Analysis of The New 2017 Czech Gambling Act
- Quick evaluation of the new Czech online gambling legislation
- Goals of the new gambling law in Czech Republic
- Analysis of the Czech Gambling Act’s technical details and discrepancies
- Protection of players and self-exclusions measures
- Blocking of online gambling websites and payments
- Appendix – Questions to answers sent to the Ministry of Finance of Czech Republic
On January 1st 2017, a new Czech regulation on gambling has entered into legal force. Quite a lot of time has passed since, which is why I decided to take a closer look on the new Gambling Act, its content and the way it has been applied into the real world since the beginning of 2017.
I will be talking about Act no. 186/2016 Sb. in this article. You can read the new act in this entirety here, however, it is only available in Czech. From now on, I will refer to the new act as "Gambling Act".
I tried to analyze the new legislation mainly from the point of view of online casinos, as I am not as experienced in other areas of gambling.
All quotes from the Gambling Act, as well as other Czech regulations and authorities’ official statements in this article are translated from Czech (my original Czech article). I’ve done my best to keep their original meaning, however, I am not a professional translator, which is why I don’t guarantee their validity.
Quick evaluation of the new Czech online gambling legislation
My analysis is quite lengthy and focuses also on minor technical details of the new Gambling Act. That’s why I decided to include the results of my analysis right here at the beginning of this long article to satisfy the readers that don’t have time to read it in its entirety. :)
The new Gambling Act is generally a good and modern act. The necessity of regulating and effectively taxing gambling is understandable (whether we are talking about online gambling or land-based casinos). When it comes to taxation, I believe that the Gambling Act will fulfil its purpose and the state treasury will benefit from its new source of income, roughly 23 – 35 % of a substantial part of Czech gambling market.
It’s a shame that the Gambling Act practically puts honest Czech gambling operators into disadvantage (those, who decided to operate under a Czech license). Specifically:
- The ban on progressive jackpots in slots will redirect players who like this sort of games elsewhere.
- The ban on games with live dealers will redirect another group of players into online casinos without a Czech license.
- The new Gambling Act limits the maximum win per game round. The new limitation is too strict, especially for players who like to bet big. Moreover, it’s not possible to calculate the theoretical maximum win per game round for some popular games because of their nature and the way they work. It’s possible that this will result in such games not being operated by online casinos that want to comply with all of the new regulations.
- New non-standard mathematical limitations and technical requirements (like the minimum duration of a game round or the maximum loss per hour) increase the entry costs for new game operators and will most likely lead to limited game offer. Players who can’t find their favorite games in licensed online casinos will have another reason to play in online casinos without a license.
It would be suitable to remove or amend some of these unnecessary limitations in the future. I don’t think that limiting game offer or increasing entry costs for new casinos is in the best public interest, because the following is true even when it comes to gambling: The bigger the competition, the better for a player.
The current number of valid gambling licenses only confirms my worries. Only nine subjects managed to get a license in six months. Out of those nine subjects, only two are currently (September 2017) allowed to operate slot games, namely Fortuna and SynotTip. Right now it seems that the process of granting new licenses wasn’t sufficiently planned out by the authorities. The fact that no license has been awarded to a foreign company yet only supports my view that the current conditions are non-standard to say the least. Some companies even decided to leave the Czech market while in the process of getting their license.
According to the statement of the Ministry of Finance I asked for, the most common issues occur in the casinos’ Terms and Conditions. However, according to unofficial information, the biggest problem is caused by the obligation for players to register at casinos’ brick and mortar offices, which obviously doesn’t make any sense for foreign online companies. Other unofficial sources point to the fact that the new legislation is strongly affected by Czech betting companies that want to secure a dominant position on their domestic market.
Whether it’s because of the mismanagement or the influence of Czech companies, the current state in the field of online casinos is not beneficial for the state, nor the players. The game operators who want to get their Czech license stopped to accept players from Czech Republic and therefore lost their market share. Newly opened online casinos in compliance with the new regulations can’t match their foreign competitors’ wide game offer, which is why many players head to smaller foreign casinos that will most likely never apply for a Czech gambling license.
Note: Some casinos kept their existing players and only stopped accepting new players. Either way, the lowering of the market share of legal game operators is the exact opposite of what the state wanted to achieve by the new regulation.
When it comes to favoring of game operators with a license, the Gambling Act also includes controversial Internet censorship. Based on my experience with the Russian market I believe that even simple blocking using DNS will be an effective tool that will put licensed game providers into an advantage over those without a license. And I think so even despite the fact that evading this form of blocking in quite easy in practice. The majority of people is too "lazy" to try to access unlicensed operators’ websites. If their needs are fulfilled by the operators with a Czech license, they will just keep using their services.
