The bumpy road to Dutch regulation

After a string of delays, partly caused by Covid-19, the Dutch online gambling market has finally launched – but perhaps without the full fanfare the regulator expected. With 29 applications having been submitted to the Netherlands Gambling Authority (KSA) after the licensing process opened on 1 April, only 10 were approved in the week leading up to the market going live on 1 October.

However, the launch has not been without its challenges, including technical hiccups at two important kick-off dates. In what could have been mistaken as a poor April Fool’s Day joke, the opening of the licence application portal on 1 April was hit by a technical fault on day one. The window was due to open at 8am but the KSA discovered a flaw in the final round of testing, delaying the portal opening until later that afternoon.

In a similarly unlucky development, it was a stuttered start to the launch on 1 October when the KSA said online operators could not accept players due to a technical malfunction with the self-exclusion programme, known as Centraal Register Uitsluiting Kansspelen (Cruks). The system was due to open from 5pm, yet instead the KSA issued a statement saying a further update would be provided at 8pm that same day. The regulator finally announced the next day that the technical issue had been resolved.

After much anticipation, the KSA eventually revealed the first batch of licensees on 29 September. International operators that have been granted licences are bet365, tombola, GGPoker, LiveScore, Play North Limited and Bingoal, while local operators TOTO Online BV, FPO Netherlands BV, Holland Casino and Betent also made the list.

However, many of Europe’s biggest operators, such as Entain, Flutter Entertainment, Kindred Group and Betsson Group, were noticeably absent from the first tranche of approvals.

Firms that are subject to a “cooling-off” period of 32 months for illegally targeting Dutch players will have to wait for it to expire before they can hope to operate in the country. It means many operators had to stop serving Dutch players from 1 October and fully leave the market by 1 November.

Flutter Entertainment’s Betfair had already announced its withdrawal from the country on 30 September, while its PokerStars brand must exit by 1 November. Similarly, last month Betlic contacted its Dutch affiliate partners informing them of the termination of all activity in the Netherlands “due to changes in our current business strategy”.

The day before the market launched, there was a mass exodus of international operators, with several of the largest firms very vocal about the financial hit they would take by doing so. Entain, which had been operating in compliance with the KSA’s cooling-off criteria since July 2019, told investors its withdrawal from the Netherlands would cost the business approximately £5m in EBITDA per month.

Similarly, Betsson and its subsidiaries took the decision to stop accepting Dutch customers to boost its long-term chances of being awarded a licence. This will cost the operator about SEK25m (£2.1m) per month from Q4 2021.

Elsewhere, in a strange turn of events, Kindred Group went from declaring on the same day that it would not block Dutch consumers to backtracking on the official launch day. The Stockholm-listed operator is more exposed to headwinds in the Netherlands than many of its rivals and, as a result, expects a negative EBITDA impact of approximately £12m per month.

Commenting on why some operators had announced their exit from the market early on, Bas Jongmans, attorney at Gaming Legal Group, believes the high tax burden – 29% on GGR (reduced from 1 October 2021) plus a 1.75% levy – and lack of protection against unlicensed operators has acted as a deterrent. He argues that the Dutch government has left all details of the legislation to the regulator but with no clear policies set, leaving operators in the dark. So, operators are essentially being asked to pay top dollar to enter the market, send all their information into the government with no guarantee that it will be adequately protected from competitors and no indication if their application will even be approved or not.

Bas Jongmans, Gaming Legal Group

“We don’t see a lot of people within the government with any experience. And, on top of this, you are basically at the mercy of people who are being left with all this authority of just making up their minds as they go along. That is just not a good deal,” Jongmans blasts.

Ready and waiting

Despite the hurdles of the legislative process, operators that have received licence approvals are now gearing up for their launch, or have already launched, in the newly regulated market. UK bingo operator tombola hired its first ever country manager for the Netherlands in June, Marc Smit, who has been building out a local team on the ground. Smit, who has worked in gaming but is new to the gambling industry, said the Netherlands team is 11-strong and growing. The operator has started recruiting customer service staff and chat moderators, while a marketing assistant started in September. There are also roles available for a graphic designer and AML analyst.

Smit tells EGR that the team will be working remotely, although its Q1 plans for opening an Amsterdam office, albeit delayed, will go ahead once the team is in place. In the meantime, tombola has been preparing everything from the technical side to the media campaign. “We’re hoping to launch in October,” says Smit.

