Pulse

Buenos Aires: Changing perceptions and perspectives

By Lewis - 26 May 2021

Online gambling has finally been regulated in Buenos Aires. New rules mean that that for the first time those living in the capital will be able to make a legal bet online via an approved number of sites monitored closely by the city lottery, Loteria de la Ciudad (LOTBA).

New rules are already in place in the province of Buenos Aires, the largest and most populous Argentine province. Slightly smaller in size than Italy, it is home to 16.65 million people or 39 per cent of the national population.

In Argentina, online gaming has been permitted since 2006 but only on a province to province basis and there is no national law in place which regulates online gaming. Crucially, up until now, online gambling has not been licensed in the capital of Argentina or in the province of Buenos Aires. Indeed, both have taken a dim view of offshore gambling in the past.

In May 2012, the Buenos Aires Lottery took Bwin to court as players from Buenos Aires province were found to be using the site while it only had a licence to operate in the province of Misiones. In March 2009, a city judge ordered that access to the 888.com.ar website be blocked for those living in the city limits.

Despite government intervention, according to city hall officials, online gambling has grown exponentially since then. Between 2018 and 2019, around 1,900 illegal gambling sites were still offering their services to those within the city of Buenos Aires alone. LOTBA has initiated legal proceedings against as many as 900 of them.

Offshore sites are especially attractive to Argentines because there is no land-based betting option available. Apart from horse racing available on track and at around 100 horse race betting outlets nationwide, the only other official sanctioned sports betting in Argentina has been an outdated football pools game called Prode. For years, Prode reported decreasing turnover and was finally terminated in 2018.

However, land-based gambling has been growing in popularity for several years and the lead up to online gambling legislation is best understood within the wider context of the development of the land-based sector in the province and the city as well as Argentina’s continuing economic crisis.

In March, the national statistics agency (IDEC) said that Argentina’s economy shrank by 9.9 per cent in 2020, year-on-year, due to the pandemic. This is its worst slump in almost 20 years. Inflation continues to rise while the peso’s value has plummeted.

GAMBLING IN THE PROVINCE OF BUENOS AIRES

In the province casinos are often state owned, located in tourist destinations and are in many cases dotted along the Atlantic coast. In addition, there are 13 Codere owned large scale slot parlours and bingo halls located in Greater Buenos Aires – the densely populated ring of municipalities that surrounds Buenos Aires City.

Ex-Governor of the province, María Eugenia Vidal, announced that she would not allow any more casinos during her administration. Yet during her term in office she ushered in the tender process for the 3,900 slot machines in seven state casinos once their licences expired and gambling saw an expansion under her leadership. She also promised to end subsidies to horse racing tracks.

While horse racing may provide jobs for thousands of people, it has been in decline for several years while casino gaming has been on the rise. Indeed, her predecessor was only able to hold off a major political crisis by renewing a number of Codere bingo licences which enabled him to make payments for state workers at the very last minute in 2012.

Vidal, who had on many occasions expressed her opposition to gambling on moral grounds, pushed through online gaming laws in September 2019 due to the dire state of provincial finances. Indeed, Argentina’s economic crisis has meant that while some lawmakers remain fundamentally opposed to gambling on principle, reform has found just enough support in both the province and the city to get approval.

GAMBLING IN THE CITY OF BUENOS AIRES

The autonomous City of Buenos Aires has a much smaller population, around three million, and is better off compared to the province, but it still needs to raise income as the economy continues to decline, especially in the wake of the pandemic. Land-based gambling is limited to two large scale locations: the racetrack and the floating casinos.

The track in downtown Buenos Aires was bought by Hipódromo Argentino de Palermo S.A (HAPSA) in 1992. In 2002, HAPSA won the right to install slot machines at the track. There are now around 4,000 slot machines located in a vast sprawling complex which is mostly underground.

The first floating casino was granted a licence in 1999 to operate in Puerto Madero, which is located (like the track) in one of the more affluent parts of the city. A second ship was joined to the first in 2004 and combined Estrella de la Fortuna and Buque Princess make up the Casino Buenos Aires.

Today, casino Buenos Aires houses over 120 tables and more than 1,400 slots. For more than 15 years the federal government and the city government fought a hard long drawn out war for control over gambling within the city limits. But in 2016 the city of Buenos Aires finally gained complete control over regulation with LOTBA eventually becoming the new supervisory body.

Questions over the tax rate and back taxes have all been addressed meaning that the industry is far less of a flashpoint for political dispute than it has been in the past. Consequently, both casinos exist in a far more stable regulatory environment and we are unlikely to see little change in the short term.

In addition the government will almost certainly find some kind of solution to keep the floating casino in business due to the tax income it generates for the city although its licence has actually expired. The racino’s licence does not expire until 2032.

However, any expansion of the landbased industry looks highly unlikely. The current administration closed down the only five traditional bingo halls operating in the capital in 2016 once their licences expired and city mayor Horacio Rodríguez Larreta has repeatedly said that he wants no expansion of land based gambling in the city limits.

