The bumpy road to Dutch regulation

Ready and waiting

Tough stance

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.