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After a Senate vote last week, Chile is now entering the final phases of a multi-year legislative process to regulate online gambling, with several pivotal policy questions due to be answered over the next few months.
The Senate voted 27-3 on Wednesday (August 13) to provisionally approve a bill to establish a national licensing regime for both sports betting and online casino games that was introduced by the government in March 2022.
Speaking on the Senate floor, Chilean finance minister Mario Marcel said that since that time online gambling “has had a very substantial expansion outside the margins of the law, in full view of everybody, without paying any taxes and without complying with any regulations.
“It is an activity and a market that requires a regulatory framework and accompanying controls to avoid the excesses that can be incurred,” Marcel told senators.
Still, the Senate’s vote to move forward with establishing regulations was not the final legislative step for a bill that was fully approved by the lower house of Chile’s National Congress in December 2023.
The vote to approve the legislation in general means the Senate’s finance and economy committees will now meet jointly to review potential amendments before returning the legislation to the Senate floor for senators to consider on a clause-by-clause basis.
It is at this point that senators will determine the final shape of legislation that has been the subject of a fierce lobbying battle between Chile’s two national lotteries, established land-based casinos and a group of leading international online operators that remain active in the country’s unregulated market.
Wednesday’s Senate floor vote came after the finance committee dusted off the bill, which had been stalled for more than a year until the committee held a series of public hearings on the issue in July and early August.
During those hearings, there was no sign of a détente between rival interest groups that are united in support for regulating online gambling in Chile, but bitterly divided around specific restrictions to be applied under the licensing regime.
Cooling-Off Period
Perhaps the most divisive issue is a proposed “cooling-off period” applicable to online operators doing business in Chile.
As drafted, the bill would require operators to cease business in Chile and wait 12 months before they can apply for a licence. They would also have to pay back-taxes of 31 percent based on gross revenues earned in Chile over the prior three years, plus additional levies based on the number of accounts created during that period.
At an August 4 hearing, a coalition of leading Chile-facing operators told the Senate’s finance committee that the cooling-off restrictions of the bill are unconstitutional, violated legal principles of free competition, and would “jeopardise the success of the regulatory model proposed for Chile, which should guarantee the necessary conditions for an orderly transition from an unregulated market to a regulated market”.
The coalition and other stakeholders have also criticised articles of the bill that would enable Chile’s two public lotteries, Polla Chilena and Lotería de Concepción, to automatically obtain online gambling licences without meeting licensing or other regulatory conditions established by the Chilean Casino Gaming Superintendence (SCJ).
On the other hand, the two lotteries continue to sharply reject legal arguments presented by online operators that online gambling is not prohibited under existing Chilean laws.
Lotería de Concepción told senators on July 7 that the bill should be amended to limit the number of licences, and extend the cooling-off period from 12 months to at least two years, “to avoid unfair competitive advantages and ensure an orderly and fair market”.
Following the Senate’s preliminary vote, a legal advisor to the coalition of Betano, Betsson, BetWarrior, Coolbet and Latamwin told Vixio GamblingCompliance that the group is “very optimistic” that the Senate’s joint finance and economy committees will choose to eliminate the “blocking and punishment” restrictions based on their unconstitutionality.
“We believe there is a fair amount of consensus in this regard,” said Carlos Baeza, a lawyer based in Santiago.
In addition, international operators also hope to change the tax provisions of the bill.
As drafted, licensed operators would be subject to a headline tax rate of 20 percent of gross gaming revenue (GGR), plus an additional 1 percent for responsible gaming and 2 percent on sports betting revenue to fund Chilean sports.
They would also be subject to a 19 percent value-added tax (VAT), with the operators estimating a total tax burden of 37.6 percent of GGR overall.
The Chilean operators are advocating for online gambling to be exempted from VAT, in line with a majority of international jurisdictions, warning that the tax burden as proposed would “minimise the objectives of revenue generation and consumer protection, due to the low level of channelisation it would produce”.
Polla Chilena, in turn, warned senators last month against the operators’ “spurious arguments” of excessive taxation, VAT and channelisation, citing tax rates applied in international markets such as Denmark, France and Mexico.
Meanwhile, Chile’s Ministry of Finance has estimated the total tax burden including VAT would not exceed 28 percent of overall GGR, and has taken the position that online gambling should not be exempt from VAT when Chile applies the tax to other digital services.
Based on recent testimony, other issues likely to be debated through the amendment process include additional restrictions related to problem gambling and provisions to benefit Chilean horse racing and land-based casinos.
Last week, finance minister Marcel also appeared to advise lawmakers to approve the licensing bill ahead of separate legislation that would establish stricter legal penalties for illegal online gambling, “so that there can be coherence between them”.
Next Steps
There is no definitive timeline for the bill’s next steps in the Senate, though it seems highly unlikely that the legislative process will be concluded quickly.
Senators have been granted until 12pm on September 29 to submit recommendations or amendments to the bill.
The finance and economy committees will then have to meet one or more times to discuss and propose a final version, which would then be submitted for another vote of the full Senate.
The two committees may not even begin that process for some time, said Baeza, since general elections will be held on November 16 and most of October will be spent campaigning.
There is then a parliamentary recess in February before a new president takes office in March.
If the bill is amended by the Senate, it would also have to go back to the Chamber of Deputies for members of the lower house to either accept the changes or form a joint committee with the Senate to reconcile the two versions.
“It’s impossible that could happen before the end of the year,” Baeza told Vixio. “Probably we will have a final bill toward the end of next year.
“After that, we have six months for the regulations to be issued, a deadline that is rarely met, and six months for the licensing process, so at least another year. We won’t have licences in operation until mid-2028.”
