The long-standing state monopoly on online sports betting in Hungary ended on December 18, 2022, when the final changes to the Implementing Decree of the Hungarian Gaming Authority (SARA) were published. Basically, only one element was missing: the forms through which the European Economic Area (EEA) (“EEA Operators”) can submit their applications for online sports betting licenses.
Adopted on 22 July 2022, the new regulation introduced many changes to Act XXXIV of 1991 on gambling operations (the “Gaming Act”) and opens Hungary to a competitive market. However, the operation of online casino games remains the prerogative of holders of national land-based casino concessions.
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The end of a monopoly
Until the entry into force of the new legislation, Szerencsejáték Zrt had a de facto 100% betting monopoly and defined the market since 2014 but was subject to legal disputes. The main and biggest players on the market, Unibet and Sporting Odds, brought the case before the Court of Justice of the European Union (CJEU) to decide whether Hungarian laws contravene Article 56 of the Treaty and the Functioning of the European Union (TFEU). This article aims to prevent Member States from disrupting the provision of cross-border trade and services.
The CJEU ruled that Hungary’s online gambling licensing regime unlawfully excluded EU/EEA licensed operators from the country’s licensing process and reiterated that Hungary must adopt market regulation that meets criteria for granting objective, transparent, non-discriminatory, and proportionate licenses. The Hungarian government submitted its proposal to the European Commission for new legislation in February 2022, and parliamentarians adopted the approved scheme at the end of the year.
EEA operators should prepare for oversized license applications
The Gambling Act, as amended, introduces a multiple licensing model. EEA operators will be able to offer online sports betting services to players in Hungary by obtaining a license from the Regulatory Affairs Supervisory Authority (“SARA”).
The legislator did not establish the maximum number of licenses to be issued. The secondary legislation, containing the detailed requirements, was subsequently adopted by the supervisory authority, as described in the text published in the Hungarian Gazette. Thus, EEA operators must meet the following conditions to obtain a License:
- the applicant must have at least five years’ experience as a gaming operator in another EEA country.
- the applicant, another company represented by the general manager of the applicant, or another company owned by the direct or indirect owner of the applicant, could not have been involved in the organization of illegal gambling activities within five years prior to the application.
- the applicant will establish a branch in Hungary and provide it with a capital of at least HUF 1 billion (approximately EUR 2.5 million);
- the applicant must provide guarantees in the amount determined by SARA, but with a minimum of HUF 250 million (approximately EUR 625,000);
- the applicant will pay a license fee of HUF 600 million (approximately EUR 1.5 million) in advance for the entire duration of the license; and
- the applicant will prepare and implement a player protection action plan approved by SARA.
According to the Implementing Decree, the license issued will have a period of validity determined by SARA, but not more than seven years. EEA operators are not allowed to operate more than one website under the same license.
Before starting the procedure for applying for a license, EEA Operators must appoint and register a local representative (“Representative”) with SARA. This representative must be a Hungarian citizen residing in Hungary, must have a master’s degree in law or economics and have no criminal record. The registration is submitted through the representative’s personal “Ügyfélkapu” (the official electronic portal of Hungarian citizens). SARA must decide on the registration within 75 days.
After the representative is registered, applicants use the form called “Remote Gambling License Application”, to which several documents are attached (game plan, conditions of participation, budget, AML related documents, systems audit certificate informatics). Upon submission, applicants pay an administrative service fee of HUF 10 million (~ EUR 25,000). SARA decides on the license application within 120 days.
Compared to the processing of the license, the law establishes an extremely short term of 15 days for the registration of licensed operators with the competent fiscal body. The corporate income tax rate is 9% in Hungary, while the gambling tax rate applicable to online sports betting is 15% (of net monthly gambling income).
Strong market control by payment service providers
SARA, in cooperation with the tax authority and the telecommunications regulatory authority, has been fighting for years to keep the Hungarian market free of unlicensed online sports betting operators. They applied a lot of measures (blocking the website, imposing fines), but with limited success.
The amended Gambling Act, in line with anti-money laundering (AML) regulations, will focus market control on the monitoring of payment accounts and relevant transfers. EEA Operators can make a payment to players only from their payment accounts which must be held with a payment service provider authorized under the Hungarian Acts on payment service providers and financial undertakings (“Authorized Account Provider”) by transfer in the payment account held by the player with an authorized account provider.
How can Szilaghi Consulting help you start your online gambling business?
Choosing a gambling licensing jurisdiction is quite difficult, to begin with. Given the sheer number of factors that need to be considered by gambling operators, the choice can be overwhelming.
Szilaghi Consulting has been providing services to the online and offline gambling industry for over 19 years. We have helped our clients to make the right choices, to realize their visions, to overcome obstacles, and, above all, to succeed. We offer transparency and efficiency and we are committed to always acting only in your interest.
Our experience in obtaining online and offline gambling licenses differentiates us from the competition. We cover all your needs, from the incorporation of the gambling company, the creation of fiscal and compliance structures, to obtaining the gambling license.
Our experts invite you to schedule a consultation with us. We like to communicate with our customers, troubleshoot their problems, and offer solutions. Szilaghi Consulting invite you to contact with one of our consultant today and discuss your needs. Let us help you take your business to the next level.