Hungary Orders Payment Blocking Against Offshore Operators

June 30, 2023
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Hungary’s gambling regulator has promised tougher action against “illegal online gambling” as it prepares to use its new powers and enforce strict payment-blocking measures.

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Hungary’s gambling regulator has promised tougher action against “illegal online gambling” as it prepares to use its new powers and enforce strict payment-blocking measures.

The Supervisory Authority for Regulated Activities (SZTFH) said it has already informed stakeholders of the changes, which are contained in a host of economic regulation amendments published in the legal gazette in July.

From July 1, payment service providers (PSPs) will not be allowed to accept gambling transactions to and from “unlicensed foreign gambling sites".

PSPs must prevent transactions “carried out with a bank card and directed abroad, affected by the organisation of online gambling without a licence”, according to the SZTFH press release on Thursday (June 29).

Hungarian PSPs can only agree to provide their services to licensed operators on the official registry of the SZTFH.

PSPs have also been told to reject payments using gambling merchant codes and terminate accounts facilitating these payments until they can verify they do not fall under the scope of the gambling laws.

Blocking payments will be the responsibility of the PSP under the order of the SZTFH and overseen by the Hungarian National Bank (Magyar Nemzeti Bank), which may impose an administrative fine on a PSP that does not comply with the new legislation.

The SZTFH already has the power to block websites and apply administrative fines.

However, some fear these changes could lead to Hungarians being unable to collect funds already deposited with foreign gambling sites.

There have been warnings in the past that Hungarian authorities were likely to make life more difficult for foreign operators in the country.

Companies have also reportedly complained that the Hungarian law is not compliant with EU law, but the Court of Justice of the European Union (CJEU) could take years before deciding on the matter.

Hungary used to restrict online gambling licences to monopolies and its established land-based sector, until it was ordered via a CJEU ruling in 2018 to reform its laws.

However, Viktor Radics, a dispute and gambling lawyer at DLA Piper, said when it comes to online casinos “no substantial change occurred in the Hungarian licensing system since the Sporting Odds (C-3/17) Judgment of the EU which established that the Hungarian rules are in breach of the EU laws”.

“In the field of online sports betting, some of the key elements of the new licensing rules, in effect from 1 January 2023, are of serious concern from an EU law perspective,” he told VIXIO GamblingCompliance.

This includes a five-year ban for previous bad actors, the need for server placement and a permanent establishment in Hungary and the use of a Hungarian bank account.

Radics believes this makes it “very likely” that PSPs and online operators will challenge the changes if they are put into practice.

“There are still concerns whether the blocking of bank card transactions by banks will be effective in practice (new filtering systems need to be applied by the banks) and also what other, unexpected consequences they might cause, e.g. if the blockings will be inaccurately extended to bank transactions not related to online gambling,” Radics said.

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