On the other hand, we are witnessing the birth of potentially dangerous precedent, according to which it’s OK to block websites that operate in conflict with the law. I just hope that this trend will not lead to blocking other services that are in conflict with other acts. If that was the case, the Czech Republic might eventually end up with Internet censorship similar to that in Russia.
Overall, I think that after fine-tuning some of the technical details and removing unnecessary obstacles (in the process of obtaining licenses), the Czech Republic will have a modern and effective online gambling legislation.
That concludes my quick evaluation of the new Gambling Act. Now, you can read the entire article and find out how I came to my conclusions.
Quick evaluation of the new Czech online gambling legislation
According to the Ministry of Finance (official statement), the goal of the new legislation was to replace the morally and technically outdated act from 1990 that simply wasn’t up-to-date with the technological advancements of the past 27+ years (like the Internet) and the common European market. You can find some of the expected benefits declared by the Ministry of Finance below (my choice):
- Allowing companies from other EU and EEA countries to operate games in Czech Republic.
- The possibility to operate games over the Internet.
- The introduction of self-exclusion measures – the option to define the maximum bet and maximum loss over a certain period of time, as well as the maximum time spent playing games.
- The introduction of a register of players excluded from gambling – the exclusion of people receiving social assistance benefits and insolvent people.
- The increase of the tax rates to 35 % on technical games and 23 % on other games.
- The measures implemented to fight illegal online game providers – blocking of websites and payments.
All of the goals listed above are quite logical. If the state wants to tax gambling, it has to create appropriate legislation to go with it. The register of players excluded from gambling is also a great idea – a person that needs social assistance benefits to make ends meet really shouldn’t be allowed to use their money to play in a casino. At the same time, there is a new option for a simple self-exclusion in licensed casinos. This addition might save a lot of problematic gamblers, who opt-in for self-exclusion when they realize they have a problem. When they later feel like playing, they simply won’t be allowed.
The website blocking is probably the most controversial part of the entire Gabling Act. This part of the new legislation was met a strong resentment from the online community, as well as IT experts. The purpose of website blocking (to give licensed casinos at least some form of technical advantage) does make some sense though.
The considered variants, as well as partial reasoning for most of the Gambling Act’s statutes, can be found in this throughout analysis (in Czech).
Scope of the new regulation
The scope of the new Gambling Act is in an interesting way specified right at its beginning. It’s supposed to cover:
"Gambling games that are even only partially targeted at or focused on people that reside in Czech Republic"
That should mean that if a casino doesn’t focus its activities on players from Czech Republic in any way or form (e.g. isn’t localized into Czech, doesn’t have Czech live chat or doesn’t advertise its services to Czech players), it doesn’t fall under the regulation and it shouldn’t be threatened by website blocking or financial penalties.
The fact that the "Casino XY" accepts players from Czech Republic (apart from the other 100 or so countries), can’t be understood as "focusing on Czech players". The official statement I asked for adds prohibition of advertising on websites visited by Czech residents, the prohibition of publication on social networks with an obvious intent to speak to Czech residents or the prohibition of presenting betting opportunities that are clearly supposed to cater to Czech residents.
I find this formulation to be a reasonable compromise that doesn’t unnecessarily limit the choice Czech citizens have. What I find strange, however, is the fact that in reality some casinos that have never targeted players from Czech Republic (or stopped doing so in the past) now stopped accepting Czech Republic.
Liberalization of the market and conditions of obtaining a license
Two of the most important changes are the possibility to obtain a license to operate casino games online and the possibility to obtain a license even for foreign companies. If these two changes were really put into practice, they would represent a very positive step towards the liberalization of the Czech gambling market.
According to the Gambling Act, a license can be obtained by a legal entity that has:
- a residence in Czech Republic or another EU or EEA country,
- an organizational structure with a proper, transparent and integrated definition of activities and decision making jurisdiction,
- a formed supervisory board, board of directors or other similar control body,
- own resources of at least 2,000,000 EUR,
- a transparent and unobjectionable source of resources,
- a transparent ownership structure, from which it’s clear who is its actual owner according to the act governing the measures against the legalization of income from illegal activities and financing terrorism,
- material, personal and organizational preconditions required for operation in the scope in which it intends to operate casino games.
These conditions appear to be reasonable to meet. However, I think that even some of the established companies might have a problem with two of them:
- I find the requirement of having own resources of at least 2,000,000 EUR unnecessarily strict, at least when put into contrast with the maximum win limited to 500,000 CZK.
