Legislative framework of gambling regulation
◊ Status: Law stated as at 01-Nov-2016 | Jurisdiction: Luxembourg
The Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law) is the main law regulating gambling in Luxembourg. Article 1 of the Gambling Law clearly states that the operation of a business of games of chance is prohibited. This principle of prohibition is based on the belief that gambling creates a danger of irrational and destructive behaviour (Trib. Arr. Lux., 26 July 2000, Nationale Postcode Loterij, No. 10605). Therefore, the exceptions to the general prohibition (that is, the grant of authorisations to suppliers that fulfil certain conditions prescribed by law) are limited, to channel any desire to gamble.
The Law dated 22 May 2009 related to the National Foundation and the National Lottery (National Lottery Law) grants the National Lottery (Loterie Nationale) the exclusive right to operate its distribution networks for any forms of lotteries and sports betting products, including online.
The Grand-Ducal Regulation of 7 September 1987 on sports betting sets out the legal framework for sports betting, and the conditions that a person must meet to obtain an authorisation from the Ministry of Justice to provide sports betting products.
The Grand-Ducal Regulation dated 12 February 1979 (as amended from time to time) sets out the legal framework for casinos and similar venues. It defines the conditions required for authorisation and provides the list of authorised games.
The Law of 30 July 2002 regulating certain trade practices and penalising unfair competition provides a list of conditions applicable to advertisers and organisers of online and land-based lotteries, mere competition games and free advertising raffles that are exclusively organised for marketing purposes (see Question 15).
In a study issued in November 2008, the European Parliament concluded that Luxembourg holds the third highest gross gaming revenue per capita in the EU (UK ranked fourth). However, the country only has two main historical gambling operators:
The National Lottery, which is organised by the National Foundation of Grand-Duchess Charlotte (Oeuvre Nationale de Secours Grande-duchesse Charlotte) (a non-profit public institution under the supervision of the Prime Minister and the State Minister).
A casino (Casino 2000 Montdorf).
Definitions of gambling
There is no definition of gambling in the Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law) or any other laws or regulations.
However, Luxembourg case law defines “gambling” or “game of chance” as a game which, either by itself or due to the conditions in which it is performed, is characterised by chance prevailing over the physical or intellectual skills of the players (Lux. 13 November 1958, P. 17, 390). These conditions are fulfilled when the gain is the result of chance, and chance is the main factor in the outcome of the game. The chance component should be analysed at the level of the average player. Therefore, a game will still qualify as a game of chance if skills can ensure gains to persons who are especially trained. In other words, the special skills or ability acquired by a few should not be taken into account.
Lottery, sports betting, casino games, slot machines and poker fall within the definition of gambling under certain conditions set out in Luxembourg laws, in particular the Gambling Law.
Mere competition games, free lotteries and raffles exclusively organised for marketing purposes are not considered to be gambling, and do not require any prior authorisation to be offered to Luxembourg residents.
Online gambling is indirectly defined as any form of lotteries and sports betting organised through information society services/tools (Law dated 22 May 2009 related to the National Foundation and the National Lottery ( National Lottery Law))
The National Lottery Law only applies to online gambling organised by the National Lottery (Loterie Nationale). However, the concept of “information society tools/services” can be applied by analogy to all online games that can be offered by any other authorised operators.
As a result, online gambling covers any game that meets all of the following conditions:
It is authorised under the Gambling Law (subject to some restrictions in respect to sports betting).
It is provided by the National Lottery, Casino 2000 Montdorf or any authorised operator.
It is provided against remuneration.
It is provided at a distance (that is, without the parties being simultaneously present).
It is provided by electronic means (that is, initially sent and received by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, radio, optical means or other electromagnetic means).
It is provided at the individual request of the gambler.
See above, General definition.
The Ministry of Justice is responsible for issuing authorisations to private operators seeking to offer sports betting products, casino games and lotteries (Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law)).
When the total value of lottery tickets to be issued is equal to, or less than, EUR12,500, the authorisation must be granted by the board of mayor and aldermen (Collège des Bourgmestre et Echevins) of the municipality where the principal place of ticketing is located.
