Market Focus: Austria

Gambling, both online and offline in Austria, relies on a patchwork of state and federal regulations governing different game types and activities, with varying licence and regulatory standards for each.

Legalised gambling in Austria is permitted under the Austrian Federal Gambling Act (AFGA), and lotteries, land-based casinos, online gambling and poker all fall under its regulatory purview. As with many other jurisdictions, the status of the gambling related activity depends on whether legally it is defined as a game of chance.

Under section 1 of the AFGA, a game of chance is any game “in which decision on the outcome of the game depends solely or predominantly on chance”. To meet this standard a monetary consideration is required to be paid in order to potentially win money or money’s worth. Any game meeting this criterion immediately falls under the act and must therefore be licensed.

Current games of chance listed under Austrian laws include: roulette, optical roulette, poker, blackjack, two aces, bingo, keno, baccarat, baccarat chemin de fer and their different variations. Games of chance, which are organised, operated, offered or made available commercially to players by an entrepreneur or entrepreneurial based organisations, can only be organised legally in Austria with a national licence, otherwise they are deemed to be illegal games of chance.

Games of skill currently remain outside the scope of the AFGA as they do not meet this specific definition of games of chance. However, existing consumer protection laws relating to ecommerce and the Austrian civil code are deemed to apply, except in instances where the AFGA would apply.

The Austrian constitution allows the Austrian federal government to establish a monopoly system and, on this basis, the government introduced a national gambling monopoly over certain types of gambling in Austria but not in others. Lottery-based gaming and online gambling is currently the subject of a monopoly system, with the sole licence issued to Österreichische Lotterien Gesellschaft. Land-based casinos are limited to 15 licences, while sports betting falls outside of the monopoly and is currently regulated at district level.

However, international online gambling operators do target the Austrian market without an Austrian licence, using the supranational legal protection of EU laws surrounding the free movement of goods and services between EU member states.

The AFGA applies to online gambling services, making online gambling subject to the constitutionally approved Austrian gambling monopoly. Under the AFGA, so-called “electronic lottery” games are defined as games of chance and subject to Austrian law. An electronic lottery game is any gambling-related activity where “the player participates directly in the game via electronic media and the decision on the result of the game is made by a central system and provided via electronic media”.

Under the AFGA online gambling can take place in two forms, either directly on the homepage of the sole licence holder or via video lottery terminals connected to a central database. The AFGA does not provide exclusive protections for players accessing online gambling sites, but instead requires the licence holder to provide adequate systems to prevent gambling addiction as part of the licensing process. Online gambling offered over video lottery terminals includes specific legislation designed to protect players.

Population: 8.96 million

GDP per capita: $50,250

Internet penetration: 81.93%

Prime Minister: Brigitte Bierlein

Principal regulatory body: Austrian Ministry of Finance[/box]

The regulator

At a regulatory level, online casino gaming, together with poker and bingo, are overseen by the Austrian Ministry of Finance. The provision of betting related services including online sports betting is overseen by individual state authorities in each of Austria’s nine states on an arising basis.

The Austrian government has four main regulatory objectives in respect of regulation, including the prevention of illegal gambling, reducing gambling addiction, stopping criminality in gambling and the collection of taxation from gambling operators. It retains the authority to add further activities to the list of games of chance currently covered under the AFGA.

Unlicensed gambling is prohibited under section 168 of the Austrian criminal code and any organisation found to be organising or promoting gambling without a licence under the AFGA can face fines ranging from between €22,000 up to a maximum of €60,000.

Licensing

One licence was granted for lottery-based gaming to Österreichische Lotterien Gesellschaft in 2012 and is valid until 2027. The requirements for this licence are that the firm be established either in the EU or EEA, operating with a minimum share capital of €109m. The operator is required to hold a corporate seat in Austria unless it has a comparable lottery licence in its home country and is subject to the same regulatory standards there. Any applicant must be able to prove this when required.

A total of 15 licences exist for casino-based gaming, each with a duration of 15 years. At present 12 of the 15 licences available have been granted to local firm Casinos Austria. As with the lottery licence, a casino applicant must be a firm established within the EU or EEA but operating with a minimum share capital of €22m.

The duration of sports betting licences varies according to the individual district in which the service is offered. However, as a rule, betting licences are generally available without the minimum capital requirements of their lottery and casino gaming counterparts. Applicants have a right to be granted a betting licence after they have fulfilled all the legal requirements to do so.

A lottery or casino licence can be withdrawn by the Ministry of Finance if the licensee violates the AFGA but this is used as a final resort if sanctions fail. Any defaulting operator can be sanctioned with fines of up to €22,000.

Although not centrally regulated, the same chain of regulation applies in the case of sports betting under local laws. Decisions by the Ministry to withdraw licences can be appealed before the Austrian Federal Administrative Court. In the case of sports betting licence withdrawals, this matter falls before the relevant regional administrative court in said district.

