Introduction
The Betting Law of 2012 fundamentally revised the regulatory framework for both traditional and newer forms of betting in Cyprus.
Following Cyprus's accession to the EU in 2004, online gambling service providers licensed in other Member States exploited a legal loophole allowing them to operate from premises situated in Cyprus. The Attorney General initially advised that this had to be permitted, given the absence of specific legislation. After considerable public debate, Law 106(I) of 2012 (the "Betting Law") was enacted to regulate the provision of betting services while prohibiting and criminalising games of chance, including online games. The law was based on Directive 98/34/EC, concerning information procedures in the field of technical standards, and Directive 2006/96/EC.
The National Betting Authority
The Betting Law established the National Betting Authority (NBA) as the regulator for all betting activity, both land-based and online. The NBA is responsible for licensing and supervising authorised gambling operators, and for monitoring and combatting illegal betting. In July 2016 the NBA announced that from 1 October 2016 it would also accept Class B applications, permitting operators to provide betting services online. Persons already holding electronic-betting licences issued by another EU Member State were prohibited from operating in Cyprus unless they applied for a licence within one month of the Authority beginning to accept applications — until 1 November 2016.
Classes of Betting Licence
The Betting Law provides for two classes of licence:
- Class A — betting services provided within physical premises (other than services covered by a Class B licence)
- Class B — online betting services, excluding slot machines, online casino games of chance, and horse racing
Class B Eligibility Requirements
An entity need not be incorporated in Cyprus to operate electronic betting. An application may be submitted by a company with shares established abroad which has a branch in the Republic of Cyprus, whose principal activity is the carrying on of bets, and whose issued and paid-up share capital is at least €500,000. The company must maintain a local managing director.
The application must be accompanied by a bank guarantee for €550,000, issued by a commercial or cooperative bank in Cyprus or a bank situated in the EU, valid for a period expiring six months after the bookmaker's licence expires. The applicant must also provide details of a back-up server located within the Republic of Cyprus and linked to the Authority's main facilitator for the deposition of real-time data, together with the associated computerised software and support system. Directives 13 to 16 set out guidelines on the back-up server and support system, domain and website requirements, terms and conditions, and record-keeping of betting placements.
Licence Fees
Each applicant pays a fixed fee of €30,000 for a one-year licence or €45,000 for a two-year licence, renewable for a further one or two-year period. The NBA may suspend a licence for up to six months where the licensee breaches the terms of the licence or fails to meet the applicable economic standards and obligations.
Due Diligence Obligations
Consistent with anti-money-laundering legislation, a service provider must perform thorough customer due diligence for identification purposes (know-your-client, or KYC) before entering into a business relationship or carrying out a transaction. Article 56 of the Betting Law extends these obligations, requiring a Class B licensee to obtain the following before registering a player:
- Proof that the player is over 18 years of age
- Identification of the player
- Proof of residential address
- A declaration that the player is fully aware of the betting provider's terms and conditions
Tax and Contribution Implications
Article 71 of the Betting Law imposes on the licensed bookmaker a gaming tax and a contribution to the NBA. A 10% tax is levied on the net proceeds from the licensed bookmaker's bets for each accounting period, and a further 3% of net proceeds is levied as a contribution to the Authority for the corresponding period.
How ASC Can Help
ASC advises operators on the Cyprus Betting Law, from assessing eligibility and structuring the Cyprus presence through to preparing and submitting Class A and Class B licence applications and advising on ongoing compliance, due diligence, and tax obligations. Contact one of our lawyers to discuss your project.