National lotteries are exclusively organised by the National Foundation of Grand-Duchess Charlotte (Oeuvre Nationale de Secours Grande-duchesse Charlotte), a non-profit public institution under the supervision of the Prime Minister and State Minister. Net proceeds resulting from the activities of the National Lottery (Loterie Nationale) are distributed to charitable institutions.
There is only one authorised and regulated casino in Luxembourg, Casino 2000 Montdorf, which is the sole holder of an authorisation issued under Article 5 of the Gambling Law. Further authorisations, if any, will be granted by the Government Council after due investigation, in accordance with specifications set out by the Ministry of Finance and after obtaining the opinion of the Council of State.
Licences issued to private operators have a limited duration, which is fixed in the decision of the competent authority. A decision to issue a licence also determines the:
Operation, monitoring and control measures of private operators.
Conditions of access to gambling premises (if any).
Opening hours of gambling premises.
A licence can be revoked if the licensee does not comply with any of the terms of the licence.
There is no limit on the numbers of licences. However, when considering the grant of a licence, the competent authority must check whether the introduction of a new game will jeopardise the existing balance of supply and demand in the market.
See box, The regulatory authorities.
Luxembourg authorises four types of poker games:
Small stakes poker.
Texas Hold’em poker (since 2015).
Omaha poker (since 2015).
All these poker games can only be offered in casinos.
To prevent addiction and money laundering, the Luxembourg public prosecutor’s department announced in 2007 that the Ministry of Justice and poker organisers (in particular bars) had concluded a gentlemen’s agreement. This agreement allows the organisation of poker “events” (for any type of poker) if stakes paid in by players are low (about EUR20 to EUR50 per player, depending on the organisation’s expenses) and certain other conditions are met.
Betting (other than sports betting)
Pure betting (other than sports betting and lotteries) is prohibited.
The Ministry of Justice can authorise sports betting (Article 4, Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law)). The Grand-Ducal Regulation of 7 September 1987 on sports betting sets out the conditions of authorisations, the betting terms and conditions and the applicable taxes.
The Gambling Law and the Grand-Ducal Regulation do not make a distinction between fixed-odds betting and pool betting. Additionally, there are no restrictions on the forms and types of sports betting (that is, live betting, betting on the results or the winner and so on).
The only existing holder of a licence (that is, Casino 2000 Montdorf) can offer the following casino games (Grand-Ducal Regulation dated 12 February 1979 (modified by the Grand-Ducal Regulation dated 8 March 2002); Article 6, Gambling Law):
Pure table games (that is, baccarat chemins de fer, baccarat à deux tableaux à banque limitée et l’écarté, baccarat à deux tableaux à banque ouverte).
Authorisations for further casinos can only be granted by a decision of the Government Council after investigation, in accordance with specifications set out by the Ministry of Finance and after obtaining the opinion of the Council of State (see Question 3).
Slot and other machine gaming
Slot and other machine gaming are prohibited on the public highway and in public places (in particular bars), except casinos (Article 3, Gambling Law).
Authorised machines provided by the Casino 2000 Montdorf are defined in Articles 16 to 20 of the Grand-Ducal Regulation dated 12 February 1979 (as modified by the Grand-Ducal regulation dated 8 March 2002), by execution of Article 6 of the Gambling Law.
The only authorised machines are machines à rouleaux and video games These devices must be previously authorised by the Ministry of Finance. The Grand-Ducal Regulation dated 22 January 2014 allows a system of electronic gaming card for slot machines.
The same legal regime applies as for lotteries (see below, Lottery).
Lotteries are defined as all operations offered to the public that provide a gain which is determined by chance (Article 301, Luxembourg Criminal Code).
Lotteries are provided either by:
The National Lottery (Loterie Nationale) under the Law dated 22 May 2009 related to the National Foundation and the National Lottery (National Lottery Law) (which repealed the Grand-Ducal Decree dated 13 July 1945).
