The introduction of Curacao's online gambling sector
The online gambling industry in Curacao is and remains a hot topic. In addition to the developments in the jurisprudence, a new gambling law is also on the agenda that is expected to be introduced at the end of August 2023. That is why we will reflect on the development of the growing gambling industry in Curacao in this blog and highlight the ins and outs of the process towards a new legal model.
Flashback
Curacao is in the top 3 countries where most online casinos are hosted. Online gambling first came into the picture in 1996. Around that same year, the first IP licenses were issued in Curacao. These licenses are now also used to host online casinos. In order to have an online casino in Curacao, you must obtain a license from a company in Curacao that has a license to distribute information and process data. The so-called master license holders. With this IP license, services for tax advice, hosting a web server or accounting services can be purchased. Curacao has a huge data center, from which thousands of online gambling sites operate.
The operator of the online casino is also called a sub-license holder and is ultimately the one who operates the online casino instead of the license holder (master license holder). The relationship between these two must be considered a contract that is concluded between two companies, so separate from the government. In that contract, various agreements can be laid down about the provision of certain services. For example, online casinos are not allowed to accept players who live in Curacao, because online gambling is prohibited in Curacao.
Given the increased risk of money laundering, the sub-licensee is also generally required to account for its source of income.
Wwhy Curacao and not another country?
There are several reasons why it is attractive for companies and online casinos to focus on the Curacao gambling industry.
Curacao's favorable tax arrangements play a major role in companies choosing the Curacao gambling industry, particularly the lower tax rate compared to other countries that allow hosting an online gambling website.
This is also one of the reasons for our Minister of Finance to develop the gambling industry in Curacao into one of the “next big thing”. The Minister wishes to use the gambling industry to achieve as many economic, fiscal, social and societal benefits as possible. For example, researchers in this field indicate that when the Tax and Customs Administration takes an adequate position in accordance with its task, a significant amount of tax money can be collected from the online gambling industry.
However, this requires the application of expert and efficient enforcement and supervision instruments. Only then will the local population of Curacao be able to benefit from the online gambling industry. In addition to the judiciary, the government has a clear task in this regard. In this context, particular attention must be paid to the lack of enforcement and regulation, as this in turn creates an increased risk of money laundering and terrorist financing. This increased risk therefore exists mainly because there is a large gap exists in the relationship between the billions in turnover generated by the online gambling industry and the meager tax revenues it brings to the Curaçao government.
Other forms of crime are also found at the companies or websites that operate an online casino. Often the websites are fake, prizes are not paid out or the websites are immediately closed, with the result that there is also frequent litigation in Curacao against the online casino and also against the master license holder.
Even when viewed from the players' perspective, there are clearly a number of caveats to the reliability and security of online casinos.
This is reflected in the case law, such as in the ruling of 14 March 2023 (https://www.wildemanlegal.com/online-kansspelen-wie-is-aansprakelijkheid-voor-de-uitbetaling-van-prijzengeld/). In these cases, the Court saw sufficient grounds to hold the master license holder just as responsible as the online casino for the damage suffered by the player due to the unjustified non-payment of the prize money. Given this current state of affairs, it is to be expected that master license holderr withdraw from Curacao's gambling industry or a smaller flow of foreign investors will want to establish themselves in Curacao due to an increased risk of liability.
The new gambling law should also focus on finding a balance between the interests of the players, the master license holder and the sub-license holder. However, it does not appear that sufficient attention has been paid to the aforementioned in the new gambling law. The Social and Economic Council (SER) has also previously indicated in its advice that the Minister wants to introduce the new gambling law too hastily, whereby the quality of the legislative process is not guaranteed.
With a new gambling law, the focus should not only be on being able to collect tax revenues, but also on introducing effective guarantees for the quality of service provision when operating an online casino. When setting quality requirements, the tools must also be created to monitor compliance with the rules. Quality is now planned to be guaranteed in implementation regulations. But as the SER indicates, these implementation regulations have not even been drafted, so there is little insight into what the licensing, supervision and enforcement will look like in practice.
Another point that may – in addition to the objections raised by the SER – play a role in introducing a new gambling law is the role of the player (the consumer) who is ultimately the one who uses the online casinos and can win money. After all, the player makes the industry profitable. But we also see more often that the sub-licensees (and the master licensee who is in principle considered to be jointly responsible for paying out the money) do not pay out the money even after being ordered to pay.
An underexposed problem here is that online gaming companies do not have access to local banking services. This results in limited redress options for players, while numerous cases are being handled at the Court to settle a dispute between a player and an online casino. This means that the player is at risk of collection.
Where are we now?
Curacao is clearly (still) a home base for many online gambling companies, while the Curacao economy benefits little from it. Reason why the Minister of Finance has decided to introduce a new gambling law, which he wants to have implemented by August 2023 at the latest. A new legal model must ensure that the economy of Curacao can benefit from it.
More haste less speed
However, we note that there must also be a focus on the interests of the parties that make the industry run and profitable. Especially if we consider the ruling of 14 March 2023 as leading for the relationship that exists between the players, the sub-license holder (the online casino) and the master license holder. With regard to the quality and the objectives that are intended with the new gambling law, there must also be a sufficient and sound balancing of the interests of the players, the sub-license holders and the master license holders. If this does not happen, it is up to the license holders themselves to find the possibilities within the framework of the law to cover themselves as much as possible against (liability) risks. A thorough analysis of the legal position of the player in relation to the master license holder and the sub-license holder as a result of the ruling of 14 March 2023 is therefore necessary.
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