Denmark Softens Online Gambling Stance

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The online gambling proposal of Denmark is currently under review by the European Commission and that has been the status for some time. This delay has given the Danish authorities an opportunity to review the proposal and the Danish Gambling Authority (DGA) has made a modification in favor of the online gambling operators in one of the key clauses.

In the original proposal it was mandatory for all licensees to have their servers located in Denmark. This condition did not find favor with online gambling operators because it required them to duplicate the infrastructure. Now the DGA has stated that under its supervision and in "special cases" it could allow part of a licensee's servers to be located in countries or jurisdictions outside of Denmark's bilateral agreement framework. The key criterion appears to be that the DGA should be able to carry out the supervision of the servers outside Denmark in a satisfactory manner.

Kristian Wind, senior technical adviser at the DGA, clarified that the list of countries and jurisdictions to which this would apply has yet to be made official. The DGA is currently discussing the issue with various national regulators and a final call will be taken only after the discussions are complete. But jurisdictions from where many of the potential licensees are already operating are likely to be covered. One of the considerations for this change was the realization the some online gaming operators would possibly not be able to operate in Denmark if their systems had to be located within the country.

The European Commission is seized with the Danish proposal not for a normal review process. The Danish slot machine association and the Royal Casino in Aarhus have challenged the proposed online gambling tax rate of 20% on gross wins. Since land casino operators have to pay tax at 41% they have claimed that the state of Denmark is subsidizing online gambling, which is against the European Commission principles of a level playing field. The DGA is hopeful that the European Commission will announce its decision before the month long summer break in August. The subsequent steps to install a regulated online gambling regime can be initiated only after that.

Originally the date set for the regulated regime to come into effect was January 1, 2011, but because of the objection of the land based gambling operators this could not be met. In December last year the Danish taxation minister told operators the government was aiming for the law to come into force before the summer of 2011, but that also is now ruled out. In fact the DGA is now unwilling to set any target date. If all goes well the beginning of 2012 is the earliest that Denmark can have regulated online gambling.

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