Other providers under new Article 2 of the Gambling Law as amended by the National Lottery Law (which repealed the Law dated 15 February 1882 on lotteries).
The organisation of lotteries is subject to authorisation from either the:
Minister of Justice, when the value of the tickets to be issued exceeds EUR12,500.
Board of mayor and aldermen (Collège des Bourgmestre et Echevins) of the municipality where the principal place of ticketing is located, when the value of the tickets to be issued is equal to, or less than, EUR12,500.
Authorisations are only granted to lotteries that are (fully or partly) organised for a purpose of general interest or public utility related to philanthropic, religious, scientific, artistic, educational, social, sports or tourism matters.
However, mere competition games, free lotteries and raffles exclusively organised for marketing purposes are deemed lawful and do not require authorisation from the Minister of Justice.
Luxembourg legislation does not classify licences according to the gaming products.
Any individual or entity can apply for a licence regardless of its nationality or location. An applicant that resides abroad must appoint a general agent domiciled in Luxembourg, who is entitled to represent the operator generally, and before the Luxembourg courts in particular. Additionally, the general agent must be jointly liable with the applicant to pay taxes and levies.
The applicant must send its application to the Ministry of Justice. Although not expressly stated in the Law dated 20 April 1977 on the operation of a business of “games of chance”, the application must include the following information:
Nature and description of the gambling activities to be exercised in Luxembourg.
Integrity of the gambling operator.
Description of the game’s respective chance and skill components.
Explanation of the utility of the proposed gambling activities (which must not jeopardise the existing balance of supply and demand in the Luxembourg gambling market).
Duration of licence and cost
The competent authority (see Question 3) can set the duration of the licence. The duration of a licence therefore depends on the agreement with the operator. There are no fees payable for the granting of a licence.
Key prohibitions applicable to gambling services provided to Luxembourg customers include the following:
The minimum age for players is 18 years (for every gambling product).
Employees of casinos cannot:
acquire a part or interest in gambling products;
for any reason, have any discount on gambling products; and
participate in games, either directly or through an intermediary.
Gambling providers and their employees cannot grant credit or lend money for gambling, or for the purpose of paying gambling debts.
Casino services cannot be provided in one single room, and must have a separate, distinct room for slot machines.
Player protection measures require that players must be able to self-exclude or to place a limit on the number of casino visits.
The authorised and regulated gambling operators (in particular Casino 2000 Montdorf) in the Luxembourg gambling market have voluntarily adopted and implemented measures relating to social responsibility and to the prevention of gambling addiction
In 2002, Casino 2000 launched a proactive player protection programme, including regular training of its employees. A team of six floor managers is in charge of this programme. All employees are trained every year to recognise signs of problem gambling and are invited to report their observations to the responsible gaming team. Casino customers who exhibit signs of problem gambling are approached by casino staff. A short self-test is offered and general information on gambling addiction may be given. Depending on the outcome, a limitation or ban may be recommended to the customer.
In 2015, Casino 2000’s player protection programme was successfully audited as one of the best among European countries under the European Casino Association’s Responsible Gaming Certification Framework. The public authorities have considered that no further action was justified.
In addition to the development of commercial methods to promote lotteries and sports betting, the National Lottery (Loterie Nationale) must (Article 9(2), Law dated 22 May 2009 related to the National Foundation and the National Lottery):
Clearly inform the public of the real winning odds for each type of product.
Organise information campaigns on the economic, social and psychological risks related to gambling.
Co-operate with the competent authorities and various associations specialised in the sector to develop an active and co-ordinated policy of prevention and assistance in relation to gambling addiction.
Anti-money laundering legislation
Luxembourg is one the first jurisdictions to have implemented anti money-laundering laws.
Following the recommendations of the Financial Action Task Force (FATF) of the Organisation for Economic Co-operation and Development, Luxembourg conducted a fundamental reform of its legislation and adopted:
Three laws dated 27 October 2010 enhancing the anti-money laundering and counter-terrorist financing legal framework and organising the controls of physical transport of cash entering, transiting through or leaving the Grand Duchy of Luxembourg.
