the reliability and professional requirements set by law; e) the infrastructures, hardware and software must be located in an EU or EEA Member States; f) pay AAMS a flat rate fee, as compensation for the entire duration of the concession in the amount of Euro 300.000 plus VAT; the amount of the fee is reduced to Euro 50.000 if the application is for bingo operations. Page 3 of 7
g) Undertaking the obligations set forth under Article 24 para. 17 which include, inter alia, i. to provide AAMS, upon request, evidence that it continues to possess the requirements for holding the concession and to inform AAMS of any variations of same; under Article 24 para. 19 of Law 88/2009 and establish that the contract must, inter alia, provide that: a) the agreement will be governed by Italian law; b) each player may enter into only one agreement; ii. iii. iv. to adopt adequate measures to limit access by minors; to adopt adequate measures inhibit gambling dependency to promote responsible behavior; c) the concession holder shall not dispose of the monies on the game account; d) any amounts on the game account shall be credited to the player within no later than 7 days from the latter s request; v. to provide AAMS with whatever documents may be necessary for surveillance and monitoring purposes. Existing concessions may be extended to additional games and betting upon payment to AAMS of the applicable flat for the various types of games (see: Section V below). AAMS shall process applications within 90 days from the date of filing; this term may be suspended if additional documentation is required and will start running once the documentation is complete. If AAMS does not issue the concession within the 90-day term, the consenting silence principle does not apply and the application is to be deemed reject. Once the concession is granted, games and betting operations may begin. However, prior to commencing the related activities, the operator is required to conclude, also through the Internet, a game account contract with each player. The guidelines of such a contract are set forth e) the duration of the game account shall not exceed the duration of the concession; f) all monies on a game account shall be diverted to the Tax Agency if they are not claimed within 3 years. Finally, Article 24 para. 24 of Law 88/09 provides that AAMS may revoke or suspend a concession or impose monetary fines upon the breach of its provisions. V. New Authorizations On 7 June 2012, AAMS adopted new rules whereby the holders of concessions granted under Law 88/09 may apply for an authorization to Page 4 of 7
provide skill games, fixed odds games of chance and card games that are not organized as a tournament. The legal ground of such an authorization is that the applicant already holds a concession and is interested in providing additional games and gambling services that are not included the concession. The application may be for a new game platform or for utilization of an authorized game platform for additional games. In both cases the applicant must file an application with AAMS containing, inter alia, technical information regarding the new platform or any modifications to the one that has already been authorized and the games the application refers to, in addition to documents and information pertaining to the concession and the concession holder. After all of the required documents and information are filed and the application is complete, AAMS shall examine the documents as well as the remote access and operability of the game sessions and game accounts. Upon the positive outcome, AAMS shall authorize the new platform or the new games. It is important to note that a new authorization is required not only to offer new games, but also to change or modify the hardware or any software components of the random number generator or of any components involved in generating number combinations. Subsequent the issuance of the authorization, an independent agency (Ente di Verifica Abilitato EVA ) must audit the platforms and games on a yearly basis for the purpose of the ongoing validity of the authorization. The scope of the audit is to verify that: a) the hardware and software and the RNG components comply with EVA s most recent certification; b) the service complies with the certification guidelines; c) the information made available to online players regarding each game s jackpot for the previous 12 months is correct. The concession holder must apply for the audit with EVA within the deadline indicated by AAMS and, after the audit is copleted, submit EVA s audit certificate to AAMS with a report on the each game s jackpot for the previous 12 months. AAMS shall assess the documentation and inform the concession holder of authorization whose validity is confirmed until the following term of expiration. Authorizations shall loose effect if the above documents are not submitted to AAMS within the prescribed deadlines and AAMS shall suspend all gaming activities through it central system. VI. Unauthorized Games and Gambling The rigid framework on games and betting, whether or not online, is aimed at preventing unlawful gambling activities and the hindrance of public policy; the unlawful exercise of games and gambling activities is punished under Article 4 of Law 401/89. Page 5 of 7
Precisely, Article 4 para. 1 of Law 401/89 punishes: the unlawful exercise of State monopoly lotteries, betting and prediction games; the unlawful gambling on CONI sports events and State monopoly horse racing events; the unlawful gambling on other sports or other events or skill games. The applicable sanction ranges from a minimum of 3 months to a maximum of 3 years imprisonment or a monetary fine in an amount ranging from a minimum of 500 to a maximum of 5.000. The same sanction applies to unauthorized betting activities performed on behalf of third party. Therefore, local agencies that operate on behalf of foreign bookmakers must be duly authorized. In addition to a concession or authorization, a licensed issued in accordance to Article 88 of the TULPS is required for the lawful exercise of gambling activities. Not only the concession holder but also the affiliate that gathers bets on behalf of the latter must have a license. DISCLAIMER The foregoing is an overview of the rules governing online games and gambling in Italy. Given the continuous expansion of new games and technology, the applicable rules and regulations are likely to change in consideration of the ongoing development. The information and commentary herein do not and are not intended to amount to legal advice to any person on a specific matter. They are furnished for information purposes only and free of charge. Every reasonable effort is made to make them accurate and up to date but no responsibility for their accuracy or correctness or for any consequences of reliance on them is assumed by the firm. Readers are firmly advised to obtain specific legal advice about any matter affecting them and are welcome to speak to their usual contact. ABOUT PG LEGAL PG Legal is a dynamic, entrepreneurial-minded Italian law firm that provides legal and consulting services to Italian and international corporations in a wide range of sectors, including the steel industry, commodities trading, insurance, banking, finance, renewable energy and gas, shipping and yachting, online games and betting. *** Page 6 of 7
For any queries you may have, please find below our contact details: Angela Rinaldi Partner E: rinaldi@pglegal.it Offices: Rome Office 11, Via Lisbona 00198 Rome T.: +39 06 884 1535 Milan Office 3, Via Sant Andrea 20121 Milan T.: +39 02 760 13359 Also in Naples and Genoa Page 7 of 7