Online Gambling in Mexico: A Safe Bet

Implications: Mexico is a late player in the online gambling business, but the passing of regulation on this matter paves the way for a growing and lucrative business. Thus, it looks as quite a safe bet.

Analysis: Concerned about the rapid rise of internet gaming, the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006. The law prevents credit-card companies from collecting payments for online bets.

Critics of this legislation have said that the U.S. government's fight to rein in internet gaming is doomed to fail, among other reasons, because by nature, the internet transcends geographical boundaries and renders the idea of physical jurisdiction obsolete. Another and not less important reason is that the regulation on online gaming in other parts of the world is much more liberal than in the U.S. Mexico is a case in point.

Mexico has an old Federal Gaming and Raffles Law than was issued back in 1947. It was not until 2004 that a gaming law Regulation was published. Based on this legislation, the Mexican government awarded around 200 permits in 2006, most of them to Apuestas Internacionales, a subsidiary of the TV giant Televisa.

The opposition parties PRI and PRD disputed the award before the Supreme Court on the basis that the said Regulatory Law was unconstitutional. On January 2007, the Supreme Court ratified the constitutionality of the regulation. “It is preferable” to have gaming sites regulated and supervised by the Ministry of the Interior, than to have other betting mechanisms over which there is no control, the Court stated.

Televisa went full speed ahead with its gaming business. Investment banks have estimated the company could generate revenues of around $200 million from the games this year and more than double that amount in 2008. The company had total revenue of around $3.45 billion in 2006. It has 25-year permits to operate 65 “centers for remote betting” (CARs), six of which are already in operation.

It is estimated that the Mexican gaming market may be worth some US$4.6 billion – equal to the country's media advertising market -. Until now the gaming business has been dominated by the government-run National Lottery but it has a substantial private-sector potential in the future. Online gambling is expected to become one of the most lucrative niches of the business.

Through Mexican sites (ending in mx) of the online casinos, it is possible to access international sites of companies such as BWin, Intercontinental Global, Gaming Net, Fastengine Limited or Vegas Technology. Backgammon Masters Group has opened an office in Mexico City as recently as July 2007. In addition to international sites with sites in Mexico, there are more than 20 companies with new permits from the Ministry of the Interior to receive online bets in CARs.

Mexican CARs allowed to receive online bets must keep an internal control system of all transactions. Credit cards are accepted in the case of online bets.

For the time being, Mexican CARs that do online gambling are operating as legal and potentially lucrative businesses under the watchful eyes of regulators and tax collectors. Their most immediate challenge is to remain as such.