How Do Crypto Gambling Regulations Vary Across The Baltic Nations?

While online gambling has gained much traction in recent years, crypto-friendly payment methods are also on the rise. As a result, many countries have begun implementing measures to navigate the changing regulatory regime, with some yet to jump on the bandwagon. Naturally, cryptocurrency entering the gambling sector not only creates unique challenges for regulators but also brings with it some great opportunities. 

The UK (alongside other EU countries) have revised their regulations regarding gambling and crypto, putting the spotlight on Estonia, Latvia, and Lithuania. Through geographic proximity and EU membership, exploring their approaches to regulating crypto gambling will help emphasise the dynamic regulatory environment. 

Estonia: The Pioneer's Progressive Yet Refined Approach

The appeal of crypto gambling stems from its convenience, including its instant withdrawal features, which eliminate the delays often associated with traditional banking. Beyond fast crypto payouts, each site offers a wide range of certified games and generous bonuses, often attracting more punters. This is especially true in a crypto-friendly area like Estonia, which could be called an 'early mover', welcoming crypto businesses and gambling operators. A result of this has seen the emergence of Estonian virtual currency service provider licenses (VASP licenses), which is another enticing factor for crypto-centred service offerings. 

With the ever-evolving legal regime of online gambling and cryptocurrencies, there has been much change in the regulatory field. For one, Estonian regulations began a revision process, and compliance has been monitored much more strictly. This includes implementing AML (Anti-Money Laundering) requirements to ensure no illicit activity is occurring. Additionally, KYC (Know Your Customer) requirements prioritised customer safety but worked against many operators. In turn, a significant number of entities have gone unlicensed due to either not complying with these regulations or offering services that go against them. 

Of course, these screening processes are monitored closely to ensure nothing goes unnoticed. The ETCB (Estonian Tax and Customs Board) and FIU (Financial Intelligence Unit) are responsible for not only crypto-related gambling but also traditional punting. A closer look at some of these regulations reveals that operators must have a robust AML framework to run their businesses legally. Even more, a minimum share capital requirement is in place for operators to show their financial stability to ensure financial obligations are met. 

Latvia: A Measured and Centralised Regulatory Framework

Compared to Estonia, Latvia's approach is much more conservative and pragmatic, incorporating crypto assets in its existing gambling framework. Additionally, the IAUI (Lotteries and Gambling Supervisory Inspection of Latvia) is the sole regulatory body for any gambling-related activities in Latvia. The current regulatory landscape is further influenced by the upcoming implementation of MiCA (Markets in Crypto-Assets Regulation). 

This European law is set to protect investors and users by streamlining the adoption of cryptocurrency, blockchain, and other ledger tech. In turn, this change will significantly impact CASPs (Crypto-Asset Service Providers) alongside their licensing requirements. For operators to obtain a license, they need to meet a series of strict requirements (similar to those in Estonia). While Estonia requires a minimum capital share amount, Latvia wants operators to adhere to a similar regulation, except that the authorised capital amount is much larger (estimated €1.4 million). 

Specifically, this is the amount for online casinos, which will go hand-in-hand with the proof of residency for casino operator shareholders or directors. This means online casino operators will need to reside in Latvia to be able to run their business legally. The State Revenue Service and Financial Intelligence Unit will also enforce strict reporting obligations regarding operators' AML and CFT compliance. All casino operators (amongst other gambling operators) will also be subjected to a 20% corporate tax rate. Lastly, there is a great focus on player safety, requiring responsible gambling measures to be put in place under the IAUI's oversight. 

Lithuania: The Stringent Stance on Consumer Protection and Advertising

Finally, there is Lithuania's approach, which is the most stringent among the three Baltic states, mainly focusing on consumer protection and gambling advertising. Let's dive deeper into how its regulatory framework is set up to protect punters, with the first centring on age restrictions. Recent legislative changes saw the minimum legal age requirement for gambling moved up to 21 to negate the potential of unlawful participation in punting activities. 

Additionally, the state aims to limit any gambling-based harm by introducing mandatory limits that operators and players must adhere to. Cool-off periods are another requirement for players to ensure no personal, financial, or mental damage is done. To ensure punters are not impacted by illegal activity, the GCA (Gaming Control Authority) monitors for and blacklists any potentially unlicensed/unauthorised gambling platforms. 

Naturally, using such sites would have potential legal consequences for punters engaging (whether they are aware of it), which the CGA wants to avoid. Looking at advertising requirements, there are much more severe restrictions in place, such as the ban on any external ads (those from out-of-state operators). 

There is a specific time limit for TV and radio ads that operators might run, with a plan to ban all ads by 2028. In part, this can be attributed to Lithuania's mission to eliminate illegal gambling, setting penalties and restricting credit and debit card payments on these unauthorised sites. Like Estonia and Latvia, cryptocurrency is legal in the state; however, there are strict measures surrounding AML and KYC. Once again, this is to mitigate the potential for illegal activity and maintain the financial stability of approved/licensed companies. The capital demand is also quite significant, with some businesses expected to show a €125,000 share capital for VASP licenses (for example).

Comparative Analysis: Key Distinctions and Shared Challenges

When comparing the three nations side-by-side, it becomes clear that each has its own focus area. Whereas Estonia is known for its openness to crypto, Latvia has tried to work it into existing frameworks. Instead of looking at crypto gambling as a whole, Lithuania has prioritised consumer protection and ways to mitigate damage. 

However, it is clear there is a common thread between each Baltic nation when it comes to their outlook on AML and KYC requirements. There is a common thread for consumer protection as well, such as the requirement for responsible gambling tools versus Lithuania's strict age and advertisement limits.