Similarly, PressEnter Group (formerly known as Betpoint Group) has been carrying out exploratory and preparatory work, including studying the regulations to understand what it needs to do to ensure it is ready once the operator decides to apply for a licence. “The Netherlands is a market that we are watching very closely,” comments Paul Caruana Turner, PressEnter Group’s senior compliance manager.

The launch of the Dutch igaming market has faced its fair share of delays, after the passage of the Remote Gaming Act into law had been postponed from January 2021 to March, and finally April. Dutch law states that the market can only go live a minimum of six months after legislation comes into force, which brings us up to the 1 October date.

For Smit, regulation of the market has been long overdue. “It’s been over 60 years since the gambling legislation was set-up. And it was in 2012 they said they were going to change that legislation. Now nine years later, we’re finally here.”

Holding a more pessimistic view, Jongmans refers to an article he wrote on the Dutch market in July 2020 titled Dead on arrival and reiterates that his view has remained unchanged. “I do feel that it has been a missed opportunity. The legislation that was proposed at that time was not written from the perspective of operators, it’s more the perspective of a government that’s trying to impose as much control as possible over the online market,” he remarks.

The country’s first attempt to regulate online gambling dates back to 2007, just prior to the launch of the first iPhone. And even two years before that, there had been discussions of an experiment allowing state-owned monopoly Holland Casino to offer remote games of chance. Jongmans believes the legislation remains outdated and that the regulator hasn’t been able to keep up with developments in technology since that first discussion in 2005.

Nonetheless, with a population of over 17 million, 93% of Dutch people owning a mobile and 95% internet penetration, the prospects for online gambling in the Netherlands could be significant if it is not stifled by onerous regulation.

In February, the KSA published a report with projections on the size of the online gambling market, based on research carried out by H2 Gambling Capital and Regulus Partners. In 2024, H2 Gambling Capital estimates the total Dutch remote gambling market at €1.1bn (including GGR and bonuses), while Regulus Partners estimates it at €827m (including GGR but excluding bonuses).

The Dutch government has a goal of moving 80% of players to a Dutch licensed offering within three years after the Remote Gambling Act came into force. However, René Jansen, KSA’s chairman of the board of directors, admitted the channelisation rate may take longer to achieve due to the recent changes in enforcement policy.

Tough stance

The KSA is known for being stringent when it comes to enforcement action and tombola’s Smit believes the country’s online gambling regulation is probably the toughest in Europe. “From a technical perspective, this is probably the most challenging launch tombola has ever had,” he remarks.

Marc Smit, tombola

Further evidence of this strict approach is the numerous changes that were announced by the government and regulator in the weeks running up to the launch date, pledging to crack down on black-market operators. On 20 September, Minister of Justice and Security Sander Dekker took aim at so-called “cowboy” illegal operators and ordered the KSA to intensify its enforcement
activities.

“Illegal providers that actively and specifically target the Dutch market, and whom I referred to earlier as ‘cowboys’, must continue to be tackled in full and with priority, including through strict enforcement,” Dekker wrote.

“Providers that do not actively target the Dutch market without a licence but do serve Dutch players must also discontinue the illegal offer pursuant to the Games of Chance Act (Wok),” he added.

Just two days later, this stance was further strengthened by the KSA which announced it had increased the cost of regulatory penalties issued against illegal operators from 1 October. Under the new regulations, illegal operators with turnover in excess of €15m will be fined 4% of their Dutch turnover by the KSA. If the turnover of an illegal operator is less than €15m, a fine of €600,000 will be handed out. However, if the turnover is unknown, the KSA will estimate an amount and decide on an appropriate punishment.

In addition to fines, the KSA will be able to sanction binding instructions and public warnings to illegal operators under the new rules. One international operator to have felt the full force of the KSA’s crackdown in recent weeks is Tipico, which was slapped with a €531,250 penalty for illegally offering online gambling to Dutch consumers.

PressEnter Group’s Caruana Turner tells EGR that in the Netherlands there is a major focus on betting integrity, player protection and AML, and this is likely to be reflected in the regulator’s stance concerning enforcement action: “Naturally, I expect the regulator to come down much harder on breaches in these areas when compared to more administrative failings which can easily be remedied.”

This is backed up by the country’s strict advertising regulations for gambling companies, as well as the cooling-off period of 32 months for operators that were offering services illegally in the country or who had targeted Dutch players in the past.

This cooling-off requirement means there is likely to be two waves of market entrants. “In phases, gambling companies will enter the market,” comments Smit. “Some will enter in October or November, and then we have a second batch of gambling companies as they are in a cooling-off period because, according to the government, they broke the rules and were illegal in our country.”

