Gaming in Czech Republic: overview

The new Act No. 186/2016 Coll., on games of chance (Gambling Act) will become effective on 1 January 2017, replacing Act No. 202/1990 Coll., on lotteries and other similar games (Lotteries Act). Therefore this chapter will focus on the provisions of the Gambling Act.

All amounts in euros in these chapters are based on the exchange rate where EUR1 equals about CZK27.50.

While most gambling matters are regulated by the Gambling Act, other important aspects, such as taxation, are governed by Act No. 187/2016 Coll., on tax from games of chance (Gambling Tax Act). Some other technical aspects of gambling (such as data transfers, technical parameters of gambling devices and so on) are regulated by secondary legislation in the form of decrees issued by the Czech Ministry of Finance.

Although gambling activities mostly take place between individuals and legal entities, gambling is a matter of public law, due to the public interest in regulating this activity. As the Czech legal system is based on principles of continental law, the Administrative Procedure Code and the Tax Code apply to gambling, when special laws (such as the Gambling Act and the Gambling Tax Act) do not provide otherwise or are silent on a particular matter.

Additionally, the following acts have an impact on the day-to-day operations of gambling operators:

• Act No. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime and financing of terrorism.
• Act No. 101/2000 Coll., on personal data protection.
• Act No. 40/1995 Coll., on regulation of advertising.

Various other laws marginally affect gambling, but will not be referred to in this chapter.

The Gambling Act and the Gambling Tax Act apply to both land-based and online gambling, which are regulated in the same way in most material aspects.

 2. What is the legal definition of gambling in your jurisdiction and what falls within this definition?

The following regulatory bodies supervise gambling activities in the Czech Republic:

The Ministry of Finance is mainly responsible for granting basic licences (see Question 5). In addition, it is responsible for:

Applications for the provision of land-based technical games, live games or bingo fall within the competence of the relevant municipal authority, which also has the authority to grant gambling premises licences following the grant of a basic licence.

The Customs Administration is generally responsible for:

Most of the supervisory and enforcement powers are divided and shared between the Ministry of Finance and the Customs Administration, while the powers and jurisdiction of the municipal authorities are fairly limited.

There is no limit on the total number of gambling licences that can be issued. The Ministry of Finance must grant a basic licence to every applicant that files an application and fulfils the legal requirements.

Municipal authorities can issue municipal decrees that prevent operators of land-based technical games, live games or bingo from operating within their territory. A municipal authority that has not issued a decree to that end must grant a licence for gambling premises to any applicant that meets all the regulatory requirements. Before applying for a basic licence, an applicant should check whether the relevant municipal authority has issued a decree. There has been a significant trend among municipalities to ban gambling within their territory and some municipalities have even become gambling-free zones (for example, Brno). However, the municipal authorities do not have any jurisdiction over online gambling operators and cannot affect the provision of online services within their territory.

Poker

Poker is not recognised as a specific gambling category and may fall under the categories of live games, technical games or small-size tournaments, depending on:

Land-based poker must be played with physical chips authorised by the Ministry of Finance. The circulation of the chips must also be recorded.

Betting

Betting is recognised by the Gambling Act and may fall within the gambling categories of odds betting or totalisator games, depending on the applicable pay-out principle. In totalisator games, the player’s winnings depend on the outcome of an event and on the betting pool (that is, the total amount of bets wagered on that particular event), which is later distributed proportionally among the players who correctly guessed the event’s outcome.

The Act No. 186/2016 Coll., on games of chance (Gambling Act) now expressly recognises live odds betting, so that bets can be placed while the event on which bets are made is taking place.

Sports betting

Sports betting is not recognised as a separate gambling category and may be categorised as odds betting or totalisator games, depending on the applicable pay-out principle.

Casino games

Casino games mostly fall under the category of live games, as live games can only be provided in casinos (not gambling rooms). However, live games can be provided online.

Blackjack, roulette and many other traditional casino games will fall under the live games category. However, casino games can also be operated as technical games, if either:

Slot and other machine gaming

Slot and other machine gaming are part of the category of technical games, which are defined as games provided via a technical device directly operated by the player (that is, the player decides the start of each spin). To play a technical game, players must register with the operator, and operators must ensure that players take a 15-minute break every two hours. There are limits on the possible winnings and losses on technical game devices, and further specific restrictions apply.

Terminal-based gaming

Terminal-based gaming falls within the technical games category (see above, Slot and other machine gaming). However, the permissible winnings and losses are higher.

Bingo

Bingo is recognised as a separate gambling category. Bingo can only be operated in licensed gambling premises, and bingo tickets can only be purchased at casino cash desks. Further conditions and restrictions apply with regards to the game plan, winnings and reporting obligations.