- The requirement of having a transparent ownership structure might also pose as a big problem for many foreign companies. Let’s face it. The gambling business is still a bit on the edge. Therefore, it’s understandable that the actual owners often prefer complicated ownership structures over keeping a list of countries they should rather stay out of. Moreover, it’s quite difficult to change the existing ownership structure. According to these methodological instructions and the statement of the Ministry of Finance, it’s necessary to include a diagram of the ownership structure of the entire group of companies. I can’t imagine how the validity of this diagram is going to be checked.?
Overall, I feel like the new legislation is put into place in a way that licenses can be obtained only by a couple of bigger entities with a strong interest in Czech market (e.g. companies that are already registered in Czech Republic). However, I don’t find that good, as the increased competition would for sure be beneficial for the players.
Analysis of the Czech Gambling Act’s technical details and discrepancies
I’ve devoted a lot of my time to reading and reviewing the entire Gambling Act in detail. I managed to find several details worth reformulating, explaining or reevaluating.
Unreasonable maximum win
Gambling Act’s § 52 states:
"(3) In a technical game operated as an Internet game the bet per game round can’t exceed 1,000 CZK and the win from one game round can’t exceed 500,000 CZK."
The limitation on the maximum stake is all right and roughly meets market standards. However, the limitation on maximum win to only 500 times the maximum stake is in strong contradiction with the current mathematical settings of numerous slot games:
- The maximum win per spin regularly meets 500 times the stake and often exceeds it (the most popular game in the World – Book of Ra – has a maximum win higher than 5,000 times the stake).
- Some games include free spins/respins as a part of their mathematical settings. The player might be awarded X bonus spins that count as a part of the one original spin, while the win cumulates and still counts as a win achieved by just one spin. What’s more, the player can win another bonus spins (respins). In this case it’s impossible to calculate the maximum win, because it’s not even possible to limit the number of bonus spins played as a part of one game round.
The casinos are then left with only two options that comply with this unreasonable regulation:
- To fixedly limit the maximum win in the Terms and Conditions and simply don’t pay the exceeding amount to a player that manages to hit a bigger win. I believe that everybody will agree that this approach is quite unfair for the players.
- To not offer games that might theoretically exceed the maximum win. This approach, however, increases the possibility of players leaving to play at unlicensed casinos because of the absence of their favorite games.
The explanation why the maximum win has been set precisely to 500,000 CZK can’t be found in the analysis of the proposed act. The official statement of the Ministry of Finance doesn’t answer this question either.
The brain teaser called "win per hour"
Gambling Act’s § 53 states:
- The maximum loss per hour is the amount of resources that a wagering player can lose on one betting position in one hour. It’s calculated as the product of the maximum bet per round, the maximum number of games per hour and one hundredth of the difference between 100 and the game’s return to player.
- The loss per hour of a technical game can’t exceed the maximum loss per hour calculated according to the formula in the section 1.
The minimum duration of a game round is limited to 2 seconds elsewhere in the Gambling Act. The first section is quite understandable:
Maximum loss per hour = 3,600s/2s * 1,000 CZK * (100 % - 96 %) = 1,800 * 1,000 * 0,04 = 72,000 CZK
The second section states that the actual loss per hour can’t be higher than the maximum loss per hour. The way that the author of the Gambling Act intends to enforce this clause is a big brain teaser for me. The fortune, of course, doesn’t work according to the statistical RTP in the short run, which means that a high-roller can’t lose 72,000 CZK in half an hour or even faster. Is the game then supposed to display a message like: "We are sorry, however, please lower your bet under 421 CZK or wait until 4:32:14 pm so that you don’t exceed the maximum loss per hour?"
And then should the game keep interrupting the player in this way, if they had a chance of exceeding the limit?
Optionally, is the maximum loss per hour calculated within fixed time periods, for instance from 2 pm to 3 pm? Or was the intention different?
Either way, this is a very technically difficult measure that pointlessly makes getting a license even harder. I think it would make sense to replace it with a fixed maximum loss per day, something similar to the self-exclusion options offered by the majority of casinos because of the requirements of other licenses.
