Online gambling in Hungary is highly regulated with some of the highest barriers to entry in Europe. There is a trend towards liberalisation, and while legal entry into this emerging market is challenging, it’s not impossible.
This article shows you how and examines the current legal framework to shed light on the situation and opportunities for iGaming operators and professionals in 2024.
The History of Gambling in Hungary
Like in many European nations, gambling in Hungary has been shaped by socio-political shifts influenced by cultural attitudes over the last two decades. Gambling in Hungary dates back to 1777 when Empress Maria Theresa of Austria introduced the first state-run lottery, marking the state's early recognition of gambling as a significant revenue source. This event was followed by the opening of Hungary's first land-based gambling venue, the Nemzeti Casino in Pest (Budapest), in 1827.
The late 19th century saw a surge in horse racing, establishing it as a popular pastime with multiple racetracks around Budapest. However, private gambling would come to an end in the post-war era of 1949 when the industry was nationalised under communist rule to assert state control over most gambling activities.
The fall of communism in 1991 heralded a new era for gambling in Hungary. The government introduced the first Gambling Act to regulate the newly liberalised market, leaning towards a free-market economy albeit under state control. A year later, the Szerencsejáték Zrt was established, bringing lotteries and sports betting under state control.
Online gambling officially commenced in 2013, with the Gambling Act providing a legal framework. Strict regulations and heavy fines, however, limited market entry, leading to an influx of offshore operators. Efforts to increase market competition and reduce unlawful foreign operators were made in 2016 and 2017 following criticisms and legal challenges from the European Union. Amendments to the 2013 Gambling Act followed to reduce taxes and fees, coinciding with the launch of Hungary’s first legal online gambling website, Vegas.hu.
Here's a timeline of some of the most significant moments in the history of gambling in Hungary:
1777 Launch of the First first state-run lottery
1827 Opening of the First Casino in Pest
1949 Nationalisation of Gambling under state control
1957 Reintroduction of the National Lottery
1991 Reintroduction of the Gambling Sector
1992 Creation of State-owned monopoly Szerencsejáték Zrt
2013 Gambling Act permitting online gambling in Hungary
2016 Gambling Act revisions to penalise unlicensed sites
2023 End of Szerencsejáték Zrt monopoly on sports betting
The Current Situation for iGaming in Hungary
As of January 2023, Hungary has made efforts to reform its gambling regulations to better align with EU directives, following the 2018 EU Court of Justice ruling that found previous laws incompatible with EU standards. The new legal framework effectively ends the state monopoly over online sports betting. However, Hungary continues to preserve strict control over online casino operations.
Under the revised Gambling Act, online sports betting is now open to private operators within the European Economic Area (EEA), provided they meet specific criteria. Overall, these regulations present a sizable obstacle for foreign investors desiring market access.
Contrary to the liberalisation of sports betting, online casino gaming remains tightly controlled. New entrants can only engage in online casino operations if they possess or obtain a land-based casino concession.
Only a few casino operators are licensed (at the time of publishing this article), and despite the opening up of sports, Hungary has yet to grant licences to foreign operators. This cautious approach to licensing new market entrants reflects the ongoing regulatory situation.
Requirements and Regulations for iGaming in 2024
Hungary enacted significant amendments to its Gambling Act In January 2023, ushering in a new era for the online sports betting market. To launch and operate successfully, private operators interested in entering the Hungarian market must meet high financial thresholds and align with local regulatory expectations.
Here’s a breakdown of the essential criteria that private operators must meet:
1. Experience Requirement
Operators must demonstrate a minimum of five years of experience providing licensed online gaming services within the European Economic Area (EEA). This requirement ensures that only experienced and reliable operators can access the market.
2. Prohibition of Past Illegal Activities
The law explicitly prohibits any operator that has engaged in unlicensed gaming activities within the past five years from obtaining a license. This measure is intended to align with EU standards and maintain the integrity of the gambling environment.
3. Financial Thresholds and Fees
Operators must pay a HUF 10 million (approx. £23,000 or €26,000) application fee and prove their financial robustness by maintaining a share capital of at least HUF 1 billion. In addition, a licensing fee of HUF 600 million must be paid to cover a supervision fee and gaming tax calculated as a percentage of gross gambling revenue.
4. Supervision Fee Cap
The supervision fee is capped at HUF 10 million, which helps to limit the licence holder's operational costs and ensures that regulatory fees do not disproportionately burden operators.
Early Cashouts
Revisions also included other more technical changes allowing operators to allow bettors to cash out early if the game accommodates such a feature. Early cashout is to be subject to the same rules and restrictions governing the payment of winnings.
When in use, iGaming operators are required to expressly draw the player’s attention to the fact that the use of this function entails an increased risk of excessive gambling and addiction.
Gambling Tax Regulation in Hungary
Gambling tax regulation is rigorously applied in Hungary. Here's an overview of the current tax regulations:
The tax rate for gambling revenues is set at 30%, which applies to annual turnovers below 10 billion Forints (around £21.75 million). For revenues exceeding this threshold, the tax comprises a flat sum of 3 billion Forints (approximately £6.5 million) plus an additional 10% on the turnover exceeding 10 billion Forints.
One of the loftier financial obligations is the annual licence concession fee of 116 million Forints (£252,145) per casino and online casino website, which is among the top ten in Europe. However, this fee can be fully deducted from the taxable amount, providing some relief.