Lottery

Lotteries are recognised as a separate gambling category. The start of operation of a lottery must be notified to the Customs Administration. The appearance of lottery tickets is heavily regulated. Additionally, drawings must be supervised by a three-member committee composed of persons who meet specific integrity requirements (for example, absence of a criminal record).

Shared lotteries fall within the lottery category, but can be operated jointly (that is, joint tickets, drawings and jackpots) with other gambling operators and entities licensed to provide lotteries in other EU or European Economic Area member states. Shared lotteries are very popular in the Czech Republic, as jackpots are generally much higher.

Horse betting

Horse betting benefits from specific advantages with regard to the registration process and the amount of security required (EUR180,000), but is otherwise categorised as odds betting or as a totalisator game, depending on the applicable pay-out principle.

Available licences

The licensing process for land-based gambling is twofold. First, a gambling operator must obtain a basic licence from the Ministry of Finance. An individual basic licence is required for each gambling category (see Question 2, General definition), but not for each individual game. The operator must then obtain a licence for gambling premises from the competent municipal authority.

Licences for land-based gambling are not limited in number and cover all gambling categories except tombolas and small-size tournaments, which are not heavily regulated and only require prior notification to the competent municipal authority.

Eligibility

A gambling operator must satisfy all of the following:

Application procedure

The basic licence procedure and the licence for gambling premises procedure take up to 30 days each. These procedures are performed consecutively and each procedure can be prolonged by up to 60 days based on the complexity of the application. The application must be filed along with mandatory annexes (for example, game plan, expert assessment and approbation of operability and so on).

Duration of licence and cost

A basic licence can be granted for up to six years. A licence for gambling premises is granted for the term of the basic licence, but cannot be granted for more than three years. The fee for basic licence is EUR200 and the fee for a licence for gambling premises is EUR150.

However, applicants must also take into account their obligation to pay a security deposit in the form of a cash deposit or a letter of credit (Act No. 186/2016 Coll., on games of chance (Gambling Act)). The amount of the security deposit depends on the gambling category (see Question 2, General definition) that the provider wishes to provide and on the form of provision (land-based or online). The amount of security for land-based providers of bingo, technical games and live games depends on the type of physical premises where the games are provided (that is, gambling rooms or casinos).

Live games cannot be provided in gambling rooms, and the number of permitted individual devices for playing technical games is lower for gambling rooms.

A security deposit is required for every individual gambling category and for any form of gambling (land-based and online). For example, an application for an online licence to provide no-limit Texas Hold’em poker and pot-limit Omaha will only require one security deposit, as both games fall under the definition of live games and are both to be provided online. By contrast, an application for a licence to operate a no-limit Texas Hold’em game on physical premises and online and for a licence to operate a slot machine (land-based) will require three separate security deposits.

The required security deposits for each gambling category are as follows:

Security deposits are not required for tombola and small-size tournaments.

Prohibitions

Operators can only provide games falling within the gambling categories listed in the Act No. 186/2016 Coll., on games of chance (Gambling Act) (see Question 2, General definition). The following games are prohibited:

The participation of players who are less than 18 years old is also prohibited and gambling operators must ensure that they do not take part in gambling activities.

Additionally, “excluded persons” (such as individuals on welfare benefits, declared insolvent and so on) cannot take part in gambling. The Ministry of Finance must establish and maintain a register listing all excluded persons. Excluded persons must not be allowed to enter gambling premises (both casinos and gambling rooms). However, they can purchase lottery tickets and participate in tombolas or small-size tournaments.

Restrictions

Cool-off periods are required for participants to technical games (see Question 4, Slot and other machine gaming), which must be at least 15 minutes long for two hours of gambling.

Gambling rooms must be closed for operation between 3am and 10am.

Players must be registered and vetted against the list of excluded persons. Additionally, all registered players must set up self-restricting rules, which can be amended subsequently. However, amendments procedures are subject to time restrictions.

Each gambling category has its own restrictions, which mostly concern the following:

Anti-money laundering legislation

The Act No. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime and financing of terrorism (Anti-money Laundering Act (AML Act)) imposes certain obligations on gambling operators. AML requirements are generally harmonised within the EU. Currently, under the Act No. 202/1990 Coll., on lotteries and other similar games, only land-based casino operators must comply with anti-money laundering requirements, which include the following:

However, an amendment to the AML Act will come into force on 1 January 2017 (see Question 17).

Entry to gambling premises is conditional on prior registration. Therefore, the verification of a person’s identity must take place before any act of gambling and regardless of the amount wagered. Additionally, players entering gambling premises must be vetted against the list of excluded persons (see above, Prohibitions).

Online gambling operators must obtain a basic licence for each gambling category. Basic licences are granted by the Ministry of Finance and are effective within the whole territory of the Czech Republic.

