San José, Costa Rica, since 1956

Bills to Regulate Sportsbooks on the Table

COSTA Rica’s thriving but controversial online gambling industry may soon face increased government regulation.

Legislators have proposed four different bills that aim to tax and regulate the country’s sports wagering firms, known as sportsbooks.

Congressional Deputies in favor of regulating online gambling see the sportsbook industry as an important generator of employment, particularly among young people, and a large source of potential tax revenue for the government.

Owners and representatives of online gambling firms who favor regulation see the bills as an opportunity to cement their rights as lawful businesses operating in Costa Rica.

In fact, The Tico Times this week was unable to find anyone opposed to sportsbook regulation.

“THERE’S a clear trend toward regulating the industry,” said Eduardo Agami, president of the Costa Rican Association of Data-Processing Centers and CallCenters and president of SBG Global, one of the country’s first sports wagering firms.

“We are legitimate businesses,” he said. “There are companies more than willing to stand up and be counted. Companies are willing to work alongside the government in favor of regulation.”

All four bills seek to establish a permanent tax regimen for online gaming, although they vary on the types and amounts of taxation proposed and on the specific conditions businesses would have to meet to be allowed to operate.

THE first bill, and the one with the highest chances of being approved in the coming weeks, is President Abel Pacheco’s proposed Permanent Fiscal Reform Package (TT, March 12).

The fiscal plan would transform a onetime licensing fee sportsbooks were charged in January 2003 as part of the government’s Emergency Tax Plan into a regular yearly operating license.

The maximum cost of an operating license under the current plan would be $55,000.

CONGRESSIONAL deputy Federico Vargas of the Social Christian Unity Party has proposed a bill that would create an online gambling call center hub in the province of Heredia.

Under his bill, all sportsbooks and online casinos would be required to transfer their operations to the outskirts of the city of Heredia.

“What I propose is a special district for sportsbooks, much like a free zone,” said Vargas, who represents Heredia in the Legislative Assembly. “I propose the location that I think is best suited, but it’s open to discussion.”

Sportsbooks also would be required to transfer one cent of every dollar they generate to the Finance Ministry to pay the government’s fiscal deficit.

“First, it would ensure these companies pay taxes. Second, it would secure the future of the thousands of young people employed by the industry,” Vargas explained. “It provides strong regulations. This benefits the country and the industry.”

LUIS Pereira, legal representative for Group, which runs a sportsbook in western San José, said he is not convinced that bill is a good idea.

“The creation of an electronic wagering district is not viable,” Pereira explained.

“The investment online gambling firms have made to be able to operate where they are located now has been large, and is practically impossible to transfer. … From a technological standpoint, it would require companies to restart their operations.”

Another attempt at regulation is part of a larger bill that aims to set up a general law to regulate all types of gambling-related activities in the country.

ORIGINALLY proposed in 2000, the Gaming Law, if approved, would regulate the operation of everything from casinos to raffles. It would require sportsbooks to use only Internet servers located in the country and conduct all of their operations through state-owned banks.

Sportsbooks would have to be located at least 500 meters away from schools and churches, according to the proposed law, which also would create a National Gaming Commission to oversee all gambling activities.

The fourth proposal is a bill that would establish a $2,500 yearly tax for every “terminal” – telephone or computer – used by sportsbooks to take wagers. Total taxation would not surpass $125,000 a year.

WHILE these bills are a step forward, they are still rough proposals. Costa Rican legislators could learn from the experiences of the Caribbean nation of Antigua and Barbuda, a pioneer in online gaming that has developed comprehensive legislation to regulate the industry.

“The first thing we did was to classify online gaming companies as financial institutions,” said Ronald Maginley, head of Antigua’s Directorate of Offshore Gaming.

“We already had a comprehensive set of regulations on how financial institutions are supposed to operate in terms of solvency and provisions to avoid money-laundering,” he told The Tico Times on Tuesday.

“A sportsbook is essentially a deposittaking institution,” he explained. “It holds money in a trust… This is reflected throughout all our regulation.”

THE nation’s Directorate of Offshore Gaming is the regulatory body responsible for overseeing all aspects of the offshore gaming industry.

In addition to processing, awarding and revoking operating licenses, the Directorate monitors the gaming software companies use to ensure fairness, keeps track of companies’ finances, makes sure they accurately report their earnings and operates a toll-free number to assist players with complaints.

The Directorate regularly audits online gambling firms in accordance with the regulations of the Caribbean Financial Action Task Force (CFATF) – an international task force created to combat money-laundering, Maginley said.

“Because we do such checks and are aware of the activities of the company, we ensure they follow best practices,” he explained. “For that reason, Antigua and Barbuda is very confident in taking actions like the one we brought before the World Trade Organization (TT, March 26).

“We, as a government, are very supportive of our online gaming sector,” he said. “We are very clear and have resisted attempts by the United States to close down companies in our jurisdiction.’’

MAGINLEY stressed the importance of reaching a fair balance when drafting regulations.

“I think, if anything, the challenge to any government is to first understand the industry,” he said. “… One must balance the need of regulation issues and the practicality of running a business.

“It’s important to make sure not to impose too many barriers,” he said. “A balance is needed. Legislation must be consulted with the industry to make sure there is a system that benefits both sides.’’


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