The Gambling Law Review: Estonia

Overview

iDefinitions

Gambling definitions are given in the Estonian Gambling Act (the Act). Gambling is a game where there is a precondition for participating in a game that the player makes a bet, when the player may win a prize as a result of the game, and when the outcome of the game is partly or fully determined by an activity based on chance or depends on the occurrence of a previously unknown event.

The types of gambling are:

  1. games of chance – games, the outcome of which depends on chance and which are played by means of a mechanical or electronic device or by mediation of the organiser of the game;
  2. lotteries – games, the outcome of which depends on chance, whereas the prize pool constitutes up to 80 per cent of the selling price of the circulation of the lottery tickets, and the outcome of the game is not determined more than three times per 24 hours or it is determined by opening the ticket field on the lottery ticket;
  3. totos – games, the outcome of which depends on whether an event bet on by the player occurs or does not occur or how it occurs, where the event bet on by the player is beyond the control of the gambling operator, the winning of a prize depends on whether the bet turns out to be true or not and the amount of the prize depends on the amount of the bet and the winning coefficient determined before the making of the bet (betting) or percentage of the total amount of the bets as determined by the gambling operator, the number of people who bet correctly and the amount of their bets (totaliser); and
  4. games of skill – games, the outcome of which depends predominantly on the physical skills or abilities or knowledge of the player, and which are played by means of a mechanical or electronic device.2

The subtypes of games of chance are:

  1. games organised on gaming tables and gaming machines – games, the outcome of which is determined by means of an electronic, mechanical or electro-mechanical device prepared or adapted for the organisation of gambling, or with the help of the organiser of the game; and
  2. additional games of chance – games which upon fulfilment of the conditions set by the rules of game grant an opportunity to the player playing on a gaming machine or gaming table to win a prize collected out of the bets of the gaming machines or gaming tables or another predetermined prize.3

The subtypes of lotteries are:

  1. (classical) lotteries, the outcome of which is determined by the organiser of the lottery after the opportunity to take part in the lottery has ended; and
  2. instant lotteries, the outcome of which is randomly determined among lottery tickets before the acquisition of the lottery tickets by a player and it becomes known to the player while opening the ticket field after acquisition of the lottery ticket.4

Games of skill, where the only possible prize is getting the opportunity to take part in the same game again, sports competitions, lotteries with the value of the prize pool of up to €1,000 and which are not organised more often than once a week are not subject to the Act.

iiGambling policy

Under the Act, gambling with obtained licences is allowed in Estonia. The right to organise a game of chance, toto or game of skill is granted only to a legal person that has both the activity licence and operating permit for organising gambling.

The legislative history of gambling started in 1994–1995 when the first Lottery Act of 1994 and the first Gambling Act of 1995 came into power.

iiiState control and private enterprise

Gambling may be organised by any trustworthy legal person that meets the requirements of the Act and has both the activity licence and operating permit for organising gambling.

Lotteries on the other hand, may be organised only by a state-owned company.

State supervision over the organisation of both gambling and lotteries is exercised by the Estonian Tax and Customs Board (ETCB).

ivTerritorial issues

Gambling in the territory of Estonia is regulated by the state in a centralised manner.

The council of a rural municipality or city council may establish a uniform restriction on the opening hours of the gaming locations for games of chance situated in the territory of the rural municipality or city government. The council may also prohibit the opening of a gaming location for games of chance situated in a separate building if the gaming location would be situated in the immediate vicinity of the immovable which is in use by a preschool childcare institution, basic school, upper secondary school, vocational educational institution, hobby school, permanent youth camp, child welfare institution or youth work agency.

vOffshore gambling

Estonia began licensing and regulating online gaming in 2010.

When Estonia first opened its market to offshore companies, it required that the operator's servers be located in Estonia. In 2012, Estonia removed that regulatory requirement.

Once the online market was legalised, Estonia started blocking unlicensed gambling sites offering their services to Estonian citizens. If any users attempted to access a foreign-based gambling site, they were automatically directed to the Estonian Tax and Customer Department. Service providers were liable to face fines for not blocking unlicensed sites. Estonia has also attempted blocking bank transfers to unlicensed sites as well as advertisement restrictions.

Estonian licensees are allowed to accept foreign players under Estonian licence.

Legal and regulatory framework

iLegislation and jurisprudence

The basic legal framework for gambling in Estonia is the Act. The current Act entered into force on 1 January 2009. Gambling taxation is regulated by Gambling Tax Act. All gambling advertisement regulations are established in the Article 292 of the Advertising Act.

iiThe regulator

The ETCB exercises state supervision over the organisation of gambling. The Consumer Protection Board exercises state supervision over the area of consumer laws and advertising. The Financial Intelligence Unit (FIU) exercises state supervision over the area of preventing money laundering and terrorist financing.

iiiRemote and land-based gambling

The legal system distinguishes between remote gambling and land-based one.

