In Costa Rica, online gambling is officially illegal. There are online gambling companies which are based in the country and offer betting on casino and sportsbook markets to people located abroad, but no online gambling firm can legally take bets from Costa Rica’s residents. Now, with a wave of online gambling regulation sweeping across northern and southern America, in this article we ask whether it is time for Costa Rica to regulate this popular pastime.
New Regulated Markets – The US, Canada, Peru and Brazil
In the past five years, huge changes have been taking place in the regulation of gambling both online and offline in the American continent. The most obvious example is in the States, where following the repeal of PASPA (Professional and Amateur Sports Protection Act) at the federal level in 2018, after years of prohibition, individual states have been allowed to set their own rules to permit gambling online and offline. New Jersey, Pennsylvania, Michigan, New York and West Virginia are amongst those to license gambling now and many more are expected to follow, including California in the next 12 to 24 months.
Further north, in Canada, online gambling has recently been made legal in Ontario, the first province to regulate the pastime and allow private betting operators to compete with state- run lottery companies.
Meanwhile, in the Southern American countries, online gambling remains largely unregulated with governments allowing their citizens to gamble on offshore sites but yet to impose a legal framework of their own under which licenses could be issued and taxes earned. The exceptions to this rule include Brazil, which is currently going through the process of establishing gambling laws and issuing licenses, and Peru, which recently set out the basic structure of regulation that would include a 12% tax on revenues.
Why Is Regulation Important?
There are two important reasons why countries are starting to regulate online gambling – tax and consumer safety.
Tax Revenues
Online gambling is a popular pastime and with access to the internet and therefore internet casinos, available from anywhere in the world, there is no government that can easily stop its citizens from gambling online.
By not regulating this activity governments are missing out on tax revenue that could be collected from gambling operators under a proper licensing structure. Tax levels vary from the 12% proposed by Peruvian officials, to 51% in New York. A good tax program can be highly lucrative for states who chose to regulate gambling.
Consumer Protection
Gambling is a controversial area as it can cause addiction. In one of the world’s most successful regulated markets, the UK, the government is currently looking to review the laws to tackle problem gambling as it has seen an alarming rise in addiction levels over the past two decades. Under new rules, stakes may be capped at $2 per spin on slots and affordability checks may be carried out on any person wishing to spend more than £125 per month on bets.
The example of the UK shows why a regulated market is better than an unregulated one when it comes to consumer protection. There the state is in a position to impose tougher restrictions to reduce problem gambling rather than leaving it in the hands of offshore gambling operators who are more interested in profit than consumer protection.
How Would a Regulated Market Look for Costa Rica?
To bring in regulation the government would first need to pass laws outlining a framework under which gambling could be legalised. This would include the following:
Licensing – Gambling operators who wished to take bets from Costa Rican citizens would have to apply for licenses and set up a business within the country. In most jurisdictions an annual license fee is imposed and operators have to pass an audit on their business practices before a license is granted.
Marketing Rules – Regulators in each market establish rules on how an operator can advertise their business. With online gambling this may include restrictions on enticements to bet which are integral part of the product. In Ontario, a new market, the regulator has banned the advertisement of free bet offers entirely. But elsewhere, free spins in Canada are regularly used as a marketing tool, the UK permits this tactic and most US states do too. If Costa Rica were to legalise gambling then the state would need to decide how aggressively its licensees could advertise their product.
Taxation – the government will need to set tax rates for online gambling companies. These may be based on wagering or revenue and could be as high as 50%. But most importantly they must be set at a level that is acceptable to a business who must see the Costa Rican market as a good opportunity, not thwarted by excessive taxes.
Conclusion – Should Costa Rica Legalise Online Gambling?
There are many reasons why our neighbours are starting to regulate this activity and it makes sense for Costa Rica to follow suit. It will create a safer environment for citizens who wish to gamble and it will enable the country to raise tax revenues. Above all, gambling is a hugely popular activity that is better when it is enjoyed safely. Perhaps, in the near future, we will see a fully regulated market in this country.
