Status report from the Hungarian gambling regime

Although the figures representing the performance of the Hungarian gambling market in 2020 are not yet available, we can assume that the trend experienced in recent years has continued and thus the volume and market share of online gambling has grown in Hungary. Rumours can also be heard in Hungary speculating that the global pandemic situation has even increased the number of potential players in the online market.

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Such theories are indeed supported by the facts that (i) Szerencsejáték Zrt., the state owned gambling organiser, introduced the (online) betting on e-sport games in the second half of 2020, which was a huge success story for the company; (ii) the 3rd licensed online casino in Hungary opened in February 2020 and (iii) the 4th licensed online casino is expected to be opened in H1 2021 with the support of a well-known international company engaged in the gambling industry.

Although the devil is in the details, no exact figures are available about the size and structure of the Hungarian online gambling market due to the considerable share of the grey market. Pursuant to the sustainability report published by Szerencsejáték Zrt. in 2020, the value of the grey market could be around HUF 20-40 billion (approx. EUR 56 – 112 million); however, even the report admits that it is an underestimated number.

Having seen the trends and developments in the market, one could expect that the legal regime adapted to this new era, but unfortunately this is not the case.

Judgments that opened the market for EU-based international operators

For those who know the very conservative and strict regulatory framework of Hungary (Szerencsejáték Zrt. enjoys an online betting monopoly and online casino licenses are only available to land-based operators who have physical locations within the country), it was not a surprise that the two landmark judgments of the CJEU (Unibet Case and Sporting Bet Case) have fundamentally shaken the confident attitude of the Hungarian regulators, which claimed that gambling operators without a Hungarian license cannot offer gambling services in the territory of Hungary.

The CJEU judgments in the preliminary court proceedings, and later the respective Hungarian courts’ judgments as well, confirmed that references to consumer protection objectives and risks to public policy and public health may be justified to substantiate a restriction of fundamental freedoms in the gambling sector, but that restrictions imposed by Member States must comply with the principle of proportionality. National legislation can only achieve such an objective if the tools used are coherent and systematic, and in order for such legislation to be justified, the system of concessions and licenses for organizing games of chance must be based on objective, non-discriminatory criteria, known in advance, which sufficiently restrict the national authority’s exercising discretion, so as not to be arbitrary. This means that legislation must be clear, precise and predictable in terms of its effects.

The above judgments establishing the non-compliance of the Hungarian regulation with the EU law resulted in the Hungarian Gambling Supervisory Authority not clamping down on EU-based operators, who have a valid licence in one of the EU Member States, i.e. they can offer their services freely in Hungary. Although advertisement bans are still applicable for the operators who do not have a Hungarian licence, which does pose enough challenges making their lives somewhat difficult. Financial blocking works very inconsistently, due to the lack of necessary implementation of the law; therefore, certain banks apply such measures voluntarily. All in all, it is interesting that non-EU based, and licensed, operators are still targeted by authorities, which could be worth knowing for UK licensed operators after BREXIT.

Prospective changes in the regulation

The Hungarian Gambling Act has not been amended in line with the CJEU judgments so far; thus, it seems that the Hungarian regulators have chosen more of an ostrich policy. Considering that the financial results of the state-owned gambling organiser and the licensed operators seemed to improve in recent years, there has been no political intention to regulate the grey market; however, it would generate significant revenue for the state budget. Since the current situation is also quite comfortable for those operators who are not licensed in Hungary, it is uncertain when the regulatory regime will be changed.

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