Limitations on live dealer table games
The Gambling Act seems to have completely forgotten games like live blackjack or live roulette. My assumptions are confirmed by this statement:
"The basic condition in this manner is the requirement to create a random process determining the result of a game, which must be generated by operator’s software game system according to the Gambling Act’s § 73 section 3; with the exception of a number lottery, a bookmaker bet and a totalizer game. It’s clear from the aforementioned statement that if an operator wants to operate an Internet live game according to Gambling Act’s § 3 section 2 subsection f, he must meet this condition, therefore make sure that the random process of generating game result was done by operator’s software game system and not by dealers at tables in a studio, as that would be in a direct conflict with the aforementioned requirement. With regards to the Gambling Act’s systematics, it’s clear that the requirements laid out in Gambling Act’s § 73 et seq. are special regulations, in contrast with the requirements for individual casino games operated by land-based casinos or in a conventional manner. With regards to the principle Lex specialis derogate legi generali, this special legislation takes precedence over the legislation in Gambling Act’s § 57 et seq. (in case there is a conflict). Therefore, the Ministry of Finance states that the previously mentioned game concept can’t be approved, because it is in conflict with § 73 section 3 of the Gambling Act."
TThat can all, of course, be solved by an amendment. At the moment, it’s likely that live blackjack, live roulette and live casino poker players will play in unlicensed casinos. I believe I don’t have to remind everyone that there are many players who despise slot games and like to play blackjack.
Limitations on progressive jackpots
According to this presentation by the Ministry of Finance, any jackpots can be operated only with in accordance with the limitations on maximum win. You should therefore forget about million dollar jackpots. It is also obvious that players of slot games like Mega Fortune and Mega Moolah will not play in the licensed casinos.
I have to admit that I don’t know any studies that compare the harmfulness and addictiveness of regular games and games with progressive jackpots (and I would be really interested to know). The study that the Ministry of Finance uses to support its argument in its official statement regarding this matter unfortunately doesn’t mention progressive jackpots.
Return to Player – a small test formula
I found out that the Gambling Act defines a very small formula for determining game’s return to player (RTP):
- The construction of technical games can’t enable the possibility of setting the RTP to a value lower than 75 % or higher than 100 %.
- The return to player is understood as the statistical value of the average ratio of winnings to bets determined by at least 100,000 game rounds. The return to player can be also understood as the median of return to player.
The upper limit can be problematic and doesn’t even have to be defined, because the casino would lose money on games with RTP higher than 100 %. The potential problem can occur because of the fact that 100,000 game rounds is not enough. Games with high volatility can end up with return higher than 100 % after "only" 100,000 rounds. My simulations show that the chance of this happening with a slot game with the RTP of 98 % and medium volatility is 16 %.
Waiver of confidentiality - a strange condition
"The operator is obligated to maintain the confidentiality of game participants and their participation on gambling. The obligation to maintain confidentiality doesn’t apply to cases, in which the participant waives operator’s confidentiality. The confidentiality can’t be waived sooner than it’s known whether the participant achieved the win in accordance with the Terms and Conditions."
The option of waiving confidentiality is great, especially if a player wants to try to solve his/her case using various forums and mediators. If it weren’t for the last sentence, the casinos couldn’t use their confidentiality as an excuse not to comment on a case being investigated. With the last sentence being a part of the clause, the casino just has to state that the player hasn’t achieved his/her win in accordance with the Terms and Conditions, which is why they can’t comment on the matter.
With regards to this subject, the Ministry of Finance explained to me that the main point is to stop casinos from asking all players to waive confidentiality in advance and then misuse them as a part of their marketing activities against their will. That’s pretty reasonable.
A missing body to investigate official player complaints
If a player gets into a conflict with a casino with a Maltese license, he/she can address his/her complaints directly to the regulator. The player’s case will be investigated and the casino will be obligated to pay out the questionable amount if the regulator decides it’s the correct thing to do.
I would like to see something like this in the new Czech legislation. I believe that a regulator should keep an eye on players and casinos following the principles of fair gambling. The players are in a disadvantage in a conflict, because the questionable funds are in the possession of the casino and not the other way around. If a casino decides not to pay out a player, he/she can’t do anything about it without any help.
According to the Ministry of Finance, players playing in casinos with a Czech license turn to Czech commercial inspection.
A mystery to end things with
Does anybody know what the following clause is about?
§ 7 (2) f "It’s forbidden to operate a casino game, in which the chance to win partially or fully depends on a bet being placed by a posterior player."
According to Ministry of Finance’s explanation, this clause is to ban games that operate like a pyramid scheme.
Protection of players and self-exclusions measures
I consider the self-exclusion options and the register of players excluded from gambling to be one of the most beneficial additions brought by the new legislation. I believe that the register of excluded players really might change the lives of problematic players for the better.
Self-exclusion options within one casino are an imitation of self-exclusion options that are already required by some of the European jurisdictions (like Malta). The player can set:
- the maximum total sum of bets per day/month,
- the maximum total net loss per day/month,
- the maximum time spent logged in per day,
- the maximum number of log-ins per day/month,
- a time period during which he/she will not be allowed to play.