A Grand Ducal Regulation dated 29 October 2010.
The FATF subsequently recognised that the Luxembourg legal regime conformed to its anti-money-laundering rules and standards.
Luxembourg laws and regulations require professionals outside the financial sector (including casinos and gambling institutions) to report suspicious transactions. Gambling institutions, which are considered to be specifically exposed to money laundering, must:
Identify any client buying or selling play money for an amount of EUR1,000 or more (the general threshold applicable to other professionals is EUR15,000).
Register and identify all clients of casinos (which are subject to the supervision of Luxembourg public bodies) before granting them access to gambling premises, regardless of any amount to be played.
Luxembourg laws are not clear as to the regime applicable to online gambling.
The current laws (including the Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law)) do not distinguish between online games and land-based games. Therefore, a joint statement issued by the Ministry of Justice and the author concluded that the Ministry of Justice could authorise online gambling activities within the limits of the current laws (including the Gambling Law), provided that the gambling operator meet certain conditions.
Consequently, the licensing regime for online gambling is subject to the same rules as land-based gambling (see Question 5). The Ministry of Justice should also check whether the introduction of a new game would jeopardise the existing balance of supply and demand in the market.
In practice, however, the National Lottery (Loterie Nationale) is the only entity carrying out online gambling activities in Luxembourg under a licence. The National Lottery is the only organisation directly regulated under Article 9(1)2 of the Law dated 22 May 2009 related to the National Foundation and the National Lottery (National Lottery Law) (see Question 2, Online gambling).
The National Lottery’s de facto monopoly
The National Lottery (Loterie Nationale) is the only online gambling entity operating in Luxembourg under the statutory mechanism set out in the Law dated 22 May 2009 related to the National Foundation and the National Lottery (National Lottery Law) (see Question 7). It is also entitled to operate its commercial distribution network for any forms of lotteries and sports betting products, including online. This de facto monopoly is a significant restriction on online gambling operator.
This situation has raised a number of questions, including whether:
There is any operator interested in offering online gambling in Luxembourg.
Any operator can fulfil the conditions for authorisation by the Ministry of Justice.
Luxembourg implicitly establishes a monopoly in favour of the National Lottery.
This means that the Ministry of Justice considers that its main objective with regard to gambling law consists of maintaining moral controls over Luxembourg residents.
This moral imperative (if any) is incompatible with the introduction of other online gambling operators on the market.
Compliance of Luxembourg legislation with EU law
There are three potential issues regarding the compliance of the current Luxembourg legal framework with EU legislation.
Notification of Luxembourg gambling legislation to the European Commission. Luxembourg is the only EU member state that has not notified any draft law or regulation relating to gambling to the European Commission under Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations, as amended by Directive 98/48/EC. Although the Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law) does not contain any specific rule applicable to online gambling, the National Lottery Law contains one explicit provision related to online gambling services (that is, that the National Lottery can operate its commercial distribution network through information society services and tools (Article 9(1)2)). However, the legislature did not notify that provision to the European Commission.
To the author’s knowledge, the preparatory works for the National Lottery Law (Draft Law No 5955) do not mention any urgent reason or any serious and unforeseeable circumstances that justify enacting the Law without any consultation or notification. Yet, it appears that the provision relating to online gambling concerns information society services as defined under Directive 98/34/EC (as amended by Directive 98/48/EC), as it refers to a service normally provided by the National Lottery for remuneration, at a distance, by electronic means and at the individual request of a recipient of services (that is, the gambler).
The European Commission has not received any complaints about Luxembourg gambling law, and has therefore never investigated any potential issue concerning the compliance of the national rules with EU law.