The European Commission had initiated proceedings against the Czech Republic for infringement of the Treaty on the Functioning of the European Union because the Act No. 202/1990 Coll., on lotteries and other similar games (Lotteries Act) did not allow other EU operators to operate in the Czech Republic. One of the purposes of the new Act No. 186/2016 Coll., on games of chance (Gambling Act) is to allow operators from the EU/EEA to carry out business in the Czech Republic.

Available licences

Licences are not limited in numbers. Every applicant that conforms to requirements of the Gambling Act is entitled to obtain a licence. With the exception of tombolas and small-size tournaments, all gambling categories can be provided online and on physical premises under a single licence, but subject to different security deposits (see Question 5, Duration of licence and cost).

Eligibility

See Question 5, Eligibility.

Application procedure

The basic licence application procedure is regulated by the Administrative Procedure Code and takes up to 30 days. An application must be filed with mandatory annexes (including a game plan, an expert assessment, an approbation of operability and so on). The time period for granting a licence can be prolonged by up to 30 days, based on the complexity of the application.

Duration of licence and cost

A basic licence can be granted for up to six years, depending on the request made in the application. The licence fee is EUR200. In addition, the applicant must take into account its obligation to pay a security deposit (see Question 5, Duration of licence and cost).

Prohibitions

The same prohibitions apply as for land-based gambling (see Question 6, Prohibitions).

Restrictions

Internet games must be translated into Czech and players must be provided with information about the operator and the game plan, among others. During the player’s active participation in an internet game, operators must display both:

Online players must register with the operator and be vetted against the list of excluded persons. Additionally, all registered players must set up self-restricting rules, which can be amended subsequently. However, amendments procedures are subject to time restrictions.

Each gambling category has its own restrictions (see Question 6, Restrictions).

Operators of internet games must not also offer devices procuring participation in internet games.

Servers for internet games must be located within the territory of the Czech Republic or an EU/EEA member state.

Anti-money laundering legislation

The Act No. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime and financing of terrorism (Anti-money Laundering Act (AML Act)) does not generally apply to online gambling. However, the AML Act will be amended from 1 January 2017 (see Question 17).

AML legislation is harmonised within the EU. The Act No. 186/2016 Coll., on games of chance include AML provisions. For example, a player must provide a payment instrument or bank account information on registration. These must be under the player’s name and be tended by a financial institution licensed within an EU or EEA member state. Gambling operators must verify the payment information provided by players.

B2B operators are not regulated by the Act No. 202/1990 Coll., on lotteries and other similar games (Lotteries Act). They must therefore comply with general legislation. It appears that the legislator had no intention to alter this position under the new Act No. 186/2016 Coll., on games of chance (Gambling Act) with regards to B2B operators that provide their services to licensed gambling operators.

However, there is a possibility that the Ministry of Finance may threaten to penalise “significant or material” suppliers of unlicensed gambling operators, to force unlicensed operators to apply for a licence. Under the Gambling Act, the “operation of games of chance” also refers to other significant and material activities that are organisational, financial and technical in nature, but are related to either:

In light of this broad definition, many activities may meet the requirements of a significant or material activity (for example, software support, provision of software or infrastructure, and many other IT/ICT services) and may therefore be treated by the Ministry of Finance as unlicensed gambling operations. To date, the Ministry of Finance has not indicated any intention to do so.

In the absence of any case law or guidelines, B2B operators that contemplate entering the Czech gambling market should exercise caution and analyse their services in light of the provisions of the Gambling Act and requirements of the Ministry of Finance.

The Act No. 186/2016 Coll., on games of chance (Gambling Act) introduced ISP and payment blocking to prevent illegal online gambling operators from entering, or further operating in, the Czech online gambling market.

The Ministry of Finance will maintain a list of unlicensed online games, which will include the webpage addresses and bank information of unlicensed online operators. To enter an unlicensed operator’s webpage or bank information on this list, the Ministry of Finance will need to initiate administrative proceedings and allow the operator to assert their rights (that is, submit evidence, make motions and appeals and so on). The list will be maintained in electronic form to allow for remote access.

Internet and payments providers will then be required to prevent access and payments to entities included on the list of unlicensed online games. This will also include payments that are not directly related to players’ deposits and cash-outs.

Internet and payment providers that fail to comply with the restrictions of the Gambling Act will face significant penalties. Additionally, natural persons procuring unlicensed gambling will be facing a penalty of up to EUR35,000. This penalty is mainly aimed at affiliates or employees of unlicensed gambling operators in the Czech Republic.

Mobile gambling is not expressly recognised as a separate gambling category. Any operator wishing to provide mobile gambling must comply with the requirements applicable to the provision of internet games.

Interactive gambling on television can also be licensed as an internet game, provided that the data transfer between the operator and the player is made through the internet. Other means of transfer, such as radio or TV broadcasting, are not covered by the Gambling Act.