Within these self-exclusion options I managed to find only one little mistake/typo:
"The net loss is for the purposes of casino games understood as an amount representing the difference between the total sum of all player’s bets and all player’s winnings and the total sum of all losses within a given type of casino game."
I would calculate the net loss as the difference between the sum of all bets and the sum of all losses. The words "and the total sum of all losses" seems to be there by mistake.
The register of players excluded from gambling is a centralized register, into which the state adds people in material need or people that are forbidden to gamble for another reason. Its main advantage is the fact that it’s centralized, which means that listed people will not be able to play in land-based casinos neither in online casinos with a Czech license. The player can also ask to be entered into the register, which means that the termination of compulsory gambling might be right at the fingertips of problematic players.
The register of excluded players is unfortunately not functional yet. Currently, there is an ongoing tender for a vendor to implement the entire information system regarding gambling and casino games. After everything is done, there will be an option to enter a new player using a freely formulated request.
Blocking of online gambling websites and payments
The most controversial part of the new legislation is the introduction of the blocking of internet websites. Internet censorship is overall a very socially sensitive topic. Many people worry that it’s only an excuse and the first step to extending the blocking to another fields. What’s more, a part of the IT community questions the effectiveness of the measures as they can be easily evaded.
That’s why I explored the way the Ministry of Finance imagines the blocking in detail.
What’s supposed to be blocked are the internet domains used to operate online gambling without a license. The technical realization of the blocking is in the hands of internet providers that are responsible for it under the threat of big fines.
The decision about which domains to block is made in administrative proceedings of the Ministry of Finance. Primarily should be blocked websites that operate casino games in Czech language or that put their effort into marketing activities in Czech Republic. The list of blocked domain names should be available here. At the time of writing this article, the list contained two domain names and one bank account number.
According to the methodological instructions, the internet providers can implement the blocking on the level of DNS servers:
"Currently, there is a line of technical solutions that can be used to implement the website blocking. Some examples include: blocking on the level of DNS, application-level firewall, stateful and stateless firewall, or alternatively various hardware-based technical solutions. However, it’s only possible to use solutions that won’t block the content of domains owned by other owners. With regards to the aforementioned statement, it’s necessary to exclude the usage of IP address blocking."
"Blocking on the level of DNS (Domain Name Service) can be considered one of the suitable measures, usage of which, in relation to the websites included in the list of blocked domain names, will fulfil the obligation according to the Gambling Act’s § 82."
At least in the beginning there will be simple blocking that can be evaded by changing the settings of DNS servers… for instance to Google’s DNS servers with the IP address of 184.108.40.206. Only few clicks are needed to do so in Windows, while Android users will have to install a special application.
However, even more complicated IP address blocking wouldn’t be more effective. Searching for a VPN software and installing it only takes a couple of minutes on both PC and mobile devices. VPN blocking, however, is outside of Czech government’s possibilities.
Do measures like these even make any sense?
My experience from the Russian market suggests that 90 % of people don’t use VPN despite the fact that casinos are completely blocked. Casino operators rely on so called mirrors – domain like casinoABC1.com, casinoABC25.com and so on. When one of these domains is blocked, the casino can still be accessed using tens of other domains. The players can use Google to search for the current mirrors. What’s important is the finding that a common user is too lazy to deal with VPN.
Another experience from the Russian market has taught me that players significantly prefer casinos with a website and customer support in Russian language. Casinos without Russian localization and marketing activities focused on Russian market are in a clear disadvantage and overall have only a miniscule chance to succeed.
When we use my aforementioned experiences to reflect on the Czech market, I believe that the blocking can be effective only if the quality of the licensed casinos isn’t significantly lagging behind the quality of casinos without a license. By "quality" I mean at least the game offer, promotions and focus on Czech-speaking people.
If the players are satisfied and find what they are looking for in the licensed casinos, they will not even think about bypassing the blocking measures. There will not be any hole in the market that could be filled by unlicensed operators, which means that casinos without a license will stop targeting the Czech market, as it costs them money.
However, if licenses are only obtained by a small number of casinos with a limited game offer, there will be a hole in the market that the unlicensed casinos will attempt to fill. If the players aren’t satisfied, they will keep looking, which means that there will definitely be casinos for which it will pay off to target the Czech market.
I hope that competent people from both sides fill realize that. The limitations set by the Gambling Act are currently over the line (with regards to decreasing the game offer) and the granting of licenses currently falters. We will see.
