Market Focus: Colombia

In Colombia, most forms of gambling are legal. In 1991, the constitution of Colombia created a monopoly on services “which are in favour of the state with a public and social interest purpose”. This constitutional proviso does, however, allow the Colombian state to delegate running of gambling-related services to private individuals and corporations, if the state ultimately receives funds from these services which are used to social ends.

Under this proviso, the activity of gambling is state run operating as a so-called “rent monopoly” with all revenues generated from gambling-related activities being used to fund health-related causes throughout Colombia.

In 2001, the Colombian government passed bill 643/2001, a bill which regulated gambling services and specifically applied the requirement to contribute to social causes to gambling. Under the bill, private individuals who want to own a gambling business must first sign a contract with the Colombian state or be authorised by the state to do so.

Bill 643/2001 does not directly cover online gambling, but electronic or internet-based gambling is included under the definition of so-called novelty games. Land-based gambling, including casinos, bingo, sports betting and virtual races are defined in bill 643/2001 as so-called localised games in which the individual gambling has to attend the establishment as a condition of the activity.

The legislation provided for the creation of a national agency to authorise operators, collect revenues and disperse them among state causes. However, the Territorial Corporation for Health, which was created under the bill and marred by allegations of corruption, was later replaced by the current regulator, Coljuegos.

The next 14 years of Colombian regulation didn’t herald much in the way of movement. However, all this changed in 2015 when the Colombian congress approved the National Development plan, a plan which aimed to promote the development of Colombia. This was later passed into law under bill 1753/2015.

Article 93 of 1753/2015 is the most important one for operators as it modifies the prior 2001 definition of novelty games to include “the pre-printed lotto, the instant lottery, the online lotto in any of its modalities, sports betting or events and all the games operated by internet, or by any other modality of information technologies that does not require the presence of the bettor”.

In addition, article 93 establishes that all private individuals or entities operating online gambling must pay taxes totalling 15% of the gross gambling revenues annually. Finally, article 93 of the 2015 law transfers contracting liability to a new regulatory entity, namely Coljuegos.

Current gambling activities which are legal online in Colombia include online slots, roulette, blackjack, baccarat, bingo and poker. Betting on actual sporting events and non-sporting events is also allowed online in Colombia.

Population: 50.94 million

GDP per capita: $7,698.4

Internet penetration: 65.8%

Prime Minister: Iván Duque Márquez

Principal regulatory body: Coljuegos[/box]

The regulator

Coljuegos is the “industrial and commercial company of the administrative state of the rent monopoly of the luck and chance games”. This was created by Colombian parliamentary decree 4142/2011 as a so-called “decentralised” state-owned company i.e. one where decisions are made by mid-level or lower-level managers and not by the head of the company (which in this case is the Colombian government). However, it retains links to the Colombian Ministry of Finance and Public Credit.

The aim of Coljuegos is listed as the “exploitation, administration, operation and issuance” of regulations of games that are part of the so-called “rent monopoly on games of chance and luck” which are not attributed to another entity. In this capacity, Coljuegos has regulatory responsibility for localised games (retail and land-based gambling) and novelty games (online and electric gambling).

Coljuegos officially began operations on 16 April 2012, assuming functions which were previously spread out among several state entities including Etesa (which was previously liquidated), the National Superintendence of Health, the National Control of Luck and Chance Games and Dian (which dealt with functions of operator control and illegal gambling).

Coljuegos can define and develop different schemes of operation for the effective exploitation of gambling in Colombia, including using third parties i.e. external operators. It can agree contracts with these operators which allows those parties to operate legal gambling in Colombia. To date, Coljuegos has signed 18 of these contracts with external online operators, together with several land-based operators.

It has the power to define licensing standards for operators, regulations for the market and the implementation of annual plans to combat the illegal operation of games of chance. Coljuegos is empowered to co-ordinate with other entities to combat illegal gambling and is required to obtain and publish regular information updates on the state of the Colombian market.

Under 4142/2011, Coljuegos can retain a certain amount of revenues generated from gambling-related activities to fund its own administrative expenses. It can also sanction operators for non-compliance and block unlicensed gambling sites from access by Colombian players.

Licensing

In order to receive a licence for online gambling, operators must provide a copy of their certificate of incorporation and financial statements, certifications of compliance with Colombian financial regulations and certifications of compliance with Colombian technical requirements for the operation of egaming. The operator must also provide a letter of introduction from its compliance officer.

Operators must provide a bank guarantee with their application and must undertake a fiscal review of their business using an external auditor. Identification documentation for this external auditor must also be provided with the operator’s application. In the case of the technical requirements, certification must be carried out by a body recognised by Coljuegos. As the licence is essentially a contract between the operator and Coljuegos, the operator must provide an estimate of the value of the contract, should it be approved. Company’s seeking licences must operate a registered office in Colombia and must be able to execute contracts with state level entities.

Once the criteria has been fulfilled, the operator must petition Coljuegos for the concession to operate its required gambling vertical. Upon acknowledgement that Coljuegos has received this request, the operator must provide its bank guarantee. It is then free to sign the contract with Coljuegos.

Technical requirements

Under Colombian regulatory standards, operators’ systems must guarantee all game operations and transactions performed during the development of online gambling services and provide records of all processes to the regulator.