Regular gambling winnings are exempt from tax, except where winnings were accrued from unlicensed sportsbooks or online casinos. Player winnings from these venues are considered regular income and are taxable accordingly.
Regulatory Bodies and Responsibilities
Three central departments oversee and regulate gambling in Hungary. Each plays a distinct role in ensuring the industry remains fair, competitive and free from corruption.
The National Tax and Customs Administration of Hungary (NAV)
NAV plays an essential role in the financial regulation of various sectors of Hungary’s economy, including gambling. Primarily, its responsibilities are related to tax collection and enforcement.
In the context of gambling, while the direct regulation and licensing might be handled by other specific gambling authorities like the Hungarian Gambling Supervisory Authority, NAV's role is to ensure that all gambling operators comply with Hungary's tax laws.
This includes overseeing the correct reporting and payment of taxes associated with gambling activities to maintain public trust and the legal functioning of gambling operations within the country.
Hungarian Gambling Supervisory Authority (Szerencsejáték Felügyelet)
The Hungarian Gambling Supervisory Authority is the main regulatory body responsible for overseeing all forms of gambling in Hungary, ensuring that gambling operations adhere to national laws.
Its responsibilities include issuing licences to operators, enforcing compliance with gambling legislation, monitoring gambling activities to prevent illegal practices and protect consumers, and overseeing the collection of gambling taxes.
Ultimately, the Authority plays a pivotal role in ensuring that the gambling market operates transparently and responsibly to safeguard the interests of both consumers and legitimate operators.
Szerencsejáték Zrt.
Szerencsejáték Zrt. is a state-owned company that holds a monopoly over most forms of gambling in Hungary, particularly in the affairs of lotteries and sports betting.
As an operator, its role extends beyond standard regulatory functions, encompassing the organisation, operation, and promotion of national lottery games, sports betting, and other gambling services.
While it primarily functions as a commercial entity, Szerencsejáték Zrt. also ensures compliance with regulatory standards within its operations, contributes substantial tax contributions, and supports various social and charitable programs.
Opportunities and Future Outlook
Despite regulatory challenges and significant financial commitments, the Hungarian market for online gambling holds substantial growth potential for iGaming professionals.
The liberalisation of sports betting offers a new avenue for market entry, yet the stringent requirements and high costs associated with licensing may pose significant barriers. Furthermore, the continued restriction on online casino licensing to land-based operators indicates a market still closely guarded by national interests.
With that said, the Hungarian online gambling market has the potential for substantial growth and evolution, offering a fertile ground for iGaming operators to enter, innovate and expand.
Hungary's increasingly tech-savvy populace, coupled with their growing preference for online platforms as a convenient and flexible way of gambling, continues to drive this sector forward. With projected revenues in the online gambling sector expected to reach £450.5m in 2024 and grow at a CAGR of 5.55% to £598.1m by 2029, the market dynamics signal robust growth potential.
The online lottery segment alone anticipates revenues of £265.2m in 2024, underscoring the vast potential for growth with considerable consumer engagement. For iGaming operators, strategic entry into this market, aligned with local regulations and consumer preferences, can yield substantial returns, cementing an operator's foothold in Hungary’s liberalised and dynamically expanding industry.
How to Apply for a Gambling Licence in Hungary
To offer online sports betting services in Hungary, an iGaming operator must navigate a series of regulatory and procedural steps under Hungarian gambling laws. Here is a streamlined overview of these essential steps:
1. Verification of Experience: Operators must demonstrate at least five years of experience managing licensed online gaming services within the European Economic Area (EEA).
2. Licence Application: Submit a detailed application to the Hungarian Gambling Supervisory Authority. It must include all documentation proving compliance, such as business plans, software audits, and proof of financial stability.
3. Payment of Fees: The application process involves paying a licensing fee. For offshore operators, this fee is HUF 10 million. Local operators may pay a lower rate, typically around HUF 5 million.
4. Financial Requirements: Operators must show adequate capitalisation to cover potential winnings and operational costs. This includes a minimum share capital of HUF 1 billion and additional financial securities as determined by the regulatory body.
5. Prove Tax Compliance: This involves preparing for a 30% tax on annual turnover up to 10 billion HUF and an additional tax rate for higher revenues. Operators must also account for a supervision fee and gaming tax, contributing to regular financial reporting.
6. Technical and Security Assessments: Operators must undertake technical audits and security checks to ensure that the gaming platform meets national standards for data protection, player security, and game fairness.
7. Legal Operational Obligations: The operator must set up operational procedures per Hungarian legal standards once licensed. This includes establishing a local office (if required), integrating with national self-exclusion systems, and ensuring all advertising meets local regulatory standards.
8. Ongoing Compliance: Operators must maintain compliance with all regulatory requirements, including regular audits, financial reporting, and adhering to responsible gambling practices.
Altenar’s experience in providing sportsbook solutions to LVC Diamond, a company that operates two online casinos in Hungary, positions us perfectly to help iGaming professionals with their ambitions in the Hungarian market.
Disclaimer
This information is not intended to be legal advice and is solely extracted from open sources. It should not be relied upon as a substitute for professional legal advice and Altenar does not accept any liability in relation to its use.