Remote gambling is the organisation of gambling in a manner where the outcome of the game is determined by an electronic device and the player can participate in the game by electronic means of communication, including telephone, internet and media services.5

Gambling is not considered remote gambling where electronic means of communication are used only for receiving bets, informing about the outcome of the game or transferring payments to the account of a player.6

Both forms of gambling are subject to the Act.

ivLand-based gambling

Land-based gambling is only permissible in a separate building, a hotel, conference centre or recreational establishment, or in a business building or shopping centre if it is not possible to enter the gaming location for games of chance through other premises of the business building or shopping centre and if there are no living quarters in the same building.

The gaming location for games of chance, toto or games of skill may not be situated in an immovable property that is in use as a preschool childcare institution, basic school, upper secondary school, vocational educational institution, hobby school, permanent youth camp, child welfare institution or youth work agency.

A gaming location for a game of chance, toto or game of skill may be opened only at an address, for which the local rural municipality government or city government has granted a written consent before the operating permit is applied for.

The consent for opening a gaming location for a game of skill is granted for up to 20 years, and the consent for opening a gaming location for a game of chance or toto is granted for five to 20 years. A rural municipality government or a city government may grant the written consent for a shorter term than the one set out in the application.7

vRemote gambling

Online gambling operator can lawfully provide its services to customers located in Estonia only if it has a valid activity licence and operating permit.

There are four types of gambling activity licences concerning the operation of:

  1. games of chance;
  2. operating lotteries;
  3. operating totos (totaliser and betting); and
  4. operating games of skill.

Separate operating permits for each type of activity licence are required. The same entity may hold several licences.

If the server is not located in Estonia, the organiser of remote gambling shall, before starting to use the server for the organisation of remote gambling, provide the ETCB with evidence that the gambling supervisory authority and the authority dealing with prevention of money laundering in the country of location of the server have a legal basis and possibilities to cooperate with the ETCB and the FIU.8

A gambling operator has the right to intermediate prizes and bets received from gambling organised by a foreign gambling operator with no activity licence or operating permit in Estonia, as well as payments to the account of the foreign gambling operator for making a bet in such gambling. In that case, the intermediary of prizes, bets or payments transferred to the account of the foreign gambling operator for making bets is considered a gambling operator, and the foreign gambling operator is considered a person to whom the activities aimed at organising gambling are transferred.9

viAncillary matters

The server shall store data in the non-aggregated form (including the amounts transferred to the settlement account of the gambling operator, the amounts of bets made by every player and the amounts of prizes won), which is the basis for mandatory reporting on gambling and taxation. The organiser must take sufficient security measures to ensure the availability, integrity and confidentiality of the aforesaid data, according to the security class T2S2K2 (the Regulation on Three-Level IT Baseline Security System (ISKE)).10

Before obtaining the operating permit the following shall be appended to the application:

  1. information regarding the software used for organising remote gambling; and
  2. independent expert assessment on the compliance of the software used for organising remote gambling with the requirements provided in the Act.

Before starting to organise gambling on a gaming machine used for games of chance or games of skill, information regarding the gaming machine and its software shall be submitted to the ETCB in order to enable identification of the gaming machine and software and verification of their compliance with the requirements of law.11

The gaming equipment used for the organisation of gambling as remote gambling shall ensure with sufficient certainty that:

  1. the randomness of determining the outcome of a game of gambling cannot be influenced by the gambling operator or any other person;
  2. the data of significant importance in playing a game of gambling shall be stored if the game is interrupted, irrespective of the reason for such interruption; and
  3. the interruptions of a game, the results of a game and any alterations made in the gaming system shall be recorded.

If gambling is organised as remote gambling, the ETCB may require at any time the submission of an independent expert assessment regarding the compliance of the used software with the requirements provided above.12

The information specified in items (b) and (c) of the requirements above shall be stored for at least five years in a manner enabling to produce such information while responding to an inquiry from the ETCB, police or FIU.

viiFinancial payment mechanisms

The payment service providers must comply with the Act and the Law on AML. The most important thing is not to contribute to illegal remote gambling. Providing access to illegal remote gambling by a provider of publicly available electronic communication service or provider of the data storing service, or crediting or debiting an account used for organising illegal remote gambling by a payment service provider in conflict with a precept of the ETCB, as well as provision of services used for organising illegal remote gambling by a provider of media service, operator, provider of telephone service or provider of mobile telephone service, are punishable by a fine of up to 200 fine units (one fine unit is equal to €4). The same act, if committed by a legal person, is punishable by a fine of up to €2,600. Article 561 of the Act regulates PSP activities regarding the prevention of illegal remote gambling.13

Use of cryptocurrencies in gambling is allowed.

