Pardini & Asociados Image Pardini & Asociados Image

Panama as an Internet Gaming Jurisdiction

The privatization of the gaming industry in1998, Panama has turned into one of the most successful gaming jurisdictions in the region. The passing of new gaming laws and regulations have provided for security in investments by major international gaming operators and thus, provided fans with the latest technological developments in gaming. Gaming has now become an attraction for tourists to come to Panama.

Although much technology has been introduced to the gaming industry in Panama since its privatization in 1998, the new gaming laws enacted at that time expressly prohibited Panama as an internet gaming jurisdiction.

As the internet has become an indispensable tool for many businesses in other markets, internet casinos are more and more sought by gaming fans all over the world. Regulated internet gaming jurisdictions are rare and economic penalties for violations due to internet gaming in forbidden jurisdictions are extremely high.

In an effort to position itself as an Internet Gaming Jurisdiction, presently the Gaming Control Board has drafted for review a proposed regulation whereby internet gaming would be permitted in Panama. The regulation has the objective to provide for the development of gaming activities by electronic means and other long distance communications, with certain restrictions.

The draft regulation states that it will be applicable to long distance gaming systems that operate in or from the territory of the Republic of Panama. This rule applies the territoriality principle which is the same used for tax purposes. All foreign source income is exempted, but income and revenues produced within Panama are subject to Panamanian tax. Due to the fact that in some cases, it will be difficult to determine whether the system applies to the Panamanian jurisdiction, the Gaming Control Board will be in charge of determining if any gaming activity or bet is considered subject to the provisions of the proposed internet gaming regulations.

Internet gaming is defined by the proposed regulation as:
"All activities whereby a bet is made or received, or information related to or necessary to place a bet is sent, received or placed, or in any other manner it is intervened by means of any equipment, application, machine or system of telecommunication and where the adverse or favorable result of the game does not depend mainly of the talent or ability of the player, and/or the bets are accepted or made over sports events in general and/or over activities that originate bets."

It is expressly excluded from the scope of application of these rules, the following activities and/or games:

1. The system of equine gaming regulated by Contract No. 106-A and the Resolution No. 060 of July 30, 1999 and other regulations related to this activity.

2. The systems of telephone bets of the Bet Agencies for Sports Events, regulated by Resolution No. 077 of August 4, 1999.

3. Telematic Games of Massive Audio Text regulated by Resolution No. 082 of August 19, 1989.

4. Commercial Promotions, Raffles or Charity Raffles that use, in their development, equipment, systems or telecommunication machines, that are regulated by Resolution No. 059 of July 30, 1999.

The main aspects of this draft regulation for internet gaming in or from the territory of the Republic of Panama are:

- In order to operate a long distance gaming system, the operator must petition and obtain a gaming license issued by the Gaming Control Board of the Republic of Panama.

- All equipment for the long distance gaming system are subject to registration, not authorization, by the Gaming Control Board of the Republic of Panama.

- In order to operate an internet gaming contract a right of key of US$40,000.00 must be paid to the State. In the event that the Administrator/Operator is represented by a Gaming Promoter, the sum of US$10,000.00 must be paid as right of key. Gaming Promoters are persons that petition and are obligated before the Gaming Control Board to file at least 10 annual contracts for internet gaming.

- Each internet gaming license will be subject to a yearly state tax of US$10,000.00, named "Participation in Revenues of the Administrator / Operator". This type of tax was created since the privatization of the casino industry, whereby it was sought to guarantee the minimum income of the State from this business. This provision is not applicable to betting agencies, which must pay annually a sum according to the volume of operations and levels of bets in each particular case.

- The Director has the faculty to authorize the entering into of contracts for administration/operation with juridical person owned 100% by an administrator/operator previously licensed to provide internet gaming.

As in other jurisdictions, many prohibitions will apply, such as:

- Prohibition for non-authorized persons to operate long distance gaming systems, independent to the name given to the same.

- Prohibition to promote a commercial business or place of residence as a site with the necessary equipment to participate, play or place a bet, in gaming and activities that produce bets by ways of electronic means for long distance communication.

- Prohibition for a person to deliberately seek commercial advantages from the use of his establishment as a site with the equipment necessary to participate, play or place a bet, in gaming and activities that produce bets by ways of electronic means for long distance communication.

- Internet gaming operated from Panama cannot be used by persons residing within the country of Panama. 

- Bets of the following nature may not be accepted: 

- Sports events at an amateur level in the Republic of Panama.

- Events held outside of Panama, where public or private institutions located in Panama participate.

- Those bets regarding the result of the election to a public post, both within or outside Panama.

- Any event, no matter where it is undertaken, that involves professional equipment that has as a home base the country of Panama.

- Any event played in Panama that involves a professional team, for which the Directors of the regent league, request that no bets be made, these must petition the authorization no later than 30 days before the initiation of activities.

- Any other event where the bets are prohibited in the corresponding contract or that has been determined as such by the Gaming Control Board.

The regulations for operations of the gaming system are similar to the ones in place for the operation of complete casinos and slot machines. Rules are established for the issuance and maintenance of licenses, investigations, accounting principles and obligations, internal controls, corporate requirements, among others.

Presently this draft regulation is under the study and consideration of the gaming authorities. We are keeping a close track on the same to learn of any changes in the proposed regulation.

Gilda Berman de Vilar

Ready to do Business in Panama?

Our Panama attorneys law firm offers a Guide to Doing Business in Panama completely FREE! Download here!

Get it now

Pardini & Asociados Image