Scope of application of Luxembourg legislation. The European Commission condemned the former version of Article 2 paragraph 5 of the Law dated 14 August 2000 relating to electronic commerce (Electronic Commerce Law). Under that version, Luxembourg law applied to online gambling activities involving money, regardless of the location of the online services providers. The European Commission considered that an automatic and systematic application of Luxembourg law could lead to an unjustified restriction on the principle of freedom of provision of services, contrary to Article 49 of the Treaty establishing the European Community. That wording was replaced in the Law dated 5 July 2004, which now excludes gambling activities from the scope of the Electronic Commerce Law. Consequently, it is currently difficult to assess whether Luxembourg courts will apply Luxembourg laws to online gambling operators, including the prohibition on cross-border gambling activities deployed in Luxembourg. The Luxembourg administrative authorities consider that the Gambling Law, as a criminal law, should apply to gambling activities offered by Luxembourg operators, including when these activities are performed from abroad but are targeting Luxembourg residents. However, the country’s policy of fair tolerance has resulted in a lack of prosecutions.
Compliance with EU case law. In assessing the legality of the monopolistic position of the National Lottery over non-casino gambling, it is necessary to note that there is no law that specifically allows or forbids private operators from offering online gambling services to Luxembourg residents. The Court of Justice of the European Union has held many times that, although a monopoly over games of chance constitutes a restriction on the freedom to provide services, the restriction can be justified by overriding reasons in the public interest, such as the objective of ensuring a particularly high level of consumer protection (which is a question for the national court).
To be consistent with the objective of fighting crime and reducing opportunities for gambling, any national legislation establishing a monopoly over games of chance must (Dickinger and Ömer (Case C-347/09)):
Be based on a finding that crimes and fraud linked to gambling, and addiction to gambling, are a problem in the member state concerned, which can be remedied by expanding authorised regulated activities. It is therefore necessary to assess whether unlawful gambling activities may constitute a problem in Luxembourg and whether the expansion of authorised and regulated activities would be likely to solve that problem.
Allow only moderate advertising, strictly limited to what is necessary for channelling consumers towards monitored gambling networks.
To limit the problem of unlawful activities, potential fraud and addiction, the Ministry of Justice currently restricts supplies to games that correspond to an existing demand. However, several non-regulated games (such as poker) correspond to an existing need and cannot be offered by authorised providers (except small stakes poker, stud poker, Texas Hold’em and Omaha poker by casinos).
The authorised and regulated gambling operators in Luxembourg have also voluntarily adopted and implemented measures relating to social responsibility and to the prevention of gambling addiction (see Question 6, Restrictions).
To achieve the objective of channelling consumers into controlled circuits, the National Lottery aims to provide an alternative to non-authorised gambling providers, notably through the use of new distribution techniques under Article 9(1)2 of the National Lottery Law. Additionally, the National Lottery claims that the advertising of its products remains strictly limited to what is necessary and does not aim to encourage consumers’ natural propensity to gamble, which is believed in Luxembourg to create a danger of irrational and destructive behaviour.
In addition, unlike in the cases of Marcello Costa (Case C-72/10) and Ugo Cifone (Case C-77/10), Luxembourg argues that its gambling and sports betting sectors have not been marked by a policy of expanding activity with the aim of increasing tax revenue. Since its statement issued on 20 October 1997, the National Foundation of Grand Duchess Charlotte emphasises that its main objective is to channel the desire to gamble, and not to maximise profits for charity institutions. The monopolistic authority also asserted that it will refuse to exceed a turnover of EUR100 million, unless additional lotteries or gambling products are introduced.
Therefore, Luxembourg adopts a policy of fair tolerance towards EU operators performing cross-border gambling services, as the country does not have the technical means to control online gambling or the intention to set up a regulatory body responsible for monitoring online gambling. Luxembourg may not have capacity to monitor online gambling activities as well as other EU member states, as the regulatory frameworks of most other member states provide a level of protection that offers more sophisticated technical means.
B2B and B2C
Although the legal status and responsibility of online operators generally differ depending on whether they are performing B2C or B2B operations, the main laws regulating this issue exclude gambling activities from their scope of application.
The Luxembourg Consumer Code, as introduced by a Law dated 8 April 2011, strictly regulates agreements entered into between a professional and a consumer. However, Chapter 2 of the Code, which relates to distance agreements:
Excludes from its scope agreements that are concluded in relation to online betting services (Article 222.2(e)).
