Gamble paying off in Romania

In recent months many of the operators granted initial one-year licences have had to decide whether or not to carry on to a full 10-year licence. The results are encouraging, says Joanne Christie.

When Romania finally got around to introducing its long-awaited online gambling legislation last year, there was little in the regulations themselves that surprised market participants.

Its system of licensing borrowed heavily from other European jurisdictions and, to the relief of operators, appeared to have heeded the mistakes of some of these jurisdictions by adopting a taxation model based on gross gaming revenue rather than turnover.

In fact, if there was an element of surprise it came from the National Gambling Office (NGO).

The country’s regulator took an unexpectedly aggressive stance when it came to licensing operators that had been active in the Romanian market prior to regulation. It demanded retrospective back taxes of 20% of revenues dating back to 2010.

Most operators paid up, among them NetBet, PokerStars, bet365 and bwin party, in the belief that it would smooth the way to being licensed.

It did for the likes of NetBet and PokerStars, but the last two were still placed on a blacklist of firms which were not allowed to operate in the country.

At issue, the regulator said, was the fact that both had failed to pause operations in the country while awaiting the official green light.

More importantly, the move shut two of the country’s biggest operators out of the market, something more cynical industry observers see as not being accidental at all.

bet365 has since appealed the regulator’s decision, to no avail; and both operators remain on an ever-growing blacklist that now features 879 websites.

The chances of anyone getting off that list look slim at present, says Cosmina Simion, co-head of the gaming practice at Romanian law firm NNDKP.

“We know there are companies which have addressed specific requests to the NGO to have their website removed from the blacklist but to the best of our knowledge no such request has yet been favourable so far,” she says.

Success for those that waited
For operators that didn’t attract the ire of the country’s regulator during the licensing process, the picture is looking much rosier.

When the legislation was first introduced, operators were only able to apply for a one-year temporary licence, however the second part of the legislation was announced in February of this year and this allowed them to obtain 10-year licences.

Although it’s difficult to quantify the exact worth of the market at such an early stage, a look at what has happened when operators’ initial licences ran out indicates igaming firms are finding Romania a worthwhile financial market.

A total of 19 operators were granted temporary Class 1 operator licences valid for an initial one-year period — among them big names such as Unibet, StanleyBet, Pokerstars, Sportingbet and 888 — and so far all of those whose temporary licences have run out have applied for full 10-year licences.

Seven operators are still operating with temporary licences, but Simion says she expects all of these to also continue on to full licences.

“In terms of financial benefits I think the operators’ expectations were met,” says Simion.

“We’ve now had interest from other operators that want to enter the market and are looking to enter directly under a full 10-year licence.”

The list of Class 2 licensees, which includes software and payment providers, is also growing fast and now stands at 190 licensees.

The regulation of the market has also been a success for the country’s coffers. Earlier this year Odeta Nestor, president of the National Gambling Office, said that gambling companies operating within Romania paid €269m in taxes in 2015, up 71% on 2014’s €157m.

It’s likely a substantial portion of this came from back taxes and online activities were only legal for part of 2015, but still it’s an indication the market is doing well.

Unibet, which was one of the first operators to apply for an interim licence and this year renewed it for a 10-year licence, has high hopes for further growth, according to its country manager for Romania, Lucian Prisecaru.

“We see the Romanian market as one that is stabilising in 2017 with more operators coming into the market and most operators receiving a 10-year licence. It will be an exciting year for us and for the gambling industry in Romania.”

Sports on top, but poker surprise second
Unibet’s enthusiasm is perhaps unsurprising given the fact that sports betting has so far emerged as a clear favourite among Romanian punters.

“Online we see the Romanian punters preferring sports betting, which fits perfectly with our strategy to invest more in our sports betting product,” says Prisecaru.

What may be surprising, to those outside Romania at least, is that the second most popular vertical in Romania is not casino, but poker.

Zoltan Tundik, founder of Eastern European information and marketing hub EEGaming, says the reason for this is twofold.

“Poker is quite popular in Romania, especially offline poker. Many groups of friends gather together weekly to play poker and the online poker market has been large in Romania because of Daniel Negreanu, who has Romanian roots,” he says.

“Casino isn’t that popular because there was a huge media campaign going on for years in this country that all of the slot machines that were in the land-based casinos were rigged and they weren’t paying out that well and so many people don’t trust them.”

He says although this poses a problem for online casinos, it also presents an opportunity for them to use the media to reverse the perception.

“There is a need for the operators to have a deeper impact in the media telling people that it is safe to play online internet casinos and they haven’t yet made any efforts to do that. In the evening TV ads you only see sports betting and poker advertised, casino is lacking.”

Tundik says another opportunity for gaming operators to get the upper hand on their competitors comes from offering omnichannel payment systems — where Romanian players can bet using a card but withdraw payouts at a land-based outlet, thus being able to access faster payouts than cards generally provide.

“eFortuna from the Czech Republic did really well with its campaign because it went out with advertising saying that you can deposit online and withdraw from its betting shops and this was really popular,” he says.

“Online payment processors such as Skrill and Neteller need to step up and do more campaigns, that way they would probably gain clients because they would reach players who need the fast [access to] money.”

What’s next for Romania?
Now that the market is up and running, it’s clear that there are aspects of what Simion calls the “work-in-progress” regulations that could be improved.

Although with elections for the country’s new parliament coming up in December and many other issues seen as being higher on the political agenda, she says this is unlikely to happen anytime soon.

For his part, Unibet’s Prisecaru says he would like to see a more joined-up approach across Europe.

“What is important is that the industry continues to push for a harmonised approach with other mature EU markets. Operating in disparate regulated markets requires a lot of work, so we would like to see a consistent approach across jurisdictions.”

One specific change that had been mooted as likely to be brought into place early next year was transferring responsibility for winnings tax — Romania taxes players on gambling winnings — to operators, although Simion says this now seems to be on the backburner.

And while there’s unlikely to be any movement by regulators on taking operators off the blacklist, there could be attempts to force ISPs to be more compliant with the list.

“We have very compliant ISPs which have blocked everything from the very first request and we have other ISPs that seem not to have blocked everything,” says Simion.

Whether or not Romanian authorities can succeed in fully driving out the black market — something many countries have tried and failed to do — it certainly seems they are heading in the right direction when it comes to attracting a regulated market.

For those operators which got into the market in its early stages, the gamble looks to be paying off.