Appendix – Questions to answers sent to the Ministry of Finance of Czech Republic
1. The number of granted licenses
In June 2017, only 5 licenses according to the Gambling Act have been granted so far, with only 1 being for an online casino (Fortuna). What is the current state of approving other licenses? How many licenses for technical games do you estimate to be granted by the end of this year and later on in total?
We provide the information about the specific administrative proceedings only to their participants. That’s why we can’t give you any general information about this manner.
The Ministry of Finance continuously processes submitted requests for the permission to operate casino games according to the Gambling Act. Other administrative proceedings are still ongoing, because a range of companies that applied for the basic license, didn’t include all of the annexes required by the Gambling Act. And those that did, were unable to meet all of the requirements of the Gambling Act and administrative practices of the Ministry of Finance, especially in the area of their Terms and Conditions. The Ministry of Finance provides an above-standard cooperation to the companies with a submitted request, in which it communicates with them about the form of submitted annexes, and organizes proceedings on the ground of the Ministry of Finance, with the purpose of having the imperfections of the requests (and their annexes) removed as soon as possible.
The Ministry of Finance publishes the current list of granted licenses here: http://www.mfcr.cz/cs/soukromy-sektor/hazardni-hry/prehledy-a-statistiky/prehledy-legalnich-provozovatelu-whiteli
To this day, 9 basic licenses to operate casino games according to the Gambling Act have been granted.
2. Targeting Czech Republic
The Gambling Act is valid for "Gambling games that are even only partially targeted at or focused on people that reside in Czech Republic". How does the Ministry of Finance interpret the phrase "even only partially targeted at or focused on"? If a game operator doesn’t have a Czech website and marketing activities in Czech Republic, can it accept random players from Czech Republic without a punishment?
The Gambling Act doesn’t exactly establish, what it means to target people with a residence in Czech Republic. From the nature of the matter, it’s clear that an operator is targeting Czech residents, when the Internet website used to operate the casino games are in Czech language, or when the casino games are able to be played with the use of Czech currency. Last but not least, when taking account individual circumstances, marketing activities in the Czech Republic or advertising on websites visited by Czech residents can be considered targeting Czech residents. Publishing on social media with a clear intent to address Czech residents or introducing betting opportunities that clearly interest mostly Czech residents can also be considered targeting Czech residents.
3. A transparent ownership structure
Two of the requirements for granting a license are having "a transparent ownership structure" and "a transparent and unobjectionable source of resources". To what depth do you require the ownership relations and the sources of resources to uncovered? How is it when it comes to joint stock companies with multiple owners?
The information stated in the methodological instructions for filling-in the application for a basic license, an updated version of which was published on March 2nd 2017 (here: http://www.mfcr.cz/cs/legislativa/metodiky/2016/metodicky-pokyn-a-formular-k-vyplneni-za-26062), is sufficient to answer this question. When it comes to the transparent and unobjectionable source of resources, there is an administrative practice in place, according to which the sources of resources are documented by an audited closing financial statement, with the possibility to include tax returns documents. Regarding the transparent ownership structure, the chain of companies that lead to the actual owner must be known, according to the Act no. 253/2008 Sb. about some of the measures against the legalization of incomes from criminal activities and financing terrorism, as amended (there should always be one or more natural persons).
4. The maximum win
In technical games operated online, the maximum win is limited to 500,000 CZK, which is only 500-times more than the 1,000 CZK maximum bet. Many of the currently popular games allow the player to win up to 5,000-times the bet. Additionally, some games include free spins/respins as a part of their mathematical settings. The player might be awarded X bonus spins that count as a part of the one original spin, while the win cumulates and still counts as a win achieved by just one spin. What’s more, the player can win another bonus spins (respins). In this case it’s impossible to calculate the maximum win, because it’s not even possible to limit the number of bonus spins played as a part of one game round. What is the specific limit of 500,000 CZK based on? How should the game operators proceed in the case of games, for which it’s not possible to limit the winnings (like in the case of the aforementioned example with free spins)?
The Gambling Act states, that the act of playing a round of a technical game is (in accordance with the Gambling Act’s § 50 sections 1 and 2) a finished process, in which a random process of determining the game result is created after one launch, and in which the bet for one game is subtracted from the deposit at the latest by the end of the game. It’s not allowed to make other bets during one game, and one game is not allowed to be shorter than 2 seconds. The term "random process" is necessary to be understood in a way that the final result of a game can be created by several outcomes of a Random Number Generator (RNG), which for instance multiply interim winnings. From the aforementioned statements, it’s clear that the decisive criteria for determining whether a new round of a technical game has been started, is the fact whether a round has been started in accordance with the Gambling Act’s § 50 section 1, therefore if the button has been pressed, with this action also being connected to the player’s will to place his/her own funds into the game, which are at his/her disposal. (Placing one’s funds into the game occurs when the funds can be lost or be the basis for a win, randomly.) This action is the basis for the start of a new game round, which means that the previous game round is always previously terminated just before the start of the new one.
