Mexico’s government has enacted drastic regulatory reforms to ban slot machines or other casino games in the country’s gaming halls, ignoring industry pleas that the changes would decimate revenues and lead to thousands of job losses.
A gaming reform decree was signed by President Andrés Manuel López Obrador (AMLO) and his interior minister on Wednesday (November 15) and published in the government’s official gazette on Thursday morning, as the AMLO administration followed through with a draft proposal that was initially released for public consultation in September.
The decree makes a series of changes to the 2004 regulation that has fostered a significant expansion of Mexico’s gambling market over the past two decades.
Although a Mexican federal law generally bans most forms of gambling, the 2004 regulation’s recognition of “drawings of numbers or symbols” has been interpreted as allowing for Class III gaming machines, as well as electronic and live table games within a network of some 400 de facto casinos across the country.
The decree published on Thursday rescinds several provisions of the regulation that expressly authorize “drawings of numbers of symbols through machines.”
The amended regulation also specifies that lawful drawings permitted under Mexican law cannot encompass “betting games played with cards … dice, roulette wheels or slot machines.”
Further changes delete various other regulatory provisions that have allowed Mexican license-holders to partner with third-party companies to operate under their permits.
On its face, that would appear to disallow not only independent operators managing land-based gaming halls licensed to another company but also the current practice of permit-holders partnering with international online gambling brands to operate under their licenses.
Elsewhere, the maximum length of a Mexican gambling permit is set to be reduced from 25 to 15 years, with operators prohibited from opening multiple gambling halls under a single license or moving halls to new locations without obtaining a new permit.
Although Thursday's decree seems set to plunge Mexico’s gambling market into a period of uncertainty, it should be noted that the regulatory changes are unlikely to make an immediate impact in practice.
Transitional provisions of the decree specify that Mexican officials will not be able to issue new permits that include now-prohibited offerings, but current permits will remain valid until they either expire or reach a term of 15 years.
That longer runway would appear to give Mexican gaming interests plenty of time to lobby either for the more prohibitive reforms in Thursday’s decree to be reversed by a new government due to take office in 2024, or for Congress to belatedly pass a new federal gambling law that more expressly regulates casino gaming.
Speaking at this month’s SBC Summit Latinoamérica Summit in Miami, the director of one of Mexico’s largest gambling operators acknowledged the proposed changes underlined how the country’s regulatory regime was “delicate” and were a clear sign that the current government “wants to freeze the market.”
Still, even with a “frozen market, there are a sufficient number of operators and sufficient, healthy competition to be able to grow the market,” said Emilio Quiros, managing director of Big Bola Casinos.
Before current permits expire, few would bet against legal challenges to the new regulations.
Operators and Mexican industry trade associations have already argued through the recent consultation process that the government’s legal reasoning for the amendments was flawed, given the Supreme Court has already upheld that drawings of numbers or symbols by machines were permissible under Mexico’s 1947 gambling law.
Industry groups and workers unions also warned that banning casino-style games would cause gambling tax revenues to decline by as much as 90 percent, with hundreds of legal gambling venues facing closure and organized crime inevitably moving in to cater to consumer demand.
Mexico’s interior ministry, known as Segob, doubled down on the reforms following pushback from gambling interests, however, arguing that negative economic impacts would be more than offset by the saving of almost 5bn pesos through a reduced need to treat gambling addiction among Mexicans.
The ministry received the blessing of Mexico’s national regulatory reform commission (Conamer) ten days ago to proceed with the changes.
In its November 6 opinion on the proposal, Conamer accepted Segob’s economic projections and said the reforms would align the 2004 regulation with the more prohibitive 1947 law, while creating additional legal security through a clearer identification of the owners and operators of gambling establishments.
“It can be observed that the proposed regulation complies with the objectives of regulatory enhancement, in terms of ensuring that regulations generate greater benefits than compliance costs,” Conamer said.