Prevents consumers from exercising their right of withdrawal (within seven working days) for service agreements related to betting and lotteries, unless otherwise agreed (Article 222-5(f)).
The Law dated 14 August 2000 relating to electronic commerce (Electronic Commerce Law), as modified by the Law dated 5 July 2004, excludes from its scope gambling activities that involve wagering with money, including lotteries and betting transactions.
However, Luxembourg laws impose some general obligations on B2C operators, including:
A prohibition on asserting that a product increases the chances of winning in games of chance, which is deemed to be an unfair deceptive marketing practice in all circumstances (Article 122-4, Luxembourg Consumer Code).
Obligations on advertisers before the broadcast of advertisements for lotteries, mere competitions games and free advertising raffles exclusively organised for marketing purpose (Article 21, Law of 30 July 2002 regulating certain trade practices and penalising unfair competition).
The obligations of gambling providers with respect to the processing and use of personal data is regulated by the Data Protection Law dated 2 August 2002, as amended by the Laws of 31 July 2006, 22 December 2006 and 27 July 2007.
A B2C operator involved in gambling is likely to be acting as a data controller, whereas a B2B operator involved in gambling will be deemed either a data controller or a data processor (as the case may be) under the Data Protection Law. A B2B operator that outsources a particular function to a service operator (such as a white label provider) is likely to qualify either as a:
Data controller, if the white label provider processes personal data on behalf of the B2B operator.
Data processor, if the white label provider determines itself the purposes and methods of processing personal data.
However, in any case, operators that provide online services to, and host information on, consumers/gamblers, are not obliged to:
Monitor the information they host or transmit.
Seek facts or circumstances indicating illegal activity.
Additionally, Luxembourg offers excellent incentives to non-EU internet service providers for establishing B2C e-business companies within the EU. As a result, major US and other international entities have decided to establish their EU B2C e-business platform in Luxembourg (such as Amazon, AOL, Microsoft, Apple I-tunes, eBay, PayPal, Vodafone, RealNetworks, Rakuten and Skype). These incentives were necessary to keep online service providers in Luxembourg following the changes to the VAT place of supply rules for B2C telecommunications, broadcasting and e-services, including online gambling (applicable from 1 January 2015). The place of supply is now where the online player resides, rather than the place of establishment of the Luxembourg gaming provider.
Luxembourg does not have any:
Control policies on websites or blocking systems requiring ISPs to block access to non-authorised gambling websites. This is because Luxembourg does not currently intend to impede the activities of service providers established in other EU member states where they are authorised to provide their services.
Blocking systems for financial transactions related to betting or gambling.
Mobile gambling and interactive gambling
There is no specific law that regulates mobile gambling or interactive gambling on television.
The Law dated 20 April 1977 on the operation of a business of “games of chance” (Gambling Law) applies regardless of the medium used (including television, mobile communications and so on). As the Gambling Law is part of criminal law, the Luxembourg administrative authorities consider that it should apply to gambling services that are either:
Operated by a mobile or television provider located in Luxembourg.
Targeting Luxembourg residents, regardless of the location of the television or mobile provider.
This interpretation of the Gambling Law results from the scope of both the:
New version of the Law dated 14 August 2000 relating to electronic commerce (see Question 8, Compliance of Luxembourg legislation with EU law: Scope of application of Luxembourg legislation).
Law dated 27 July 1991 on electronic media, as modified (Media Law), which implemented Directive 89/552/EEC on the co-ordination of certain provisions concerning the pursuit of television broadcasting activities and Directive 2010/13/EU on the coordination of member states concerning the provision of audiovisual media services.
Gambling services are excluded from the scope of the Media Law and the corresponding directives. Therefore, the principle of freedom to provide media services between EU member states does not apply to gambling services that target Luxembourg residents.
Luxembourg hosts some of the biggest IT companies (such as Amazon, iTunes, eBay, PayPal, Vodafone, RealNetworks, Rakuten, Skype and so on) and some leading fast-growing online cloud and social gaming companies (such as Innova, OnLive Inc, Zynga, Big Fish Games, Kabam, Nexon, Bigpoint and Mgame), which have elected Luxembourg as their European distribution platform.