Social gaming is not specifically regulated by the Act No. 186/2016 Coll., on games of chance (Gambling Act). An entrepreneur wishing to offer social gaming must therefore comply with the same rules as any other entity wishing to conduct business in the Czech Republic.

The legal provisions that may have an impact on social games (for example, in relation to advertising, taxes and so on) are contained in various pieces of legislation. Social gaming providers must comply with any applicable legal restrictions. The most substantial limitations on social gaming operators are set out in the Gambling Act, as social gaming should not fall within the definition of gambling (that is, a game, betting or a lottery on which the participant wagers a bet, with no guaranteed return on their bet, and for which the winning or loss entirely or partly depends on chance or unknown circumstances).

To determine which activities fall outside the scope of the Gambling Act, it is necessary to assess both whether:

Due to the absence of case law on the new Gambling Act, it is impossible to state with certainty which position the Ministry of Finance will adopt with respect to the potentially extensive scope of the definition of “bet”. It may be that a game meeting the above two requirements will not be construed as gambling under the Gambling Act because it satisfies one or both requirements in a negligible manner.

To mitigate risk, social gaming operators may wish to use a virtual currency with no value (or a symbolic value) on conversion to an actual currency. When operating a social game that is not purely skill-based, operators are advised not to allow players to trade for real money any virtual currency or in-game items that have been purchased. Skin trading or skin betting (that is, allowing players to gamble with virtual items or to turn them into real money) remains a grey area under the Gambling Act. It appears that the Ministry of Finance will tend to argue that skin betting is prohibited.

Gambling debts incurred from licensable bets, games and lotteries are enforceable (section 2883, Act No. 89/2012 Coll., civil code). Licensable games are listed in the Act No. 186/2016 Coll., on games of chance (Gambling Act) (see Question 2, General definition).

Exchange-based betting, where players are allowed to give odds and make bets against each other, is a grey area. Therefore, this type of betting should be set up carefully to avoid the bets being unenforceable.

Land-based gambling

There are two types of tax imposed on both land-based and online gambling providers:

Online gambling

The taxation of online gambling is the same as for land-based gambling (see above, Land-based gambling). When seeking to lower any income tax payable, software licence fees paid by a Czech company to a non-Czech resident controlling entity are deductible, provided that the licence fee is based on arm’s length principles (that is, it corresponds to a fair market price).

Land-based gambling

The advertising of unlicensed gambling is not permitted. The advertisement of licensed gambling must:

Additionally, the building, or the publicly accessible parts of the building, in which gambling premises are located cannot be labelled as a gambling site or otherwise promote gambling. Windows and doors of gambling premises must be secured to prevent anyone from looking inside.

Online gambling

Online gambling operators are generally subject to the same rules as land-based operators (see above, Land-based gambling).

Land-based gambling and online gambling

The adoption of the Act No. 186/2016 Coll., on games of chance (Gambling Act) has been the most significant development in recent years.

The Act No. 202/1990 Coll., on lotteries and other similar games (Lotteries Act) was introduced in 1990 and did not account for any modern types of gambling. Since coming into force, it has been amended many times with the aim of bringing it up to date with the current gambling trends, although many amendments were rather controversial. The main flaw of the Lotteries Act was the strict ban on non-Czech based operators, which led to the emergence of a significant black/grey gambling market.

The aim of the Gambling Act is to remedy the main defects of the Lotteries Act and to finally allow EU and EEA-based gambling operators to enter the Czech market and to legally compete against Czech entities under the same conditions.

Other

The Lotteries Act also regulated “consumer competitions”, which are typically linked to the purchase of goods or services or to attending a promotion event, and are decided through a draw or other random choice. Before then, consumer competitions were generally prohibited, except for competitions with non-monetary prizes of a value of up to CZK200,000 annually per operator (and CZK20,000 per single winning), or competitions that were not linked to the purchase of goods or services and/or were skill-based.

The Gambling Act does not explicitly regulate consumer competitions. Therefore, consumer competitions will need to be assessed as to whether they can fall within any general category regulated by the Gambling Act. If not, consumer competitions will be subject to the general law.

The most recent reform concerning Czech gambling legislation is the new Act No. 186/2016 Coll., on games of chance (Gambling Act), which will come into force on 1 January 2017. A number of issues, especially the interpretation of certain definitions and provisions of the Gambling Act, are yet to be clarified by secondary legislation and decisions of the Ministry of Finance.

On 1 January 2017, an amendment to the Act No. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime and financing of terrorism (Anti-money Laundering Act (AML Act)) will become effective. The amendment will require all land-based operators to comply with the AML Act, not only casino operators, as is currently the case. Another amendment to the AML Act is currently undergoing the legislative process, and would require all gambling operators (not just land-based) to comply with the AML Act requirements, including the obligation to identify players (who must be physically present at the time of the first identification).