Jansen of the KSA expects more licensees to be added in the short term and that by around July 2022 there will be a more complete picture of what the Dutch online gambling market will look like.

PressEnter Group’s senior compliance manager feels the cooling-off period could be the biggest barrier for some operators as they miss out on a head start. “Operators that are subject to this will need to find a creative way to make up that market share once they are able to enter,” Caruana Turner remarks.

With the regulated market now live, Smit says it will be a “complete reset” for players and the already existing land-based operators. “Even if you already have an account at a betting website or you used to go to a land-based casino for the last 20 years, from 1 October you have to basically register all over again.”

Tombola is hoping that by being among the first wave of operators to launch in the market it can establish itself as the “number one bingo website”. According to Smit, the reason tombola decided to enter the country is due to bingo being “in the DNA of Dutch people”. “For tombola, it’s a great opportunity to launch in this country and I think we can own bingo in the Netherlands,” he boldly states.

As operators establish themselves as market leaders early on due to the phased entry, Caruana Turner highlights the importance of a tactical marketing approach to stand out. While PressEnter Group is still exploring what its strategy will be, he confirms it will be driven by digital efforts like SEO, PPC, social media, affiliation and programmatic, as opposed to more traditional methods.

Trade off

In September 2021, tombola was announced as the newest member of the Netherlands Online Gambling Association (NOGA), a trade body which has 10 members. Smit tells EGR that it is “super important” to be a member of NOGA and that the Netherlands doesn’t want to end up in a similar situation to other EU countries where gambling TV commercials are outlawed. “We need to communicate to our players. If we don’t regulate the industry, then there’s going to be an overkill of ads. And there’s going to be complaints that will have a very negative influence on the player base.

“So, it’s in all our interests not to go for the short term but for the long term. We want to be here in 10 years from now in the same way we are starting,” he remarks. Smit reiterates that it is important that licence holders all have a seat at the table with the same interests and commitment to responsible gambling to fight back against the unlicensed operators. “There is some prognosis on the channelisation, but it all depends on how the government will act against illegal websites and that will determine the success of legalised licence holders.”

Based on the KSA’s report, the channelisation rate is expected to be more than 90% by 2024 in relation to the player base. Channelisation in terms of GGR is projected to be around 70% that same year, with the remote tax rate playing an “important role”, according to H2 Gambling Capital.

Caruana Turner believes the Dutch regulatory framework is one of the better ones in Europe as it does a lot of what it says on the tin. “For instance, the main aim is channelisation and they recognise that to achieve this, companies need to be able to advertise and attract players. However, the regulation is robust enough to ensure proper responsible gambling protections are in place, thus achieving another key goal – player protection,” he remarks.

The H2 gambling report found that gaming tax rates were one “major obstacle” to Dutch channelisation, with a particularly high tax rate of 29% in the Netherlands, compared to 18% in Sweden or 28% in Denmark. Smit agrees that this could prevent operators from entering the market if it is not financially viable: “It is one of the highest-taxed countries in Europe, so it’s going to be tough to get the right margins. I would understand if an operator would decide not to go to the Netherlands because of the high taxes. That’s a valid point.”

In turn, Gaming Legal Group’s Jongmans believes the current legislation is “downright discriminatory” against smaller operators since a licence application alone costs €48,000. “You don’t get to burn €100k in redesigning policies or redesigning your website if you’re a relatively smaller operator. So, should you only be allowed to operate in the Dutch market if you have millions of euros? I don’t feel that it’s fair,” he asserts.

Chopping block

Just last month, a new trade association was launched, Licensed Netherlands Online Gaming Providers (VNLOK), which currently has five of the largest land-based operators signed up. VNLOK and fellow trade body VAN Kansspelen collaborated on an advertising code for online gaming together with an international party. The proposed code calls for a maximum of three online gambling ads during a TV commercial block on the Nederlandse Omroep Stichting. Only one ad will be permitted in a three-minute TV commercial block, while a maximum of two ads can run during a three- to five-minute TV commercial block.

However, NOGA hit back at the proposals stating the code is targeting online gambling and TV advertising but not land-based advertising that covers billboards, bus shelters, public transport and letterboxes.

NOGA director Peter-Paul de Goeij said the code “did not go far enough” to stop unlicensed gambling, and that it placed online-only licensees at a disadvantage.

