Shutting its doors: How Latvia’s closure of online gambling might be the first of many

It took a little while before worldwide Covid-19 measures started to affect the egaming industry directly rather than indirectly by suspending all sports events, but the first signs of it entering this market are currently being seen. The Latvian Saeima (parliament of the Republic of Latvia) adopted an emergency act last month, the purpose of which is to prevent further spread of the coronavirus within Latvia. Aside from other measures that became rather standard in these weird days, this act seems to prohibit all gambling activities in Latvia. Specifically it says that: One, until this emergency act will be lifted it is prohibited to organise or host land-based gambling (including lotteries) or remote gambling (it is not 100% regarding remote gambling at this point) and secondly, that the Latvian regulator should suspend all gambling licences existing in the country. However, on the first point, it seems that it is unclear if online gambling is prohibited as even the Latvian regulator requested a clarification from parliament in this regard.

The reasoning behind this decision is pretty obvious while the Latvian population is in self-isolation, it could be rather challenging to ensure that this “isolated gambling” would be fully safe for people. On the other side, one may see this decision as another manifestation of a harsh approach of jurisdictions to the gambling industries throughout the world.

Industry impact

Don’t get me wrong, it is obvious that egaming will not be the only industry that will suffer big from the ongoing Covid-19 outbreak and the resultant pause in the economy. Everyone will be affected one way or another, but the Latvian approach demonstrates that the never-ending discussion about the perception of our industry by the authorities should not end until gambling businesses are treated the same as other industries. For instance, Latvian authorities could have considered to implement certain restrictions on online gambling rather than a complete ban. Especially given the fact that most of the operators acting in Latvia are local ones. In other words, if these licensees are not expanded to additional markets, this ban virtually means the close of business for them, layover of employees and a gloomy uncertainty for the future.

To add to the Latvia case, we can also look at Russia, which has implemented large-scale emergency measures (calling it a “long weekend” instead of a quarantine), but already managed to forget about the Russian gambling industry (which includes land-based casinos, slots parlours and land-based and online sports betting/tote) in its preliminary emergency measures directed towards all businesses suffering from a dramatic drop in demand and economy owing to the virus outbreak.

Main issue here is that Russian law encompasses a mandatory requirement for sports betting operators to make a targeted contribution to the Russian sports federations in an amount of no less than approximately €175,000 every three months. It is rather obvious that when all sports events are suspended, it is almost impossible to ensure that one would be able to pay this contribution as esports and Belarus and Myanmar football championships are not meant to create volume necessary to comply with this requirement. To add to that, if a certain operator is on its growth stage and does not have any profits saved, these operators will face the same hard choice and same consequences as Latvian ones.

However, to add a grain of optimism to this depressing sideline, on Monday one of two sports betting self-regulating organisations (this is an institution within the Russian gambling market to control and connect all operators, but it might be over-optimistic to assume that these organisations are reaching 100% of their intended goals) sent an official appeal to the Russian government with a request to suspend the above obligation to contribute until sports events are on the table again. The Russian government has not replied yet, but I am not sure that this reply would be in favour of the industry.

Anyway, this worldwide turbulence will create a new world for the egaming industry, and virtually for everyone. I want to believe that everything will settle soon and we would be able to discuss successes and triumphs and not country-wide bans.

Ilya Machavariani is a gambling and gaming lawyer for Europe, Russia and the CIS heading Russian and the CIS gambling practice group at Dentons. He has extensive experience advising on gambling issues and advises clients on operating in the Russian Federation and the CIS, on the full range of regulations relating to the activities of gambling operators, as well as drafting the necessary contracts and internal documents. He also handles licensing processes for gambling operators that are entering new markets throughout the world.