Mexican Operators Raise Alarm Over Draft Gaming Decree

September 15, 2023
Draft gambling reforms to prohibit “drawings of numbers or symbols through machines” threaten to reduce industry revenue by up to 90 percent and wipe out thousands of jobs, according to two Mexican trade associations.

Draft gambling reforms to prohibit “drawings of numbers or symbols through machines” threaten to reduce operators’ revenues by up to 90 percent and wipe out thousands of jobs, according to two Mexican industry associations.

Proposed amendments to a 2004 federal gaming decree were submitted to Mexico’s national regulatory reform commission late last week by the country’s interior ministry, Segob. 

A 1947 federal law bans most forms of gambling in Mexico, but the country has become home to a network of several hundred de facto casinos offering slot machines and even live table games based on the 2004 decree and subsequent amendments that have gradually expanded the legal definition of drawings, or “sorteos”, which are exempted from the prohibition.  

The proposed reforms would delete various articles of the 2004 decree that expressly recognise the legality of “drawings of numbers or symbols through machines”. 

The amendments would also specify that the term “drawings” or “sorteos” cannot be interpreted as including any “gambling games played with cards or their equivalent … dice, roulette and slot machines.”

In accordance with Mexican rules, Segob opened a ten-day public comment period on the proposed amendments. 

Earlier this week, however, the two main trade associations representing Mexican gaming businesses both submitted preliminary comment letters seeking at least 30 days to respond because of the “high impact” the proposals would have on their sector.

In its September 12 letter, industry group APPJSAC warned the changes “would be like going back to black-and-white television”.

“A majority of gaming halls would close and thousands of direct and indirect jobs would be lost,” warned the group, which represents leading operators including Televisa, Caliente and Codere.

Fellow trade association AIEJA estimated the proposed reforms would “produce a massive closure of gaming halls, accompanied by a reduction of around 90 percent of their economic contributions”. 

Both groups are understood to be preparing more detailed responses to push back against the proposed changes that came without warning and threaten to upend the entire industry.

Other changes proposed by Segob include reducing the length of Mexican gaming permits from 25 to 15 years. 

The draft decree also would delete articles of the 2004 regulation that currently allow for Mexican license-holders to partner with third-party operators — a change with potentially severe implications for online gambling as many Mexico-facing operators act as the skin partner of an incumbent permit-holder similar to the regulatory model of New Jersey or other U.S. states.

As of Thursday evening, lawyers representing at least seven individual operators had submitted their own comments on the changes, warning of a series of consequences that include gaming equipment manufacturers likely closing their operations in Mexico. 

The lawyers also point to two Supreme Court rulings that have upheld the constitutionality of the 2004 decree and subsequent amendments made in 2013, both finding that the term “sorteo” could encompass a wide range of games.

It should be noted that there is a long way to go before the proposed changes to Mexico’s regulatory environment become a reality.

The proposals, as things stand, are merely a draft subject to review by regulatory reform commission Conamer, and they could yet be revised or withdrawn altogether.

If the changes are adopted they would inevitably lead to a series of legal challenges, both at a national level as well as by individual companies seeking protection from local courts.

Meanwhile, established operators could continue to operate under the existing terms of their current permits, most of which do not expire until the late 2030s.

That provides plenty of time for the industry to lobby future Mexican administrations for the changes to be reversed before they truly make an impact.

There is also past precedent of Segob floating regulatory changes and then not following through with them.

Two years ago, the interior ministry proposed a series of less controversial guidelines on licensing and advertising, but they were not brought into effect.

Segob also has held public roundtables with stakeholders to discuss potential reforms to update Mexico’s underlying 1947 gambling law, although no such legislation has been put to Congress under the administration of outgoing President Andrés Manuel López Obrador.

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