These companies have chosen Luxembourg to:
Install the technology centre of their European operations (for example OnLive Inc., Innova, Zynga or Mgame).
Manage their operational activities for development, marketing and public relations in the European market (for example, Nexon).
Organise through Luxembourg their language customer support, marketing and business development (for example, Kabam).
Organise their accounting and marketing activities (for example, Bigpoint).
Games that are free to play, or do not offer any prizes, do not require any prior authorisation or licence to be offered to Luxembourg residents, except for the authorisation of business establishment (if required). Applying the same reasoning as for slot machines under Article 3 paragraph 2 of the Gambling Law, social games should not be prohibited if the player has no chance of enrichment or material advantage other than the right to take part in further games.
Where virtual money used in social games involving chance can be exchanged for other prizes, it is necessary to analyse whether the gaming operator is taking advantage of the player’s propensity to gamble or is simply offering an “entertainment” game, such as snooker or electronic flipper, in which case no prior authorisation or licence from the Ministry of Justice is required. Social games are only deemed to be gambling activities requiring prior authorisation from the Ministry of Justice if all the following conditions are met:
Chance prevails over the intellectual or physical skills of the players.
The game requires real money from the players (that is, considerable buy-ins exceeding the gaming operator’s management and acquisition costs/expenses plus normal profits).
The game creates a risk of losing the buy-in and the hope of winning a prize, any direct or indirect financial consideration or other material advantage (other than the right to play again).
Social games organised in the form of lotteries, mere competition games and free advertising raffles exclusively organised for marketing purposes must meet the conditions set out in Article 21 of the Law of 30 July 2002 regulating certain trade practices and penalising unfair competition (see Question 15).
Gambling debts (dette de jeu) are not enforceable, and the payment of a wager (pari) is not a recognised cause of action in civil proceedings (Article 1965, Luxembourg Civil Code). However, as games and wagers between private persons are not unlawful, a voluntary payment made by the losing party to the winning party is a valid transfer. The losing party cannot demand repayment of that sum, unless the payment was the result of any of the following (Article 1967, Luxembourg Civil Code):
False pretences (supercherie).
Courts have applied these statutory provisions consistently (and Luxembourg courts have developed interesting case law in this area). Additionally, while these rules have been extended to the financial markets, they have only been applied to future contracts to be settled in cash and to contracts for differences (jeux de bourse).
The same tax regime applies for land-based and online gambling.
The tax base is the operator’s gambling proceeds, which are defined as follows.
Casino games. Gambling proceeds comprise:
For banking games (that is, games where one player, the banker, competes against each of the other players individually, including roulette, trente et quarante and so on): the difference between the initial stake (together with any complementary stakes from time to time) made by the casino and the proceeds realised at the end of the game, less a 25% deduction for expenses and a 10% deduction for losses relating to artistic events organised by the casino.
For commerce games (such as bridge) and circle games (such as baccarat and écarté): the aggregate amount of charges or rakes withheld by the casino during the games.
Sports betting games and lotteries. The tax base is the gross amount bet.
Casino games. Withholding tax is levied on casinos’ gambling proceeds at the following rates:
10% up to EUR45,000.
20% above EUR45,000 and up to EUR90,000.
30% above EUR90,000 and up to EUR270,000.
40% above EUR270,000 and up to EUR540,000.
45% above EUR540,000 and up to EUR1,080,000.
50% above EUR1,080,000 and up to EUR2.7 million.
55% above EUR2.7 million and up to EUR4.5 million
65% above EUR4.5 million and up to EUR6.3 million.
75% above EUR6.3million and up to EUR8.1 million
80% above EUR8.1 million.
Sports betting and lotteries. The withholding tax rate is 15%.
Gambling proceeds are exempt from income tax, wealth tax and VAT.
Lotteries and sports betting products offered by the National Lottery (Loterie Nationale) are exempt from tax, as 100% of the gains realised by the National Lottery must be redistributed to charitable organisations.