However, despite VNLOK and VAN Kansspelen’s best efforts, the bodies were unable to get the final code across the line in time for the market’s launch.

“It is a pity that we have not been able to come up with a definitive advertising code for the opening of the online gambling market on 1 October,” VNLOK chair Helma Lodders said. “We remain committed to arriving at a definitive code because making advertising proportionate is in the interest of consumers, advertisers and the providers of advertising time.”

On the idea of a limit to three ads per commercial block, tombola’s Smit is of a similar stance: “That’s exactly what I would suggest. We’re talking to and negotiating with broadcasters at the moment, and they all say they want to cap gambling commercials. We don’t want a commercial block with five, six or seven gambling commercials. I’m also a consumer and if I look at the commercials, it’s an overkill.”

The current advertising rules prohibit gambling ads on TV before 9pm. This means operators like tombola have to think about alternatives such as sponsoring a TV show, which is permitted before 9pm but only with a logo. “Out of home [advertising] is a big part of the plan so we have a lot of creative ways to fill that gap. If every single licence holder has the same playing field, then it is fine with us,” says Smit.

In terms of the future prospects for the Dutch market, PressEnter Group’s Caruana Turner has high hopes as he believes the Netherlands has drawn up a solid framework that allows for competition within the market while ensuring players are protected. He sums it up: “What’s more, given its size, I think it will be a very interesting and enticing jurisdiction for those that enter.”

Jongmans argues the only way to properly regulate the market is to get all 27 EU member states at the table and strike a deal on a European framework. “There is still no gaming directive because there’s a lot of money to be earned for governments from gaming, so they don’t want to give up that piece of the pie.”

As we enter October, there will hopefully be more signs of movement with additional operators officially launching after receiving their stamp of approval and not just those bigger names with cash to splash resulting in a monopoly as some critics fear. Instead, the ideal situation is a fair and level playing field for all licensed operators and harsher deterrents for those operating illegally in the market. The road ahead may still be long and bumpy, but opportunities are there for the taking once the regulatory framework settles.

Supply chain

Supply chain

EGR Intel talks to Steve Cross, director of games development and operations at Greentube, and Sev Alev Kaya, commercial director for EveryMatrix’s CasinoEngine, on the preparations involved as the Dutch market goes live

Steve Cross, Greentube

 The regulatory situation on approvals of games

Steve Cross (SC): The regulations for the Netherlands are relatively straightforward, as they match some of our other markets. At Greentube, we only operate in regulated markets and we are used to having to adapt our content to be compliant with the specific rules and regulations set in each jurisdiction. Working with GLI, we are managing to get our games quickly licensed for the market.

Sev Alev Kaya (SAK): The introduction of the new Remote Gambling Act in the Netherlands has added the important requirement of meeting its Cruks guidelines. This register is to ensure that player safety is taken seriously, and self-exclusion is as effective as it can be. The process of delivering the requisite regulatory and technical aspects is certainly rigorous and is being implemented thoroughly, as can be seen by the fact the KSA only approved one out of every three applications at launch on 1 October.

Integration and the tech landscape

SC: The integration process is also relatively straightforward. We have an advantage as we are working with a lot of partners that we already know, which makes it a lot easier and overall, it has been a smooth procedure.

SAK: The strictures of the Dutch Gambling Act make the selection of a reliable, adaptable B2B software provider a natural solution for operators looking to enter the market. From the Player Account Management (PAM) to casino and sportsbook platforms, products that are based on micro-service architecture allow for seamless adaptation to new jurisdictions such as the Netherlands. An integration platform that allows for the implementation of player protection measures without the need for vendor customisation will naturally provide a competitive advantage, as does a payments platform that includes customer verification micro-services designed to meet requirements set out by the KSA.

Sev Alev Kaya, EveryMatrix

Dutch player demographics and profiles

SAK: The Netherlands online gaming market’s transition from state-owned to a free model provides a virtually clean slate for operators, with the implementation of a cooling-off period for those who passively attracted Dutch players pre-legislation. As we see it, it offers a host of advantages over rival markets. There is an existing appetite for gambling and sufficient average income to sustain its safe adoption into digital. We also see positive demographic trends, a diverse audience, a clear love of sports betting and what we view as the correct balance between player protection and business requirements.

The affiliate and B2C player marketing landscape

SC: As the market has only just opened, we are still unsure of the best marketing route and if the Dutch market will be ideal for affiliate or streaming partnerships. We are, however, exploring collaborations and looking forward to future potential partnerships in these areas.