The New EU Members: Hungary

"The New EU Members" is a 10-part series providing information on the regulations and legislation, mainly on interactivity, of the gambling industry in the 10 countries that joined the European Union on May 1, 2004. This first edition to the series covers Hungary.

The 10 new members are: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia. In total, the European Union now consists of 25 countries. When two more countries (Bulgaria and Romania) join in 2007, the it the European Union will have a population of nearly half a billion.

This single market opened up its borders, allowing people, goods and services to move around freely within the European Union. If goods, services, people and money are to move around freely within the single market, there must be rules to ensure fair competition. These rules are laid down in the E.C. Treaty.

In this E.U. arena, legislation discussed and introduced covers areas such as the violation of freedom of establishment, free provision of services, the E-commerce Directive, fair trade, the harmonizing of national laws, cross-border commerce, privatizations, money laundering, trademarks, telecommunications and more. Above that is the European Court of Justice, which overrules all national courts of the member states.

So the European Union has many tangent planes with the gambling industry. Further, more than 300 million European citizens abolished their own national currency as of January 1, 2002 and started using the euro as a normal part of daily life.

Lottery and Gaming Operators

The Hungarian monopoly lottery and gaming company Szerencsejáték Rt, fully owned by the state privatization and asset management company ÁPV, was established by the government in 1991. Its revenue was $545 million in 2003. In 1992, Szerencsejáték Rt also acquired shares in the casino and horse racing market. In 1995, Szerencsejáték Rt pulled out of racing. The Hungarian government currently planning to sell its minority stake in the company.

Casinos

Between 1998 and 2000 (according to "The 2003 Casino and Gaming Market Research Handbook," written by Terri C. Walker), a series of casinos in the capital of Hungary closed--he result of a systematic government policy to centralize and increase control over the gaming industry as a whole.

In early 2002, there were two state-run casinos and two privately owned casinos. In 2001, table games generated gross gaming revenue of $27.5 million, and slots generated $2.1million. The average casino visits were 57,000 per casino. There were 108 table games and 117 slot machines.

Legislation

The duties of the Gaming Board are laid down in the Law of 1991. (Click here to view a copy of this law.)

Dr. Etelka Vita, head of the legal department, offers the following information:

In Hungary. the legal regulations of gambling are contained by the Act No.XXXIV of year 1991 on gambling (the "Act"), which has been modified and supplemented several times, and the Order of the Ministry of Finance No. 25/1991 ("X.16") on licensing, operating and supervision of gambling, which has been modified and supplemented several times. The rules of operating casinos are also contained by a) the guide on the general game conditions for casinos, issued by the president of the Gaming Board, b) in case of concession-based operation the concession contract between the Minister of Finance (on behalf of the state) and the winner of the tender, c) in case of state-operated casinos the former license of the state game organizer received from the Minister of Finance.
Based on Section 1(4)-(5) of the Act, gambling organizing activity, which grants the right of participation through telecommunication means and systems from the territory of Hungary is allowed exclusively in compliance with the provisions of the Act. The permission of the Gaming Board is needed for the publication of offers on participating in gambling organized through telecommunication means and services.
According to Section 3(3) the number drawing games (such as bingo) and-except for the organization of horse race betting based on concession contract and except for bookmaker-type betting-the organization of betting can be done exclusively by the state game organizer.
The bookmaker-type betting can be done only by an economic company exclusively owned by an economic organization with a 100 percent state ownership, or can be done by an economic organization with a majority state ownership.
According to Section 27(2) a casino must not be operated through telecommunication means and systems. During the operation of the casino, the activity of gambling organization must not be done through telecommunication means and systems.
Therefore, in Hungary neither bingo nor sports betting, nor other (types of) gambling are allowed to be organized by an "offshore" gambling organizer. It must not operate a casino, and casino games must not be played online either.
According to Section 2(7) of the Act, no sales, organizing or intermediary activity for the participation in gambling organized abroad is allowed in Hungary; nor are advertising activities connected to foreign gambling.

IGN Conduced the following brief interview with Dr. Vita:

IGN: Have important new rules been introduced for casinos

Etelka Vita: The Act No. XV of year 2003 on the prevention and hindering of money laundering (PHML) has introduced new important rules in respect of casinos:

By the modification of Section 7(4) of the Act, the above mentioned act has obliged the Gaming Board to supervise and to penalize the activities which do not meet the provisions of PHML)
The PHML has declared the obligation of the casinos as service providers to give data and information to the Gaming Board.

IGN: When offshore operators are targeting your country or when they operate from your jurisdiction, what means you have to stop them?

EV: If the Gaming Board learns that a foreign company wants to organize gambling in Hungary, it takes the necessary steps, but the start of a criminal process because of money laundering and organization of prohibited gambling is basically the competence of the police authorities.