Interview: Marja Appelman, CEO, Netherlands Gaming Authority

The regulated market opening in the Netherlands is greatly anticipated among industry stakeholders. How are the preparations going from your perspective?

As the regulator, we see a slow process. On the one hand, that makes us a bit impatient, because we want to protect the consumer and we can only do that properly when the new bill is in place. On the other, it has given us more time to prepare and for more companies to express their interest in the Dutch licence. We have had a few meetings with potential licensees, and hope to have more once the secondary legislation is published by the Minister. This contact with companies not only allows us to get to know them better but also helps them understand what our expectations are of them and to foster the exchange of information. We have structured the regulations to impose the lowest possible administrative burden on licensees, because we see this as the right way to do regulation. That’s why we make the effort to get in contact with licensees and continue to do so. We’ve also been in touch with our fellow regulators. We have been to several countries, and some of them have been to see us, with a large part of the exchange of information between us focused on the technical aspects of the regulation. This is to ensure where possible that we regulate these in the same manner as other countries, again to reduce the regulatory burden as far as is possible.

We have already finished drafting the technical requirements, so are now in the process of making these documents better and better, amending them to take account of whatever changes are made to the underlying regulation. But we are ready to start!

Which date is the Kansspelautoriteit now working towards in terms of being ready to issue the first licences for regulated iGaming in the Netherlands? Are you still on track for 2017?

It is still 2017. We hope to start the application process in mid-2017, and the market will be open late 2017 or January 2018, or somewhere around then.

How many expressions of interest have you received from online operators?

To date, we have had 335 expressions of interest. That’s a lot, but includes a whole range of interests, from online operators already licensed in other European countries, to smaller operators with slot machine licences in the Netherlands, and even some private individuals. We don’t expect all of these 335 to apply or a high number of applications in the end however.

Are you surprised by the level of interest, given the relatively small size of the market?

We are not surprised, because it is free to show your interest, so I can imagine that figure includes anybody who has the slightest interest in entering the market or just wants to be better informed. 

The remote gambling legislation has been in the pipeline for several years now. What have been the major challenges for the Kansspelautoriteit in the intervening period, in terms of managing the situation with (and expectations of) overseas gambling operators?

The biggest challenge is the balancing act between, on the one hand, needing to prepare for the remote gambling market and getting in contact with licensees to ensure their suitability, and on the other, enforcing the illegal market, as we are tasked to do by the politicians. Finding the appropriate balance between these sometimes conflicting initiatives has been our major challenge over the last few years.

The Kansspelautoriteit issued several hefty fines for unauthorized gambling activity last year and has also pursued enforcement actions against a number of companies. Have these actions had the desired effect (i.e. by deterring non-compliant operators and/or sending a clear message to the wider industry)?

It has had the desired effect, but we need the online gaming bill to come into force to become effective. There is an endless offering of online gambling, and we cannot protect the consumer from that attractive offer without a decent, regulated and legal offering. Having said that, we feel we are effective in fighting illegal gambling, and although the fines have been noticed by everybody, they are not our most important form of activity in this area. The most effective thing we do is issue warnings to all those operators who are aggressively targeting Dutch consumers. We tell them: “Don’t do it. You know the drill – don’t use a dot.nl page, don’t use the Dutch language, do not advertise to the Dutch consumer.” That is our main focus and it works very well. Of course, the Dutch consumer still finds their way to the illegal offering – that is the nature of consumer demand – and only legalised online offerings can help that. But we have proved very effective in shifting the focus of many online operators away from Dutch consumers.

Presumably the effectiveness of such tactics comes down to operators not wishing to jeopardise their chances of being licensed in the Netherlands…

Yes, of course! That is the stick that we have, and they know we have that stick! You presumably speak with your counterparts in other countries that have regulated online gaming. What have been the most valuable pieces of information and advice you have received on how to approach and implement iGaming regulation in the Netherlands? That establishing a dialogue with future licensees is crucial, as having this relationship helps the licensing process to judge their application go smoothly. And whatever we are able to do beforehand, we will do so, such as ensuring technical requirements and licensing rules are in place and in line with the industry norms. So, establishing that dialogue with prospective licensees before the formal process starts is the main piece of advice we have received from the other regulators. The second piece is to use principle-based regulation where possible. This involves setting the norms and objectives in our framework and leaving it up to the industry to develop the best and most innovative ways to comply with and operate within those.

And as mentioned earlier, we are already exchanging information with other regulators regarding practical technical aspects, which from an industry perspective, may be the most important element. In contrast with other industries, such as finance and energy, there are no harmonised European rules for the online gambling market. So regulators have to establish close contacts with each other in order to harmonise as closely as possible without interfering with respective policy differences.

What concerns and potential problems does the higher 29% tax now proposed by legislators present you with as a regulator?

The level of taxation is something the politicians have to decide on. But as regulator, it is our duty to say what effect this will have on our ability to fulfil our main task of protecting the consumer. As we have made very clear and also stated in our recently published annual report is that we are afraid the higher tax rate will make this task a bit more difficult. Of course, we don’t know this for certain, because we are talking about the future, but logic says we can only protect the consumer if there are attractive legal gambling options. Many factors determine the attractiveness of the game for a consumer, and the payout ratio may be one of the most important. If players have a much higher payout ratio at an illegal offering compared to the legal, we are afraid that many of them will choose the illegal option.

Despite the higher tax, we still hope licensees can provide an attractive legal alternative, but are concerned in light of the experience abroad and research that clearly shows a tax rate higher than 20% may not capture the intended 80% of online players. The Ministry of Justice has calculated that an increase in the tax rate from 20% to 29% will result in 16% less turnover. This means that we can’t protect the intended percentage of online consumers of games of chance, but also that illegal offerings will increase. So, we will have to divert a major part of our attention towards combatting illegal offerings. Our laws also make it very hard to fight companies that are based outside of the Netherlands. But we will still do everything we can to make the legal market as attractive and as big as possible, including our own marketing campaign aimed at diverting consumers to the legal part of the market.

What would you like to say to potential licensees waiting for the market to open?

Everybody has been looking at the Dutch market for such a long time now, and I hope the political process will speed up so we can start, but I am very grateful to everybody for their patience. People can of course lose patience, but then there would be no thriving gambling market in the end, and we don’t want that to happen!