Gambling business: basic concepts of legal regulation

In today’s world, gambling is regulated by the state according to three main approaches:

The British model of gambling business. It is based on the principle of restriction of this business by the state power, but at the same time this model is characterised by a liberal approach that does not provide any incentives for the development of gambling. This model restrains the expansion of such services market, limits free access of population to gambling, but at the same time it is very tolerant based on the realistic assessment of risks related to the possible development of gambling business in the country;

European model. Gambling is being integrated into the country’s economy. There is a recognition and use of casinos by the government to strengthen its capacity, which in turn helps to support not only local areas but also regional markets;

American approach. The state uses economic liberalism in relation to gambling. On the one hand, the state does not prevent the expansion of the market, building new casinos and maximising profits, but all these processes are strictly controlled. In some states stricter restrictions on gambling are possible.

Legalisation of any kind of business requires regulation of the relevant industry

The world practice testifies to the existence of quite a wide list of legal acts, which regulate activities in the sphere of gambling. Among such acts it is possible to allocate:

  • special laws – for unitary countries of the continental legal system;
  • Legal acts of the subjects of federation – for federative states;
  • Judicial precedents – for the countries with Anglo-Saxon legal system;
  • Individual provisions in the constitution of a State are very rare. The most striking representative is Switzerland.

As noted above, Switzerland is unique in terms of gambling regulation because the regulation there is enshrined in the constitution. The Constitution contains the main provisions on gambling activities.

The main legislative framework is formed at confederation level, but the interests of the cantons must be taken into account. When granting the licenses the regulatory authorities take into account the social risks involved and the existence of regional conditions for the establishment of such establishments.

The gross income of all gambling houses is taxable. It must not exceed 80% of the gross income of a gambling house, which is derived from gambling. All taxes go towards repayment of state subsidies, retirement, disability or survivors’ pensions.

Gambling is supervised comprehensively by the confederation and the cantons. There is a single supervisory body, which is made up of representatives of the executive power: members of the confederation and members of the cantons in equal shares.

In addition to the system of state laws, which apply to everyone, there are also cantonal laws, which regulate the activities of the gambling establishments on the ground. The latter take into account the characteristics of the game, the location and the mode of operation of the gambling houses. It is the representatives of the cantons who control the profits from the gambling business and ensure that they go towards the welfare of society, including the development of culture, sports and social life.

In other countries, depending on the subject of regulation, legislation on the organisation and conduct of gambling can be divided into special and general ones.

General (fundamental) laws – completely regulate the process of gambling business on the territory of a certain state, starting from its organisation and finishing with the allocation of received taxes. They establish certain rules for this type of business, its goals, as well as the basics of regulation.

Such laws, as a rule, are aimed at fixation of the conceptual apparatus, fixation of powers of state authorities in the sphere of gambling activity, differentiation and regulation of types of activity, issues of licensing, as well as development of mechanisms of protection of vulnerable categories of citizens from harmful influence of gambling games.

General gambling laws exist in the following countries:

  • Belgium – Law on Gambling and Gambling Houses (1998);
  • Great Britain – Gambling Act (2005);
  • Hungary – Gambling Act (1991);
  • New Zealand – Gambling Act (2003);
  • South Africa – Gambling Act (2004).

Specific laws, unlike general laws, regulate only part of the relationships that arise in the organisation and conduct of gambling.

There are states where a general law is passed and then a number of special laws are passed. These may be passed at the same time, or at different intervals. There are countries (e.g. Sweden) where gambling business is regulated only by special laws that are individual for each of the existing gambling segments.

Obviously, the law is not capable of regulating all gambling relationships, and hence the next layer of regulation is by-laws.

As a rule, the main by-laws are developed by special regulatory bodies responsible for gambling control and licensing of the relevant business. Such bodies are established under Ministries, often in the form of special commissions or councils.

Thus, in Switzerland and Belgium they exist under the auspices of the Ministry of Justice, in Slovenia and Bulgaria – Ministry of Finance, in Great Britain – Ministry of Culture, Media and Sports. As a rule, however, they are separate bodies, separated from the general structure of a ministry, because the market in question is specific and often the regulatory functions are not specific to one or another ministry.

Additionally, local authorities play a certain role in the regulation of gambling business. It is they who, on the basis of general and specific laws and relevant acts of the executive authorities, establish specific rules binding on gambling businesses located in their municipal territory.

Federal states, in addition to the basic legislation, use the legal acts of the federated entities. Union constitutions distinguish between subjects that are under the control of the federation and those that are reserved to its constituent entities. The federation’s gambling legislation exists due to the distribution of spheres of influence.

There are federal states in which all matters relating to the organisation and conduct of gambling or betting are under federal control. And it is the unions that issue the relevant acts that regulate gambling.

There is also another model, for example in Germany. The federation sets the general framework within which gambling establishments should operate, while the subjects of the federation are responsible for regulating the business itself.

In the UK, the US with its Anglo-Saxon legal system, judicial precedents play a huge role: they set the rules by which all gambling business operates. They regulate the organisation and conduct of gambling and/or betting.