A fundamental part of the opening up of the online market has been the continuation of a more business friendly political alliance which has held sway in city hall for several years now.

In November 2015 centre right Mauricio Macri won the presidential election having previously served as mayor of the city. Larreta succeeded Macri as mayor in 2015. Larreta had helped Mauricio Macri to create the Republican Proposal (PRO) party.

While Macri lost his Presidential re-election bid in 2019 Larreta was re-elected as mayor in 2019 meaning a direct continuation of policies in place in the capital.

Larreta is above all things pragmatic and has shown a willingness to engage in political negotiation – a skill woefully lacking amongst his political rivals who have sadly been all too willing to exploit the increasing polarisation within Argentine society.

It is this pragmatic approach and ability to get things done which had seen his popularity rise even during the current recession.

A JOINT APPROACH

Close political ties between Larreta and Governor Vidal, both of whom belonged to the same centre-right governing coalition, meant that the city and the province worked together to shape online policy.

Tensions between Buenos Aires and the city have existed for years but after the election of 2014 for the first time in 23 years, the City of Buenos Aires, the Province of Buenos Aires and the country was run by politicians of the same party. Vidal governed the province while Horacio Rodríguez Larreta ran the City and Macri, the country. All three were members of the PRO party.

Indeed regulation of the industry in the city limits was coupled with an agreement signed between the management of the administrations of Larreta and Vidal for the coordination of actions over the running of online gaming between both jurisdictions.

Both bills were also signed into law in the same month: December 2018. LOTBA was granted the authority to call for tender processes for the city while The Buenos Aires Provincial Institute of Lottery and Casinos was granted control over online gambling in the province.

ONLINE LICENCES IN THE PROVINCE

A total of 14 companies were scheduled to contend for the seven online gambling licences for the province of Buenos Aires. International interest was high with a number of well known online operators teaming up with local companies in order to make a bid. However the changing political landscape and trouble for Vidal delayed the process.

In September 2019 Vidal put the tender for the online gambling licences on standby while she sought re-election. Vidal lost the primary race to ultra-kirchnerista Axel Kicillof by almost 17- per cent margin in August 2019. President Mauricio Macri was also unexpectedly defeated in the primary elections.

Vidal and Macri eventually lost the election in October 2019, as frustrated voters rejected the incumbent’s handling of the economic crisis. Macri was defeated by left-wing rival Alberto Fernández and his running mate former President Cristina Fernandez de Kirchner who was president from 2007 to 2015.

Kirchner has a far more radical left wing base. Her previous term in office, saw long a line of protectionist moves which shifted power away from the private sector and put it squarely in the hands of the state (there was even speculation at one point that she was planning on putting casinos under state control during her terms of office).

Kicillof had previously served as minister of the economy under Kirchner. During the 2019 campaign, Kicillof predictably distanced himself from the online gambling initiative and the issue of gambling altogether. However, he ultimately approved Vidal’s online gaming law (albeit as discreetly as possible) and granted licences to seven companies to operate online gambling with the news published in the Provincial Official Gazette on the last day of 2020.

Kicillof, like Vidal, might be opposed to gambling on principal but the fact is that just like his predecessor he needs to raise money. Indeed, the province’s finances have inevitably worsened and it has been in default for nearly a year after it missed a $150m bond payment in May 2020.

Although it is a small amount compared to billions owed to its creditors, it is estimated that the newly regulated industry will generate around $90m for the province and $60m for the provincial lottery which in turn is a major source of funding for a number of state funded social welfare programmes.

LICENCES GRANTED

Companies had to present themselves in groups, one international together with one local company. In all 14 applications were made. Luckia (Grupo EGASA), Codere SA and BetCris were amongst the rejected applicants. The partnerships require that the local operator hold a minimum 15 per cent stake in the business.

Products may include betting on horseracing, sports and non-sports events (including virtual events but excluding politics), casino games and lotteries. Licences are valid for up to 15 years. Each new licensee must make a down payment of €650,000 to obtain its BA licence, with five per cent of online gambling turnover taxed.

Online gambling will be composed of the following foreign and domestic partnerships:

– ArgenBingo BA and William Hill
– Pasteko SA and Hillside Media Malta (bet365)
– Hotel Casino Tandil and Playtech
– Boldt SA and Cassava Enterprises Gibraltar (888 Holdings)
– Atlántica de Juegos y Stars Interactive Limited (Flutter)
– Binbaires SA and Intralot SA
– Casino de Victoria and Betsson Group

LICENCES IN THE CITY

At the end of May 2019, the Legislature of the City of Buenos Aires approved the final regulation of online gambling. The granting of online licences has yet to be completed in the city but a number of agreements have already been reached and one online casino is already live.

According to LOTBA officials, six companies have applied for a licence as well as two land-based operators. In addition the 1,200 lottery outlets could be used as places where players can make deposits into their online accounts. The city government expects to generate between US$6.8m in tax revenue for the city via online gambling.

