Hungary tightens grip on online gambling operations

Hungary strengthens measures to protect online gamblers amidst regulatory changes

In a bid to combat unlawful online gambling, Hungary’s gambling regulator, the Supervisory Authority for Regulated Activities (SZTFH), has announced stricter measures and enhanced authority to block payments. The amendments, published in the official legal gazette in July, outline the regulator’s plans to clamp down on unlicensed foreign gambling sites.

Effective July 1, payment service providers (PSPs) will be prohibited from facilitating gambling transactions to and from these unauthorised offshore gambling platforms. The SZTFH has mandated that PSPs prevent transactions involving bank cards associated with online gambling operations lacking a valid license.

To align with regulatory requirements, Hungarian PSPs can only provide services to operators listed in the SZTFH’s official registry. Furthermore, PSPs have been instructed to reject payments with gambling merchant codes and terminate accounts that support such transactions, unless they can verify compliance with gambling laws.

The responsibility of enforcing payment blockades falls upon the PSPs, overseen by the Hungarian National Bank (Magyar Nemzeti Bank). Non-compliant PSPs may face administrative fines imposed by the authority.

While the SZTFH already possesses the power to block websites and issue administrative fines, concerns have arisen regarding the potential difficulty for Hungarian citizens to retrieve funds previously deposited with foreign gambling sites.

Past indications have suggested that Hungarian authorities intend to create more obstacles for foreign operators in the country. Some companies have voiced discontent with Hungarian law, alleging non-compliance with EU regulations. However, any decision from the Court of Justice of the European Union (CJEU) on this matter is expected to take several years.

Previously, Hungary limited online gambling licenses to monopolies and the established land-based sector. However, following a 2018 CJEU ruling mandating revisions to the country’s laws, the licensing system for online casinos remains largely unchanged.

Viktor Radics, a dispute and gambling lawyer at DLA Piper, has expressed reservations about the new licensing rules for online sports betting, effective January 1, 2023, in terms of their compliance with EU law. Concerns include a five-year ban on individuals with misconduct records, server placement and a permanent establishment requirement within Hungary, and the mandatory use of a Hungarian bank account.

Radics suggests that payment service providers (PSPs) and online operators are likely to challenge these changes if implemented due to the raised concerns.

Additionally, questions persist regarding the effectiveness of banks in blocking card transactions, as they will need to implement new filtering systems. Radics has also highlighted the potential for unintended consequences, such as mistakenly extending these blockades to unrelated bank transactions unrelated to online gambling.

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