Italy has taken a significant step towards a comprehensive reform of its online gambling sector in 2024, as the government has decided to proceed with the Ministry of the Economy and Finance (MEF)’s decree to reorganize the gambling sector. However, newly envisioned licensing fees have caused significant friction with operators who accused policymakers of their haphazard and chaotic approach.

The New Decree Aims to Bolster Customer Safety

According to the Italian government, the new legislation aims to safeguard players, especially minors, combat criminal activities, and bolster tax revenues for public projects and social causes. The new decree encompasses measures to tackle illegal gambling, protect vulnerable players, introduce self-limitation tools, disseminate cautionary messages, and enforce customer restrictions based on deposit levels. 

Licensing fees will also receive a significant revamp, rising drastically to €7 million ($7.66 million) from 2018’s €200,000 ($392,000). Operators will also be subject to a 3% operating fee on their net revenues, along with an additional annual 0.2% fee contributing to responsible gaming campaigns under the jurisdiction of a dedicated gambling department of Italy’s Customs and Monopolies Agency (ADM).

The reformed concessions system will impose a cap of five licenses for each operator, aiming to eliminate ‘skin websites’ and single concessionaire product sales, a concern previously raised by the ADM. The government anticipates generating significant revenues, estimating €350 million ($383.6 million) from competition and an additional €100 million ($109.6 million)  annually from concession fees.

Italian Operators Strongly Protest Some of the Changes

Despite the government’s best intentions, some measures have raised significant concerns among industry stakeholders, like the Italian Association of Public Games Operators and Italy’s Association for Slot Machine Vendors. They urged the government to involve the industry in making necessary changes before proceeding with the decree, warning that the proposed changes would disproportionately hurt smaller businesses.

With 83 existing operators in Italy, the government expects at least 50 to apply for the new concession, signifying a notable industry shift and a means to resolve legal disputes surrounding licensing extensions. While the government has envisioned new measures to block unlicensed websites and transactions with illegal operators, the broader industry warns that they may fail to achieve their desired effect.

We urge the Council of Ministers to reconsider the proposal, as it will make the country’s online gambling black market problem even worse, not better.

Maarten Haijer, European Gaming & Betting Association secretary general

Despite rising discontent from industry representatives, the Italian government appears determined to proceed with its planned revisions. Treasury Deputy Minister Maurizio Leo and PM Giorgia Meloni have expressed their support for the reorganization, focusing on the economic benefits and improved customer safety. However, the refusal to engage with the industry raises growing concerns that the new decree may have unintended consequences.

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The resorts in question, Mohegan Sun and Foxwoods, decided to opt out of indoor smoking during the COVID-19 pandemic, fearing that cigarette smoke could help the virus spread and infect more people. More than a year after the pandemic has been defeated, the resorts seem to show very little interest in bringing back smoking on their casino floors. Recently, even Kansas tried to push for an indoor smoking ban on casino floors.

Tribal Operators in Connecticut Continue to Say No to Smoking

The resort’s owners, the Mohegan Tribe and the Mashantucket Pequot Tribal Nation, are citing their community members’ health, but also point out that the lack of cigarette smoke has not really impacted their financial bottom lines.

The debate to suspend smoking on casino floors has been ranging from Rhode Islands to California, with states such as New Jersey arguing that casino smoking should indeed go, but casino operators, including the Casino Association of New Jersey, cautioning that chasing smokers away would depress financial performance and slow down post-pandemic recovery.

Connecticut, however, tells a different story as the two biggest resorts there are obviously not seeing the point in bringing cigar smoke back. Jason Guyot, Foxwoods’ president and chief executive, said that there was more economic sense in opposing smoke as a matter of fact. He said that before the pandemic, sanitary staff would retrieve the equivalent of 200 packs of cigarette butts a day.

Those are usually made of plastic, which is also causing environmental harm. Jeff Hamilton, the president and general manager at Mohegan Sun, shared a similar sentiment in which he outlined that the company has been enjoying positive feedback from guests and employees, with people welcoming the chance to be healthy and enjoy their favorite games.

The Virus Forces Casinos and Resorts to Prioritize Health

Of course, tribal operators were also more susceptible to the pandemic. Their communities suffered disproportionately from the COVID-19 virus, and that quickly made businesses established to serve those communities that the best option to protect members is to ensure that every precaution is taken – that meant snuffing out cigarette smoke on casino floors. Connecticut, though, is far from banning indoor smoking on casino floors.

Presently, nearly all states in the United States prohibit indoor smoking but make an exception for their gambling industry based on thin evidence. As Foxwoods and Mohegan Sun have shown, cigarettes are not necessary for an economic boom.

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Chinese authorities allege that Zhijiang played a central role in organizing and facilitating illicit gambling activities, which have long caused concern due to their association with criminal networks and potential societal harm. As a result of the evidence presented against the businessman, China has canceled his visa, enabling his deportation. However, She is prepared to use every legal option to evade or postpone such a measure.

She Argues He Is No Longer a Chinese Citizen

With the legal proceedings initiated by Chinese authorities, She Zhijiang is contesting his extradition from a foreign jurisdiction. Zhijiang’s legal team is expected to argue against the measure on various grounds, including concerns over fair trial rights, potential mistreatment, and the political motivations behind the charges. This high-stakes battle is likely to involve intricate legal arguments and diplomatic negotiations.

She’s primary defense relies on the fact that the casino mogul is technically no longer a Chinese citizen, having obtained Cambodian citizenship. He also argued that the government had many chances to arrest him as he still held a Chinese passport but pursued legal action only after he became a citizen of Cambodia. 

The businessman’s legal team is preparing his defense, hoping to appeal to international extradition law. Such cases, particularly those involving individuals of significant prominence or ties to the business world, often present complicated legal and diplomatic challenges. The resulting legal process can take years to conclude, meaning She should remain safe in the foreseeable future.

The Case Will Have Far-Reaching Implications

Despite the casino kingpin’s defense, the Chinese government has presented some damning evidence. According to She’s arrest warrant, he was the head of a criminal gang that operated between January 2018 and February 2021, collaborating with several companies to maintain his illegal online gambling platform. Authorities allege that 330,000 gamblers transferred $22 million abroad, netting She at least ten years in prison.

The escalation of this case matches China’s recent crackdowns against illegal gambling. The government initiated 10,000 criminal cases and 75,000 administrative cases related to underground casinos, primarily in rural areas. Hong Kong police also completed a successful operation against Triad members, investigating a connection between unlawful gambling, drugs, and trafficking.

Although the case against She represents only a fraction of the Chinese government’s anti-gambling efforts, it may have substantial implications for the casino industry and international cooperation in combating transnational crimes. The outcome of the extradition battle will have far-reaching consequences, not only for She Zhijiang but also for the broader fight against illegal gambling operations and the continued efforts to safeguard public safety and welfare.

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