If a game is a technical game that contains only the so-called basic game, there’s not a problem with the interpretation of this statement, respectively understanding which part of the game process the technical games’ parametric requirements apply to. Of course, if a game contains bonuses or other similar game elements, therefore the launch of the bonus game is not connected to player’s will to place his/her disposable funds into the game, it’s always necessary to individually examine whether this process isn’t divided into multiple game rounds according to the Gambling Act’s § 50. In the case when another part of the game round is initiated after the so-called basic game, but there was no other "launch" as described above (like various bonus game, in which the winnings can only be increased – for example the aforementioned free spins/respins), it’s considered a part of the original game and the fulfilment of parameters is assessed for the two parts of the game round as a whole.
The winnings from one game round that have to meet the maximum win limits mentioned in the Gambling Act’s § 52 is calculated as the sum of winnings from the so-called basic game and the winnings from the bonus game phases (free spins for example). Therefore, it’s not true that the maximum win achieved from free spins can’t be limited. A technical game has to be programmed in a way that it doesn’t exceed the limits set by the Gambling Act. The maximum wins are also verified as a part of the obligatory documentation from a commissioned authorized person. When it comes to the maximum win limit in the case of an Internet technical game, the sum of the winnings from the basic game and the bonus phases, that were launched as a part of the same game, can’t exceed 500,000 CZK.
The limitation on the maximum winnings is considered a necessary element of protection of gambling participants, as the results of the study called "Gambling in Czech Republic and its impacts" (Czech: „Hazardní hraní v České republice a jeho dopady") by the National monitoring center for drugs and drug addictions indicate that technical and other parameters like the structure of the winnings and the maximum possible winnings have a significant impact on players’ relationship to the game and their gaming behavior. Also, the limitation on maximum winnings is not completely new to the Czech legislative, as it was already present in the previous legislation, specifically based on the created administrative practices. To sum up, the Gambling Act introduces new limits for the maximum bet and win, with the protection of gambling participants in mind. The limits are based on the fact whether a casino game is operated in a gambling room, a land-based casino or online, therefore on a game mode and not on the type of the technical device.
5. Progressive jackpots
The current limits don’t allow for operating games with a progressive jackpot (which cumulates over all game rounds and can achieve millions of EUR). Was this kind of games omitted on purpose? Is there a study that proves these games are more dangerous?
Yes, this type of games was omitted on purpose. Yes, see the final report from RIA to the proposal of the Gambling Act (available at https://www.vlada.cz/assets/ppov/lrv/ria/databaze/ZZ-RIA-k-navrhu-zakona-o-hazardnich-hrach.pdf), that states that the structure of the wins (their count and value), the likelihood of a win and the size of the jackpot are all important factors influencing formation of pathological gambling, which is also supported by the study called "Gambling in Czech republic and its impacts" by the National monitoring center for drugs and drug addictions (here it’s necessary to mention the connection to the maximum win limit).
6. Live dealer games
According to the statement http://www.mfcr.cz/cs/soukromy-sektor/hazardni-hry/zadatele-a-provozovatele/stanoviska/2016/stanovisko-k-moznosti-provozovani-tzv-li-26167, it’s not possible to operate online games with a live dealer. Was this type of games omitted on purpose? Will this type of games be legalized in the future?
Yes, this type of games was omitted on purpose. The Gambling Act (more specifically § 73 section 3) doesn’t consider the process of determining the game result random in live Internet games.
§ 11 (1) "The operator is obligated to maintain the confidentiality of game participants and their participation on gambling. The obligation to maintain confidentiality doesn’t apply to cases, in which the participant waives operator’s confidentiality. The confidentiality can’t be waived sooner than it’s known whether the participant achieved the win in accordance with the Terms and Conditions." The option of waiving confidentiality can be used by a player that wants to try to solve a conflict with the game operator publicly on one of the mediation websites. The second part of this clause, however, gives the casino an option to refuse to comment, because they can’t, as the winnings weren’t achieved in accordance with the Terms and Conditions (which is also the most frequent subject of conflicts and argument for refusing to pay out player’s winnings). What was the reason for adding the second part of the clause into the Gambling Act?