The licensing process

iApplication and renewal

The right to organise a game of chance, toto or game of skill is granted to a trustworthy legal person that meets the requirements of the Act and has the activity licence for organising gambling and operating permit for organising gambling.

A game of chance may be organised by a public limited company or private limited company whose share capital amounts to at least €1 million.

A game of skill may be organised by a public limited company or private limited company whose share capital amounts to at least €25,000.

An activity licence for organising totos may be applied for by a public limited company or private limited company whose share capital amounts to at least €130,000.

Before submitting the application an applicant have to pay the state fee.

The state fee for reviewing the gambling activity licence is:

  1. €47,940 for organising games of chance;
  2. €31,960 for organising totos; and
  3. €3,200 for organising games of skill.

The state fee for reviewing gambling operating permit (except lottery) is €3,200.14

The state fee for reviewing a lottery operating permit is €640.15

In order to obtain an operating permit, an application shall be submitted to the ETCB, and the following shall be appended to the application:

  1. for opening a gaming location for a game of chance, toto or game of skill at the address indicated in the application, the written consent of the rural municipality government or city government for opening the gaming location, and the plan and description of the gaming location;
  2. information about the gaming equipment used for organising gambling;
  3. the rules of the game;
  4. an overview of the security measures to be applied in the gaming location and upon organising the game;
  5. information on how the protection of the data of the persons participating in the game will be secured in accordance with the Personal Data Protection Act; and
  6. if bets of a lottery or toto are accepted or if prizes are distributed by means of distance communication, then the telephone numbers, website addresses and other contact details enabling the making and accepting of bets, and information on the current accounts used for intermediation of payments between the operator and players.16

The term for the review of an application for an operating permit shall be extended by the duration of the expert assessment but not over two months. The ETCB shall inform the applicant in writing about an extension of the term.

The operating permit is granted for up to 20 years. An operating permit for remote gambling is issued for up to five years. Application for an operating permit for organising remote gambling is governed by the provisions of the Act location of the server regarding exchange of information on gambling supervision.

The activity licence is valid for an unlimited period. An activity licence expires:

  1. upon entry into force of a decision on revocation of the activity licence;
  2. upon entry of a new company in the commercial register if the gambling operator merges with another gambling operator and it brings about the foundation of a new company;
  3. for a company being acquired when the entry regarding the merger is entered in the commercial register;
  4. upon declaration of bankruptcy or abatement of the bankruptcy proceeding of the gambling operator; and
  5. upon dissolution of the gambling operator on any other basis.17

iiSanctions for non-compliance

Organisation of gambling prohibited by the Act, hindering the randomness of gambling or violation of the requirements provided for in the Act for gaming equipment used for the organisation of gambling by a gambling operator is punishable by a fine of up to 200 fine units or detention. The same act, if committed by a legal person, is punishable by a fine of up to €2,600.

Organisation of gambling by a gambling operator holding an activity licence without an operating permit or at a location not indicated in the decision on the issue of the operating permit, as well as organisation of gambling not indicated in the decision on the issue of the operating permit are punishable by a fine of up to 300 fine units. The same act, if committed by a legal person, is punishable by a fine of up to €2,600.

Failure to identify or register the persons entering a gaming location for games of chance by the organiser of the game of chance or violation of the requirements established for registration is punishable by a fine of up to 100 fine units. The same act, if committed by a legal person, is punishable by a fine of up to €2,000.

Wrongdoing

An activity licence shall be revoked if the holder of the activity licence has been involved in money laundering or repeatedly violated the procedure for preventing money laundering and terrorist financing established by legislation.

If the server is not located in Estonia, or in a state that is a party to the Convention on Cybercrime, and the ETCB and the FIU do not have a cooperation agreement with the competent authorities of the country of location of the server regarding exchange of information on gambling supervision, the organiser of remote gambling shall, before starting to use the server for the organisation of remote gambling, provide the ETCB with evidence that the supervisory authority for gambling and the authority dealing with prevention of money laundering in the country of location of the server have a legal basis and the possibility of cooperating with the ETCB and FIU.18

Taxation

Gambling tax is paid by gambling operators.

