Hungary Is Launching New Betting Rules for Online Operators

Online sports betting will be a state-controlled industry in Hungary. With this significant move, gambling distributors with EEA registrations are now allowed to get into the lucrative Hungarian market.

Ending the Stalemate

New rules establish a bookmaking division for the government-owned business Szerencsejatek Zrt. The market has been regulated since 2014. Since then, numerous legal arguments have been brought up about the industry situation.

To find out if Hungarian laws breached Article 56 of the Treaty and Functioning of the EU, important stakeholders like Unibet and Sporting Odds filed a request with the CJEU. The objective of this document is to prevent member states from impeding cross-border commerce and service supply.

The CJEU ruled that Hungary's online gambling licensing scheme was illicit and that qualified distributors from the EEA were not eligible to apply for permits there. It also emphasised the need for fair, transparent, and non-discriminatory market laws in the country.

In February 2022, the European Commission (EC) received and approved the Hungarian state's proposals for the new policy.

Requirements for Businesses

The revised gambling act includes a provision for multi-licensing. EEA businesses can propose online sports betting services to adult Hungarian users after receiving a permit from SARA.

The number of licences that might be given to distributors was not capped by the lawmakers. According to the Hungarian Gazette, the authority would subsequently draft secondary rules incorporating obligations.

Here are some of the prerequisites that must be met by EEA operators for obtaining a licence:

• The candidate must have 5 + years of experience running a gambling establishment in any other EEA nation.
• The applicant needs to establish a branch in the country. It has to have a capital of about € 2.5 million in Hungary.
• A minimum of € 625,000 in securities must be provided by the petitioner, while the quantity required will depend on SARA's criteria.
• The applicant is required to pay the full licence price of € 1.5 million for the whole length of the permit.
• A player protection strategy that has been authorised by SARA must be created and implemented by the candidate.

Processing Period

To be qualified to take part in the market, EEA entrepreneurs must designate and register a local representative before submitting a licence application. The delegate must be a citizen of Hungary and live there. Additionally, they have to hold a law or economics master's degree. Only an authorised official may make legally binding declarations on behalf of the company regarding the rules.

For EEA operators, extended administrative timelines are to be expected. Representative registration may take up to 75 days to complete. Following that, the licencing procedure will take 120 days.

There is a 15-day period if certified businesses are not listed. The current corporate income tax rate in Hungary is 9%, while the fee on online sports wagers is 15% of monthly net gaming income.

Payment System Improvement

The SARA, together with the tax administration and the telecoms agency, has worked hard for many years to stop illegal internet betting companies from entering the Hungarian market. Numerous strategies had been tried, such as website blocking or harsh sanctions like fines. They failed to have any real success, though.

By concentrating on tracking payment accounts and transactions in compliance with AML requirements, the revised Gambling Act will improve market surveillance. Only money-transfer accounts approved by the Hungarian Law on Payment Service Providers and Financial Enterprises may be used by EEA companies to send funds to users.

A further provision of the new regulation states that an operator may only have such an account if they have received a licence. The rules for limitation or blockage of unlawful card holders and transactions involving illicit distributors will be provided as well.

Regulatory Expectations

EEA operators who are interested in getting a licence can already start preparing. Despite the current restrictions, some candidates are active in the Hungarian marketplace and provide services to numerous local players. Their further fate is under consideration.

Now, punter wins are paid through registered operators, so the situation with income taxes is unclear. The framework will research the profits from unlicensed sports betting sites.

The SARA will shortly release its regulation outlining the technical specifications, certification requirements, and operating procedures. These regulations should not considerably deviate from the draught presented to EC. In fact, EEA distributors are left hanging until the last set of criteria is accepted and made public.

James Burton The Casino Market partner, the owner of the gambling establishments’ network

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