Michel Reznik: Mexico's slot machines to be banned and operators to be out of the picture

On 16 November 2023, the Official Journal of the Federation (DOF) published the new changes to the Rules of the Federal Law of Games and Raffles to come into force on 17 November 2023.

Slot Machines Banned

Slot machines have a long history of being considered a grey area of the gaming industry in Mexico on the basis that players do not know the odds programmed into machines. They legalised in 2013, when the legality of the activity was accepted through a new concept of "Raffles of numbers and symbols through machines", whereas previously, slot machines were able to operate pursuant to interpretation of "raffle of numbers and symbols".

The incumbent President Andres Manuel Lopez Obrador has expressed his beliefs that slot machines are a threat to young people in Mexico and an avenue for criminal activity as they can be found in several unauthorized areas such as flea markets and convenience stores.

With the new decree published on November 16, 2023, by the DOF, slot machines have new restrictions that need to be considered:

• Authorisation to operate Slot Machines will no longer be granted to new operators.
• The prohibition of slot machines applies only to new operators. Previous operators with authorisation to exploit Slot Machines will remain eligible to do so until their permit expires.
• No renewals for the authorisation to exploit slot machines.
• Authorisation to operate slot machines was previously granted for a minimum of 1 year and a maximum of 25 years. The term for those entities that were granted authorisation to operate for more than 15 years has now been lowered to 15 years from the time their authorisation was granted.

What’s next for slot machines?

While these new changes related to slot machines are certainly aimed at their gradual removal, this does not pose an immediate threat to current operators. For now, the prohibition is mostly directed to any illegal and unlicensed entities and anyone using unregulated slot machines found in places outside casinos.

If these new rules are to stay, operators will be eventually encouraged to move their activities online, where the standards of virtual slot machines can be more easily regulated.

Operators Have Been Removed

Article 30 of the previous Rules of Federal Law of Games and Raffles, which prescribes the requirement of permit holders to work with operators, has been removed. This change can potentially change the landscape of the gaming industry in Mexico, as the omission of previous definitions or activities in the new decree is now considered illegal.

"Activities related to games with bets and raffles that are not expressly contemplated in the Law and these regulations are prohibited."

It is important to note the distinction between permit-holders and operators, as permit-holders are required to be domiciled in Mexico. With operators now seemingly out of the picture, this effectively means that the ability of foreign brands to partner with permit-holders to operate under their license is now prohibited.

What’s next for foreign operators?

As the authorisation to manage all operations is now held exclusively by permit-holders, this will severely limit the options for any foreign parties interested in entering the market. However, it’s important to make the distinction that the publication by the DOF is a Ruleset, and not a Law. This means that brands may have the right to appeal any decision made by SEGOB (the regulator), and decisions are made on a case-by-case basis on the premise of interpretation. This can potentially open some leeway for operators to act as funders, or acquire a brand that has previously been granted authorisation to operate, as the ruleset explicitly states that it is not retroactive.

"The purpose of this ordinance is to regulate the provisions of the Federal Law on Games and Raffles, for the authorization, control, surveillance and inspection of games when bets are involved in them, as well as raffles in all their modalities, with the exception of raffles celebrated by the National Lottery."

With the heavy restrictions on operators, and President Lopez Obrador’s term lapsing in 2024, this is now a time of uncertainty of what will be the next step for operators interested to enter the Mexican market.

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