In the event of organising a tournament of a game of chance, the period of taxation is the period during which one tournament of a game of chance is organised, starting on the first day of accepting the participation fees set out in the rules of tournament of the game of chance and ending on the day when the acceptance of participation fees set out in the rules of tournament of the game of chance is terminated.

The rates of gambling tax are the following:

  1. €1,278.23 per gambling table;
  2. €300 per gaming machine used for organising a game of chance and 10 per cent of the total bets made on the gaming operator's gambling machines of games of chance, less the winnings;
  3. €31.95 per gambling machine of game of skill;
  4. 18 per cent in the event of organising a lottery, the total amount received from the sale of lottery tickets;
  5. 18 per cent in the event of organising a commercial lottery, the winning pot whose value exceeds €10,000;
  6. 5 per cent of the amount in the event of organising a totaliser, the total amount of bets, less the winnings;
  7. 5 per cent of the amount in the event of organising an online game of chance or an online game of skill, the total amount of bets, less the winnings; and
  8. 5 per cent of the in the event of organising a tournament of a game of chance.19

Winnings from gambling offered by a licensed operator are exempt from personal income tax.

Advertising and marketing

Advertising of gambling, a gaming location and organiser of gambling is prohibited if the organiser of gambling has no operating permit required under the Act.

Advertising of gambling shall not contain an incitement to participate in gambling or visit a gaming location or information which may suggest that gambling contributes towards social success.

Advertising of gambling shall include the textual warning: 'Attention! This is advertising of gambling. Gambling is not a suitable means for solving financial problems. Examine the rules and behave responsibly!' The warning shall, given ordinary attention, be noticeable, understandable and clearly distinguishable from other information.20

Advertising of totos and games of skills is prohibited:

  1. in and on the buildings and territories in the use of pre-school child care institutions, basic schools, upper secondary schools, vocational educational institutions, hobby schools, permanent youth camps and youth project camps and in close proximity thereof, on websites directed at children, at the place and during the time of holding an event that is mostly directed at children and on the tickets for the event, before and during television and radio programmes that are mostly directed at children;
  2. on the front and back covers of newspapers or magazines, unless published together with the sponsor's announcement; and
  3. as outdoor advertising, unless published together with the sponsor's announcement.21

A trademark of an organiser of totos, games of skill or lotteries may be exhibited only if it does not contain an incitement to participate in gambling or visit a gaming location or contain information that may suggest that gambling contributes towards social success. A trademark of an organiser of games of chance that does not express a game of chance, a gaming location of a games of chance or a chance of winning in words or depict them in picture may be exhibited outside the places specified above. Communication of a trademark of an organiser of gambling to the public is prohibited in and on the buildings and territories in the use of education, on websites and before and during television and radio programmes that are directed at children.

Violation of the requirements for advertising might cause a fine up to 300 fine units (one fine unit is equal to €4).

The year in review

The legal framework and jurisprudence in Estonia related to any gambling affairs have been quite settled. The level of those who have gambled in past two years has stayed the same as in 2014. Online gambling has doubled since then.

According to the ETCB, as of July 2020, there were 20 operators with gambling licences in Estonia, including 16 online. As of June 2020, there were 1,631 blocked, illegal remote gambling sites in Estonia.

The covid-19 outbreak of 2020 has been detrimental to Estonia's casino market.

Outlook

The Act also regulated online gambling for the first time under Estonian law. Estonian gambling and gambling-related laws did not change significantly in 2020, and no major changes are expected in the foreseeable future.

Footnotes

1 Andrius Gabnys is the founding attorney-at-law at Gabnys Law Firm.

2 Gambling Act of the Republic of Estonia, 2008.

3 ibid.

4 ibid.

5 Gambling Act of the Republic of Estonia, 2008.

6 ibid.

7 ibid.

8 Tax and Customs Board, Organisation of remote gambling, 2017.

9 Gambling Act of the Republic of Estonia, 2008.

10 Tax and Customs Board, Three-level IT Baseline Security System ISKE, 2019.

11 Gambling Act of the Republic of Estonia, 2008.

12 Gambling Act of the Republic of Estonia, 2008.

13 ibid.

14 Activity licence for organising gambling, eesti.ee. 2019.

15 Operating permit for organising gambling, eesti.ee. 2019.

16 Gambling Act of the Republic of Estonia, 2008.

17 Gambling Act of the Republic of Estonia, 2008.

18 Gambling Act of the Republic of Estonia, 2008.

19 Gambling Tax Act of the Republic of Estonia, 2009.

20 Advertising Act of the Republic of Estonia, 2008.

21 ibid.

Get unlimited access to all The Law Reviews content