All operators must take measures to ensure confidentiality and integrity in communications between itself and the players, including player identity verification, gambling duration, betting transparency and when a player elects to self-exclude. Operators must all have a simple registration form which the player is required to fill in to obtain his/her registration for the site. Submission requirements include identity documentation, citizenship cards and immigration documentation where applicable. All operators are required to establish a procedure to validate and update these documents on an annual basis.

Licensed operators are required to establish procedures to prohibit access to gambling services by minors, at-risk individuals and those who have elected to self-exclude. The operator is also required to provide mechanisms to allow players to self-exclude for a defined period, to bar access during that period and to provide mechanisms to restart gaming once this period has expired. Operators are required to publish their terms and conditions, making them accessible to players at all times.

As part of responsible gambling requirements, operators are required to display the playing time of a player, together with responsible gambling messaging from Coljuegos. The operator must maintain a page dedicated to the protection of the player and the link to this must be available on all its customer-facing pages.

Taxation

In Colombia there is a 20% tax rate on earnings from gambling, lottery, raffles and other similar games, with taxes being collected through Colombian income taxes. Online gambling operators must also pay 15% of their gross gambling revenues to Coljuegos for distribution among the various municipalities in Colombia. Online sports betting providers are required to pay a 17% tax rate on their gross gambling turnover.

In addition to this, all operators must pay a 1% fee on top of this tax to fund Coljuegos’ administration expenditure.

Restrictions

Coljuegos has the power to issue do-not-serve notices against unlicensed online operators and can require Colombian internet service providers to cease access to any unlicensed website.

Local Expert View

Juan Camilo Carrasco joined Asensi Abogados S.A.S in 2015 when the Colombian office opened in Bogotá. Since then he has been the lead lawyer for gaming and corporate law for egaming clients in the region. He holds degrees in international business law and dispute resolution from the University of La Sabana and Harvard Law School. He shares his thoughts on the Colombian gaming market.

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

Juan Camilo Carrasco (JCC):  Being the first country to have issued a specific law where rights and rules are clear for investors is with no doubt the main opportunity for operators. A regulated industry entitles the operators to protect their investments creating an environment of strong legal certainties.

Colombia has one of the most open corporate regulatory stances on regulation regarding foreign investment of any country in the region, and with a gaming regulation dated from 2001 it has a strong gambling culture among its citizens.

Although online gambling has been a huge success in the region with almost three million registered users, there is still a lot of the market to be explored. With a wide margin of internet penetration (a 70% rate of household internet connectivity), the alternative of retail sports betting and with a potential player base of about 20 million, there are a lot of opportunities for operators.

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

JCC:  In my opinion, the natural lack of experience and a slow learning curve by the regulator slows down the process of developing a technology-led business, full of innovation. It seems important to point out that the regulator must understand that with an ever-changing technological environment it simply cannot regulate every detail of the business and should allow for a degree of self-regulation, which is a common phenomenon that occurs in businesses where technology prevails.

This is the case with one of the last amendments to the online gaming law, having developed an actuarial formula to establish the return to the player on bets on real events was not the best decision, since the RTP finally is reached naturally with the competition between operators offering the most competitive quotas, as different regulated markets have experienced.

EGR Compliance: Is Coljuegos doing a good job of regulating the Colombian market?

JCC:  Yes, with the autonomy that the law has given to Coljeugos, it is constantly looking forward to developing new games within the legal framework. Being the first country in the region with a formal regulation grants a high responsibility. We may see that the authority is continuously making efforts to be up-to-date with the industry fostering of an open, fair, and predictable regulatory framework through the rationalisation of the regulatory process and favouring contacts between regulators and the industry. This year we have seen the regulation of virtual sports betting and the clarification from the regulator that esports and fantasy games are allowed in the online gaming portfolio. We will expect live casino in the regulation by mid-2020. Regarding international liquidity for poker, the timing is not clear yet.

EGR Compliance: How would you describe the attitude of Coljuegos to operators?

JCC:  The structure of the law has been designed to provide a very efficient way to regulate new games according to the demand of new products by the consumers and operators. Coljuegos as the national level authority definitely has a pro-operator attitude, usually soliciting opinions on all proposed changes to democratise the industry and to receive feedback from interested parties and actual operators.

EGR Compliance: In your opinion have Colombian players embraced online gambling?

JCC:  In this case, I will point out that numbers speak for themselves. By December 2017, after the first year that the online gaming regulation was set in place, 253,000 registered players were gambling on sites belonging to the eight operators with an active concession contract. By the end of 2018, this number had risen to 1,200,000 players and had generated a turnover of $554,844,254 among 17 operators.

Recently disclosed numbers from Coljuegos in September 2019 revealed there were 2,761,030 active accounts, with a market turnover of $987,925,741 and a GGR of $93,863,903. This for me is enough proof that Colombian players are embracing online gambling services provided by the 19 licensed operators.

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

JCC: Taxation in Colombia is quite favourable when compared with other regulated jurisdictions. Indeed, a monthly taxation rate of 15% of GGR monthly fee and an annual fee of approximately $200,000 is very competitive taxation. Additionally, there is a fee of 1% over the monthly and annual fee which corresponds to administrative expenses for the regulator. The 15% fee is conditioned to comply with an RTP over 83%, otherwise a 17% over turnover shall be paid.