It’s necessary to mention that the second part of the clause doesn’t give the game operator the option to insist on confidentiality when the source of the winnings is questionable. It just determines the moment, from which the confidentiality can be waived. The game operator’s confidentiality can be waived only after it’s known whether the game participant achieved his/her winnings in accordance with the Terms and Conditions. This moment can be understood as the evaluation of a specific bet, therefore the moment when the game operator decided whether the game participant did or didn’t achieve a win. (The fact that the game participant doesn’t agree with this decision is not decisive. The decisive factor is the fact that randomness or previously unknown circumstance has already taken place and was evaluated.)
The goal of this legislation is to protect gambling participants that now have the option to consider whether they want to allow the game operator to use the information for example for marketing purposes, with this decision being made after achieving the win itself. With the previous form of legislation, where was an option to waive the confidentiality in advance, without being aware of any future wins, which might have vast negative consequences, mostly in the case of a very big win. This important factor certainly affects the act of decision making about the confidentiality and its waiving.
When it comes to the game participant’s option to discuss the conflict with the game operator on a public mediation forum, the game operator is not obligated to make a statement, not even in case the confidentiality has been waived. The game operator can’t be forced to make a statement.
However, the Ministry of Finance wants to always give the game participants an option to try to enforce their claim, in a form of a properly filed complaint, when the game provider refuses to pay out a win with the reason that it wasn’t achieved in accordance with the Terms and Conditions. The way a game participant can file his/her complaint, alternatively which other bodies he/she can turn to (Czech commercial inspection, The Ministry of Finance, the court), is specified in each of the Terms and Conditions approved by the Ministry of Finance.
8. Conflicts with a licensed operator
Is there a body that a player can turn to in the case of a conflict with a licensed game operator? What are the instructions for submitting an initiative to investigate a conflict?
The authorities responsible for the supervision of compliance with the responsibilities established by the Gambling Act are the Ministry of Finance and the customs offices. A player can submit a motion to both of these bodies over e-mail, mail, personally at the registry office or using a data box. A motion should be submitted with contact information, with a description of the conflict described as accurately as possible and with relevant evidence.
The Ministry of Finance requires each of the approved casino Terms and Conditions to contain the process of reclamation described in detail, which is available for players to use if needed. If the there is a consumer conflict between a player and a gambling operator connected to player’s game participation, that fails to be resolved by a mutual agreement, the player can submit a proposal for an out-of-court solution of this conflict to the authority responsible for out-of-court resolutions of consumer conflicts, which is the Czech commercial inspection (contact information: Česká obchodní inspekce, Ústřední inspektorát – oddělení ADR, Štěpánská 15, 120 00 Praha 2, email: firstname.lastname@example.org, web: adr.coi.cz). The consumer can also use the platform for online conflict resolution, that was set up by the European Commission and can be found here: http://ec.europa.eu/consumers/odr/. The resolution of conflicts between a game operator and a player is done by Czech general courts, with the local jurisdiction given by the address of the game operator, with the applicable law being the Czech law.
9. Pyramid games
§ 7 (2) f "It’s forbidden to operate a casino game, in which the chance to win partially or fully depends on a bet being placed by a posterior player." – Could you provide some examples of gambling games that this clause applies to?
For example, pyramid games.
10. Voluntary enrollment into the register of excluded players
How can a citizen ask to be voluntarily enrolled into the register of people excluded from gambling?
The register of people excluded from gambling ("the register"), in which a person needs to be listed so that he/she is not able to gamble, is still in the process of creation. There is an ongoing tender that will determine who will create the information system for operating casino games. The register will be a modular part of this information system.
As soon as the register is set up, there will be an option to submit a request to the Ministry of Finance that will be the administrator of the information system and therefore also the register itself. There is no special form of what the request should contain. A freely formulated request is sufficient, as long as it meets the content requirements according to § 45 of the Act no. 500/2004 Sb. (administrative procedure code), as amended, combined with § 37 section 2 (see "from the submission, it must be clear who makes them, what are they about and what is being proposed"), all of that ideally with reference to a given clause § 16 section 6. There are no other conditions. The request can be filed by any natural person that wants to be excluded from gambling. With regard to the aforementioned information, it’s pointless to file a request to be enrolled into the register before the announcement of the exact date of its launch. However, a person can be listed in the register no sooner than on the day of its launch.
11. Register check
In the Gambling Act, I only found the game operator’s obligation to check the register of people excluded from gambling for the player’s name only during the process of his/her registration. Is there an obligation to check this register even after the registration (for example when the player logs in for the first time in a calendar month)?
Yes, this obligation is established in the Gambling Act’s § 17. A person with an entry in the register of excluded players can’t be allowed to create and use a user account, which has to be checked by the game operator each time the player logs in.