Taxation

At present, all gaming and betting taxes are levied at the point of consumption, irrespective of whether the operator holds an Austrian gambling licence. Under Austrian financial laws, betting and games of chance enjoy a 20% VAT exemption, except for slot machines and video lottery terminals.

Gambling activities are taxed at varying rates based on the activity involved. Sports betting, both online and offline is taxed at 2% on stakes, while online gambling (which falls under the definition of electronic lotteries) is taxed at a rate of 40% of gross gambling revenue at the point of consumption. So in effect, this tax applies to unlicensed operators as much as the licensed ones. Lottery based gaming is taxed at varying levels ranging between 2% and 27.5%. Land-based casinos are taxed at a rate of 30% of gross gambling revenue.

Restrictions

As with the taxation calculation, restrictions on gambling related activities vary based on the individual game of chance. Casino and lottery-based gaming currently has no restrictions on maximum stakes or pay-outs. However, section 56 of the AFGA requires casino and lottery licensees to restrict their advertising to a “responsible scale” i.e. not advertising to minors or being overly aggressive in their advertising practices. Advertising illegal gambling carries an administrative penalty of up to €22,000.

Restrictions on sports betting vary between individuals’ states. Some only allow sports betting, while others including Vorarlberg and Salzburg allow betting on social events such as elections. Most Austrian states have introduced restrictions on certain sporting events as well as restrictions on maximum stakes and live betting.

Local Expert View

Nicholas Aquilina is an attorney at Brandl & Talos, specialising in international gaming, betting and entertainment law, EU law, social gaming, esports, fantasy gaming, skill gaming, payments and cryptocurrencies, as well as ecommerce. He shares his thoughts on the Austrian gaming market.

EGR Compliance: Where are the biggest opportunities for operators entering the Austrian market?

Nicholas Aquilina (NA): There are major differences in the regulation of online gambling in Austria. This is mainly because sports betting in Austria is not considered a game of chance. Only games of chance are regulated at a federal level (by means of a questionable de facto monopoly), while sports betting is generally regulated by the nine Austrian states (Bundesländer). These require a licence for online sports betting only when the servers from which the betting offer is provided are located in the respective state. Providing online sports betting from servers located outside of Austria is currently largely unregulated, however, subject to taxation on a point of consumption basis as is the case for online gambling offers, such as online casino, poker or slots.

EGR Compliance: Where are the biggest deficiencies in Austrian regulation and how would you address them?

NA: Austria has a de facto monopoly in place for land-based casinos and lotteries. The single licence available for lotteries was extended to include so-called “electronic lotteries”. This term is understood as capturing all forms of online games of chance, excluding sports betting. Online gambling operators are thus unable to obtain a licence for offering their products to customers in Austria.

Looking at this from an international perspective and comparing this situation with the majority of other countries across Europe that have regulated and opened their markets over the last decade, the regulatory situation in Austria fails to take into account the market realities of the 21st century. Ensuring player protection by channeling consumers into a regulated offer can be achieved a lot better by a licensing model applying strict qualitative criteria to licensees than by prohibition and restriction of the consumer’s freedom of choice to only one single offer. The current de facto monopoly for online gambling also raises concerns under the EU market freedoms and the Austrian gambling regulation as a whole has been and continues to be subject to cases pending before the Court of Justice of the European Union.

EGR Compliance: Is the Austrian Ministry of Finance doing a good job of regulating the Austrian market?

NA: Austria’s current regulation leaves only little room for effective regulation. This is, however, a deficiency of the law itself and not of the regulatory authority. Not only does the Gambling Act maintain an outdated monopoly for online gambling, as mentioned above, it also fails to stipulate qualitative criteria and restrictions to the marketing and advertising of the monopoly, quite in contrary to the requirements set by the case law of the Court of Justice of the European Union. As regards enforcement, there has been a focus on taking action against illegal land-based slot machines in the past as well as on tax enforcement.

EGR Compliance: Are there any appetites for reform of gambling regulations among Austrian states?

NA: The Austrian states are currently in the course of reforming their betting legislation, in particular when it comes to AML and ensuring correct implementation of the 4th and ultimately the 5th AML Directive. This comes with several new requirements for the – currently mainly land-based – betting licensees in the Austrian states.

The harmonisation of rules across Austria, including moving betting to regulation at the federal level rather than at the state level, is also being discussed, but we are currently not aware of any legislative proposals or more concrete legislative developments.

EGR Compliance: Is the high taxation method being used by the Austrian government putting off operators?

NA: The tax rate of 40% on GGR for online casino is taxed at the point of consumption and applies also to unlicensed operators. As there is only a single licence available for online gambling in Austria, this tax rate has been introduced to tax foreign operators at the same rate as the de facto monopoly operator is taxed. Thus, the tax rate fails to take the reality of the market into account. In a competitive market, a feasible tax rate would need to be lower and in the range of tax rates we see in regulated markets across Europe.