2021: A Legal Outlook for the Gambling Industry

With what is perhaps the strangest year in living memory drawing to a close, planning for 2021 is set to be a complex, but essential task for every business.

To make that task a little easier, we polled a group of international law firms on the key compliance and business issues facing gambling companies next year.

Acquisitions & Opportunities

It’s now clear that not only will the lingering effects of coronavirus continue into the new year, but so will the pandemic itself, further widening the gap between the COVID-19 winners and losers. Among other things, that will drive yet more mergers and acquisitions in the worldwide gambling market, say Malta-based GVZH Advocates.

“We expect to see more strategic consolidation throughout 2021 and we are of the view that clients should be thinking more carefully about strategic expansion or developing clear exit plans very carefully given the existing economic climate,” said a spokesperson for the law firm.

“There are some attractive purchasing opportunities for the larger, more robust players in this space which will boost growth and market share,” they said.

Fellow Maltese-headquartered firm WH Partners said its international case of lawyers were also “busy on the M&A front”.

This was thanks to “consolidation continuing across operators and affiliates, and more private equity investing groups in the industry”.

UK-based partner at CMS, David Zeffman, added his weight to predictions of more M&A in 2020.

Meanwhile Polish law firm RM Legal pointed to specific opportunities created in its local market by the impact of COVID-19. “Some companies will want to find buyers, while some will close down or go bankrupt,” predicted managing partner Marek Plota.

Ultimately though, “there will be more space in the Polish market for companies with an established position, a well-known brand and financial backing”, he said.

But, if the country’s high tax rates dissuade new entrants from taking the plunge, “the market will consolidate to the benefit of the largest companies” in Poland, he said.

Compliance & Regulation

In the UK, all eyes are on the government to see how the planned overhaul of the 2005 Gambling Act will play out.

For Zeffman, avoiding oppressive changes to the law will require an effort to alter the prevailing narrative.

The industry should be “engaging with the gambling review and trying to turn the tide of the anti-gambling sentiment that has come to pervade all political parties and most of the media,” he said. “Above all, this needs a coordinated industry response.” Enforcement is also not expected to dry up in 2021.

Zeffman predicts more Gambling Commission penalties, while in Malta firms say they expect a continuation of the crackdown on money laundering by the Malta Gaming Authority (MGA) and Financial Intelligence Analysis Unit.

“Last year both authorities embarked on a drive to audit remote gaming operators based in Malta against the requirements of the Gaming Act and those of the PMLFTRs respectively,” said WH Partners.

“The drive is ongoing. Several operators were fined, or had their licences suspended. An MGA licensed entity was fined over €700,000 for what were reportedly failings in the application of its AML policies,” they said.

“Several others have also been on the receiving end of a fine. Most notably for failing to have proper AML risk scoring, inadequate PEP and sanctions monitoring and failure to collect suitable source of wealth and, or source of funds documentation.”

GVZH echoed the importance of anti-money laundering, adding that on a wider scale gambling is now a “comply or die” environment. “We expect compliance to develop exponentially,” they said.

Developing Markets

More than two years since sports betting was legalised in the United States, focus on its diverse range of state markets is expected to be even more intense in 2021.

The law firm that led the team in New Jersey’s seismic Supreme Court victory to overturn the longstanding US ban on betting, Gibson Dunn, says it has more powerful legal action in the works for the coming year.

In particular, it will be crunch time for the Wire Act. The ageing legislation currently prevents any gambling data from travelling across state lines, blocking liquidity and forcing operators to set up costly sets of servers in each state. Gibson Dunn partner Matthew McGill said he expects a First Circuit ruling on whether the Department of Justice’s strict reading of the Wire Act should be overturned in late 2020 or early 2021, but believes “the case may ultimately end up at the Supreme Court”.

However this is unlikely to be the end of the line for the Wire Act, with “regulated parties likely seeking further clarity on how the Wire Act interacts with online sports betting” throughout the year.

Either way, McGill is confident that the businesses “will make US online gambling and sports betting a focal point of further industry expansion and litigation in 2021”. In continental Europe, legislation in Germany, the Netherlands and elsewhere is also set for a major shift.

“We continue to be optimistic about the possible opening up of markets that have been on the unofficial ‘grey list’,” said GVZH.

In general there is a hope that jurisdictions “will begin to take more of a structured and open approach towards establishing standards in the regulation of online gaming activities”.

The Maltese also made reference to the long-desire dream of cross-border gambling rules in the EU.

They said: “[The regulation of grey markets] could continue a drive towards the establishment of minimum common standards throughout the European Union, which could eventually drive a degree of harmonisation which will serve to benefit both operators and players alike, making the EU’s single market more of a reality in the remote gaming space.”

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