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Mexico Gaming Supplier Regulatory Overview

8 March 2011

Regulatory Management Counselors, P.C.

In Mexico, the regulation of commercial gaming occurs at the federal level through the Ministry of the Interior (Secretaría de Gobernación). The government evaluates and issues permits for operators of gaming facilities but does not regulate suppliers or providers of gaming equipment or services. Mexico's complicated history with regulated gambling, however, has led to a proliferation of illegal gambling facilities posing as legitimate businesses. According to a recent article, "as many as 25-30 percent of the casinos in Mexico may be operating without bona fide permits, or are possibly fronted by individuals who do not represent the true ownership or control of the business."1

Operator Regulation

The issuance of gaming licenses is authorized through the Regulation to the Federal Gaming and Raffle Law of 2004. This law amends the 1947 Federal Gaming and Raffles Law, which limits legal gambling to merely raffles, games, and sporting activities to include online gaming, bingo, and other activities under the vague definition of "raffles."2 Notably, all entities seeking to become licensed gaming operators in Mexico must be incorporated in Mexico.

Currently, many of the largest licensed operators are part of the Asociación de Permisionarios de Juegos y Sorteos, an industry group representing operator interests in Mexico.

Supplier Regulation

Suppliers of gaming and non-gaming equipment, however, are not explicitly regulated and licensed in Mexico as they are in the majority of United States jurisdictions. However, those persons or entities looking to do business with gaming facilities in Mexico must be wary of doing business with unlicensed operators as doing so may affect future licensing in other jurisdictions.

Consequently, it is important for those companies doing business in Mexico to conduct regular due-diligence checks in order to verify information regarding the ownership of the operator and the background of management and other individuals employed by the operator.3 Typical suitability requirements in the United States often examine the relationships that an applicant maintains outside of the jurisdiction. Therefore, doing business with an unlicensed or illegal gaming operation in Mexico could result in negative licensing consequences beyond regulatory or legal action in Mexico.

Technical Standards for Electronic Gaming Machines

Technical standards for electronic gaming machines in Mexico are not as detailed as in many United States jurisdictions. In fact, industry observers have stated that "even within the context of accepted international standards, Mexico's regulations provide little or no operating guidance, and meaningful technical standards do not exist."4 However, the Regulation to the Federal Gaming and Raffle Law of 2004 does provide some guidance as to the machines that are constitutionally approved for use by operators. In general, machines are allowed if they meet the following criteria:

1. The device works on a "draw of numbers" or "raffle of symbols" basis;
2. The device contains a central processing system that records and accounts for all bets wagered;
3. The device is monitored via a secure telecommunications system;
4. Patrons must "hold" a card (either physically or electronically) that has a predetermined set of numbers or symbols that affects the outcome of the draw; and
5. The method of determining winning outcomes of the game is approved by the Ministry of the Interior.5

Please note that this definition, in general, closely resembles the definition of a Class II gaming device in most United States jurisdictions. Other than the above guidelines, however, there are no specific technical requirements that mirror those utilized in United States jurisdictions regarding the specific operating requirements of individual machines.6
1José Luis Benavides et al., 'Illegal Operations in Mexico: Beware the Dark Side,' Casino Enterprise Management, May 2008, 14 at 18.
2François Peglau, 'Mexico - A Regulatory Overview,' Gambling Compliance, March 10, 2008.
3Robert R. Russell, 'Know Your Customer,' Global Gaming Business Magazine, May 2008, at 55.
4José Luis Benavides et al., 'Gaming and Politics: An Industry at a Crossroads,' Casino Enterprise Management, March 2008, 12 at 14.
5José Luis Benavides et al., 'Decoding the Market - The Regulatory and Political Environment,' Casino Enterprise Management, October 2007, 26 at 28.
6Id.

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