In February 2020 LOTBA opened the tender for online gaming operating companies that wanted to launch in the city limits. There was no limit of permit holders and licences can be extended for a further five years. For a company to be granted a licence it must have at least two years of experience in the online gambling industry and annual revenue in excess of $1.5m, with net worth not less than $25m.

Interested parties must apply to LOTBA, and pay US$30,000 in administrative expenses when entering the system, and must also offer a guarantee of $2,000,000 plus 10 per cent on net proceeds. Operators must be certified by an accredited gaming laboratory, meaning that LOTBA will put in place a “Registry of Certified Laboratories” in order to complete and provide transparency for the online sector.

A strict advertising code will also be imposed, as well as responsible gaming standards. Before the pandemic it was expected that online gambling sites would have been operational in the last quarter of 2020.

The new bill also categorises different types of online gambling and allows for online sports betting and online casinos in much the same way as they are now permitted in the province. However, unlike the province land based operators will also be permitted to offer online games.

This was after a federal appeals court temporarily suspended the online gambling licensing process in May 2020. This in turn followed an appeal from local land based gaming operators who claimed that city hall did not have the authority to approve online gambling.

However, in order to compensate the two casinos for the temporary closure during the pandemic in September 2020, city hall approved proposals to permit the racino and the floating casino to apply for online gambling licences.

The government was only able to obtain enough votes for the bill by inserting the so called ‘clean record’ clause.

The clean record clause is aimed specifically at excluding one of Argentina’s most powerful gaming moguls from the process, namely Cristóbal López, who has had close political ties in the past with the Kirchners. He was found guilty of defrauding the Argentine tax office (AFIP) of $8,000m but was released in 2019 on bail.

NEW DEALS

Although it is early stages there are already signs of a growing online gambling market. The racino in downtown Buenos Aires launched its own locally developed and run online casino Betfun in March and the product is being promoted heavily in the casino foyer.

Until now advertising has not been permitted and has not been present in local media or via sponsorship deals in sport. However, top flight football teams are already inking deals with online operators. Ahead of its online launch in Buenos Aires, Codere, has reached a jersey sponsorship agreement with one of Argentina’s most popular football clubs River Plate.

The agreement is worth an estimated $3m and will see the company becoming the main jersey sponsor by mid 2022. More sponsorship deals will undoubtedly follow.

Meanwhile, the city government has begun steeping up its gambling awareness programme in billboards across the city. In 2018 Gaming Laboratories International (GLI) signed a 12- month deal with (LOTBA) to offer a variety of advisory, consulting, training, and auditing services in relation to games of chance and their connected activities. Since then GLI has played a crucial role in helping LOTBA establish a certification and responsible gaming programme for operators.

Other deals have also been reached. Recently Play’n GO received accreditation from LOTBA. As one of the first suppliers to be approved by the regulator in the market, Play’n GO is now able to offer fully compliant casino content to operators licensed in the City of Buenos Aires as well as those of the province.

LOTBA has also approved the implementation of the technical project for the operation of online gaming presented by Grupo Slots and Gaming Innovation Group (GiG). Following the approval, the companies will make preparations for the final certification of the online gaming platform in conjunction with Grupo Slots’ website. Online casino supplier Zitro has also been granted a licence to operate.

The approval from the Loteria de la Ciudad de Buenos Aires (LOTBA) allows Zitro to provide its portfolio of games to licensed iGaming operators in the city.

THE WIDER CONTEXT OF ONLINE LEGISLATION

The new licensing regime in Buenos Aires will encourage other provinces to follow suit and a number of provinces are already moving forward with online regulation including La Rioja amongst others. In October 2020 Mendoza approved online gaming legislation and the government will grant seven licences in all. In March the province of Corrientes gave online casino games and sports betting the green light under bill, Resolution No. 0615.

Key to the development and changes in perception of online gambling has been Colombia. In 2016 Colombia became the first jurisdiction in the region to fully regulate the industry.

Since then the market has shown rapid growth with the industry generating millions in tax revenue for the Colombian health service. The market is still growing thanks in no small part to the gaming board Coljuegos which has been able to adapt requirements for licensees entering the market.

Peru has also permitted a handful of licensed operators to offer online sports betting for years within the context of local business laws. Broader online measures are expected later this year which will allow for a much larger expansion of the market.

Other jurisdictions will also be watching closely, especially Brazil which is soon to launch online sports betting. It is believed that that the Ministry of Economy has been looking at international regulatory models to understand what kind of framework would be best suited to Brazil.

It remains to be seen if LOTBA and the Buenos Aires lottery will be able to match the achievements of Coljuegos. For now many companies look poised ready to expand their reach into Latin America.

However, a lot of questions still remain unanswered. How will those living in Buenos Aires take to regulated online gambling? How will government agencies crack down on offshore unlicensed operators? Will the new rules really be enough to channel players towards the legalised market? We will have a much clearer picture soon. Many are watching how online gambling develops in Buenos Aires. Much depends on its success.