Change is on the cards – how the Czech Republic is set to open its gambling market

On 1 January 2017, a new law on Gambling (the "Gambling Act") [1] will come into force, opening up the Czech gambling market. The opening itself is generally considered as good news, especially by foreign gambling operators who have a registered seat in a member state of the European Union or European Economic Area. The reason for this is that unlike the current law on Lotteries and Other Like Game (the "Lotteries Act") [2], the Gambling Act is going to allow them to legally provide online gambling to Czech residents, provided that they first obtain a licence from the Ministry of Finance of the Czech Republic.


All bets are off – what are the proposals?

The Gambling Act is an attempt by the Czech government to regulate the online gambling market and, even more importantly, to increase its tax revenue. Under the current Lotteries Act, the ban on foreign gambling operators is frequently violated by the majority of online gambling operators, and thus the Gambling Act brings new enforcement means to the table.

The Ministry of Finance will now be responsible for establishing and maintaining a list of unlicensed online games and, subsequently, internet connection providers; payment services providers will be forced to deny internet access or payment services to such listed unlicensed online gambling operators. Additionally, operation of unlicensed gambling will be considered an administrative offense, which may attract a fine of up to CZK 50,000,000 (approximately EUR 1,850,000).

Gambling Operation” – how far will the legal definition stretch?

It is therefore crucial to understand the legal definition of a ‘Gambling Operation’, which, according to Section 5 of the Gambling Act, means:

a performance of activities consisting of execution of gambling for the purpose of making a profit. Such activities include, without limitation, the acceptance of bets and gambling deposits, pay-out of winnings, other activities that are of organisational, financial or technical nature, while related to launching a game into operation and providing for the operation alone, as well as activities required for termination and settlement of a game.”

Furthermore, the Gambling Act´s explanatory note, which, under Czech law, is a commonly issued document accompanying a new piece of legislation stating the main reasons behind the new legislation and revealing the legislator’s intentions with it, states that the term ‘Gambling Operation’ includes not only the direct implementation of gambling, but also other activities that are associated with it or inseparably linked with the direct realisation of gambling. These additional activities do not have to be implemented directly by the operator itself; they can be provided to the operator by a third party.

Under such a wide spanning definition, a vast number of activities may meet its requirements ‑ cloud services, hosting, software development, and perhaps even energy supply to a datacentre to name but a few.

Unlikely to miss a trick – how will it be enforced?

Whilst the precise extent and nature of the Gambling Act’s enforcement remains to be seen, what is apparent is that the Ministry of Finance will need to show unlicensed gambling operators that it means business if it is to achieve any increase in tax revenue from online gambling.

Since the definition of a ‘Gambling Operation’ is so wide, it can effectively pressure not only the gambling operators themselves to comply with the Gambling Act by placing them on the unlicensed gambling operators list, but their core suppliers as well, who, unlike the unlicensed gambling operators that are often seated in tax havens, may well be within the reach of the Ministry of Finance.

[1] Act No. 186/2016 Coll – official translation.

[2] Act No. 202/1990 Coll – official translation.

Leave a Reply