The advertising of gambling is generally allowed, but must not target minors. The advertising of land-based and online gambling is not otherwise subject to specific restrictions or regulations. However, the general regulations regarding faithful, trustworthy and honest commercial advertisements are applicable to gambling. The following are prohibited:
Assertions that a product increases the chances of winning in games of chance, which is deemed to be an unfair deceptive marketing practice in all circumstances (Article 122-4, Consumer Code)
Unsolicited communications (Law dated 30 May 2005 on data protection in the sector of electronic communications, as amended).
The use of automated systems without human intervention or electronic e-mails for the purposes of direct marketing is only permissible in respect of subscribers who have given their prior consent. However, a supplier that obtains the electronic contact details of its customers, in the context of the sale of a product or a service, can use those details for the direct marketing of its own similar products or services. The supplier must clearly and distinctly give every customer the opportunity to object, free of charge and in an easy manner, to the use of their electronic contact details when they are collected and within each marketing e-mail (where the customer has not initially refused to such use).
Additionally, advertisers and organisers of online and land-based lotteries, mere competition games and free advertising raffles exclusively organised for marketing purposes, are subject to the following obligations (Article 21, Law of 30 July 2002 regulating certain trade practices and penalising unfair competition):
Before broadcasting any advertisement, an advertiser/organiser must draft a regulation stating the conditions and operation of the transaction. This regulation and a copy of documents to be addressed to consumers must be submitted to a ministerial officer who is responsible for assessing their legality. The full text of the regulation must be sent to any person on request and free of charge.
The advertising documents must not:
cause confusion of any kind in the mind of their recipients; or
be misleading as to the number and value of prizes, and as to the conditions of their allocation.
The entry form must be separate from the order form for the product or service.
Participation in the draw must not be subject to any kind of compensation or to any necessary purchase.
An advertiser/organiser that created, through the design or layout of its communications, the impression that the consumer has won a prize, must provide this prize to the consumer.
Developments and reform
There have been no significant changes in recent years, except for the:
Introduction of new forms of poker games in casinos (see Question 4, Poker).
Introduction of semi-automatic gaming machines.
Increase of police controls over machine games in bars.
The Luxembourg Government is holding regular discussions on the following issues:
Introducing a specific legal framework for online gambling.
Offering a consistent structure to regulate land-based poker and other games that correspond to an increasing demand of Luxembourg residents.
However, the Luxembourg Government currently considers that these matters are not a priority.
Luxembourg is constantly improving its legal framework and attractiveness for ICT and social gaming companies, to be the distribution platform leader for access to worldwide markets.
Under the pressure of the European Commission, the Luxembourg Ministry of Finance recently agreed to abolish the requirement for private gambling operators to appoint a general agent domiciled in Luxembourg (see Question 5, Eligibility). This change still needs to be reflected in Luxembourg law, which will most likely be the case in 2017.
The Ministry of Justice (in a joint statement with the author) recently recalled that financial, management and accounting activities related to gambling are not considered as gambling activities, and do not therefore require prior authorisation (although clearance is advisable to avoid risks).
The regulatory authorities
Ministry of Justice
Description. The Ministry of Justice is responsible for issuing authorisations to private operators seeking to offer sports betting, casino games and lotteries. Where the total value of lottery tickets to be issued is equal to, or less than, EUR12,500, the authorisation must be granted by the board of mayor and aldermen (Collège des Bourgmestre et Echevins) of the municipality where the principal place of ticketing is located.
National Foundation of Grand Duchess Charlotte (Oeuvre Nationale de Secours Grande-duchesse Charlotte)
Description. The National Foundation of Grand Duchess Charlotte is a public institution under the supervision of the Prime Minister and the State Minister. It is exclusively responsible for organising national lotteries.
Description. Legilux is Luxembourg’s official law website. It provides access to national legislation published in the three series of Luxembourg’s legal gazette, the Mémorial.
Ministry of Justice
Description. This is the official website of Luxembourg’s Ministry of Justice.
Source: Practical Law