International edition
August 06, 2020

Exclusive interview with Fast Offshore CEO Ron Mendelson

"In emerging markets, gaming jurisdictions really need to identify who their clients are"

"I am a firm believer in self-regulation and I think we need to build on a culture of responsibility in the iGaming sector," says Fast Offshore Director Ron Mendelson.
Costa Rica | 11/18/2019

The specialist compares Malta and Curacao gaming licenses, both of which get the most interest for iGaming operations. He suggests operators to start preparing now for Brexit, by acquiring a license in an EU country, get fiscal advice, among other potential measures. He believes the US Wire Act DoJ's reinterpretation should be dismissed, so individual states create their own legislation to legalize all kinds of betting.

R

on Mendelson is the Director of Fast Offshore, which provides international business services including online gaming as one of its main areas of expertise, and has been serving clients in the iGaming industry for over 20 years. The executive provides licensing advice and guidance as well as fiscal, corporate, and payments services in jurisdictions all over the world.

What jurisdictions are your gaming industry customers from in most cases? What are the typical concerns and difficulties they are asking about, especially in terms of licensing, compliance and payments? Could you provide some examples?

We typically serve a wide variety of customers from jurisdictions spanning five continents, but in terms of which jurisdictions get the most interest for iGaming operations, it would have to be Malta and Curacao. Malta is known as a leading EU jurisdiction and has a sterling reputation. Requirements from the Malta Gaming Authority in order to obtain a license are quite stringent and require a considerable sum of upfront capital, therefore it tends to be a license operators apply for once they have already been established elsewhere. Curacao has always been a popular choice and has been offering its gaming license since 1996. It is popular with first-time operators because of its favourable fiscal regime and relatively low cost set up and licensing process. Compliance in EU states is also tough and subject to change, so again, operators need to consider what markets they want to operate in and where they want to be based.

In terms of concerns of stakeholders in the market, for those operating in the EU, Brexit is a big concern. The uncertainty of what may happen has caused turmoil for those who are based and/or operate in the UK and other EU countries. In the US, it seems to be an element of regulatory uncertainty across the board due to the issuance of various legal opinions that could seek to restrict online gambling. Overall, people are looking for certainty and stability — thankfully there are a number of jurisdictions that can still provide both.

Can we have your current assessment of Brexit impact on the online gaming industry? What are the key tips you would provide to stakeholders, especially in terms of licensing, compliance and payments, and what are your expectations for the short and long term?

Firstly, the ongoing uncertainty of how Brexit will happen, when it will happen, and to a certain extent, whether it will happen at all is causing concern throughout the industry. In Malta, one of the world’s leading iGaming jurisdictions, they have already issued a guidance note with a 12 month transitory period for licensees to take the necessary measures to ensure that they are compliant with Maltese and EU laws. Any company that is established in Malta and operating in the UK or is established in the UK and providing services within Malta will have to ensure that they hold the necessary licenses to continue and if not, they need to make alternative arrangements. 

The UK government has also issued advice in the form of an eight-point checklist including checking whether staff need work permits, updating data protection policies, and adhering to changes in auditing and accounting requirements. A number of big players such as 888 have reported a loss of profits in the last quarter that they have attributed to Brexit uncertainty.  

My advice to operators is to start preparing now. We don’t know what is going to happen with Brexit and when, but in my view, it is good to be one step ahead. Start considering your options, think about acquiring a license in an EU country, get fiscal advice, communicate with your payment providers, and put mechanisms in place so if there is a no-deal, your company, operations, and revenue won't suffer.

What is the current status of the US Wire Act reinterpretation, how is it affecting the transactions within the gaming sector, and what are the future scenarios? What would be the best approach in your opinion?

As far as I am aware, the latest news on the Wire Act was that the Department of Justice had submitted a notice of appeal over the judge’s ruling that the Act only applies to sports betting. It wasn’t an unexpected reaction but it does nothing to help how operators in this emerging market are feeling. As a response to this, a trade group known as iDEA Growth responded to the DoJ’s appeal requesting it be withdrawn. They want the focus to be on combating unlicensed and illegal offshore operators who don’t pay tax or protect consumers, not legitimate US-based businesses. In my opinion, the best approach is for the appeal to be dismissed and for individual states to create their own legislation to legalize all kinds of betting, without federal interference

What regulatory and taxation frameworks would you identify as current models for iGaming? What would you put forward for emerging markets, such as the US and LatAm? What do you think of Colombia’s gaming market?

After many years on the periphery of the global gaming industry, it seems that Colombia is ready to take steps towards being a key player. Following several amendments to regulations and the granting of the first operating license in 2017, Colombia’s online gambling sector has really made a name for itself in the emerging Latin American market, so much so in fact that other countries are now following its lead. As with any new market, there are still issues to be ironed out but I am optimistic that it will become a jurisdiction of choice for many established names as well as start ups.

As someone who works in most of the iGaming jurisdictions in the world and comes into contact with a variety of different models in terms of regulations and taxation, it is difficult to say which one I prefer or would consider as a “current model.” So much depends on what the client wants and needs as well as what their ultimate goal is. I adopt a tailor made approach for all of my clients so it would be difficult for me to pinpoint one that would work for everyone. In terms of emerging markets however, I would say that they really need to identify who their clients are. Will they go for big names and demand a big price tag for licensing? Or will they look for lots of smaller startups, charge less, and have less stringent regulations? In my opinion, there is room for both models in the market at the moment and I would discuss all options with my clients before making any suggestions.

What licensing model do you find the most suitable for Brazil’s sports betting?

Well, according to the latest news, an initial regulatory decree has already been disclosed to the gaming community where fixed-odds betting will operate in a free-market environment and there will be an authorisation license-granting model where any interested party must meet certain legal and regulatory requirements before being able to commence operations. Not much has been said about license fees, license terms or important considerations such as tax and maintenance fees but I am hopeful that they will legislate in a way that protects operators and customers, as well as paving the way for a fast-paced, new market.

What new challenges do you find in terms of Responsible Gaming and self-exclusion, and what is the best approach international operators should take? What about compliance in terms of sports betting integrity, in a market like the US?

I am a firm believer in self-regulation and I think we need to build on a culture of responsibility in the iGaming sector. The focus needs to be on attracting and retaining good quality clients and not falling foul to the temptation to hook people and profit at their expense or that of applicable regulations. There should be a robust approach adopted by international operators that provides both prevention and treatment, including steps such as self-exclusion, interventions in extreme cases, and responsible advertising that doesn’t target children and young adults.

In terms of the US market, the opening up of sports betting will inevitably attract nefarious actors so there needs to be a suitable legal regime in place. It is my view that this should be able to detect, deter and punish any game integrity violations. At the moment, legislative efforts do not adequately address these issues and concerns and I would hope that they are addressed in a way that benefits all stakeholders.

More information:
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