Gaming in Latvia

From circumstances where casinos and gaming were banned to one of Europe's most vibrant and growing markets, Latvia has certainly seen a remarkable transformation.

After centuries of being ruled by and passed between its larger neighbours Sweden, Germany, Russia, and Poland, this small Baltic nation was annexed by the USSR following World War II, and gambling was strictly forbidden under Communism.

"Gambling in Latvia was almost unheard of before independence, and was banned for much of the Communist era," said Janis Ungurs, the director of the law department for the nation's Lotteries and Gambling Supervisory Inspection.

This situation did change for a time during the 1950s and '60s, when officials allowed betting on horse races at Riga's Hippodrome. The majority of the clientele for these activities were Soviet military personnel or Communist Party officials. But, following another change in leadership and a fire that destroyed the venue in 1965, this pastime was again banned.

"In the times of the Soviet Union, one Communist Party official would allow something, but then the next one who came along would change the law, and it was only after independence that the gambling market in Latvia began its rapid development," Ungurs said.

The first casino in Latvia, Casino Latvia, opened in the nation's capital of Riga in 1991, following independence, as a joint 50-50 venture between Casinos Austria International (CAI) and local company Forums.

"At that time, the number of companies organising different kinds of gaming activities in our country increased," Ungurs stated.

But, as in many new markets, legislation regulating these activities was often slow to catch up with the desires of players and business interests.

"There was no legislation at that time covering the procedures of gambling, including casinos and lotteries, and there was also insufficient supervision and control of the gambling market by the state," Ungurs said.

Most of the companies organising these activities were local, due to the relatively small size of the Latvian market and unease over the lack of legislation, and the market developed almost spontaneously. In addition, many of these smaller companies were not able to find enough capital and organisation to run their businesses.

"Many gambling halls were small and without air conditioning or other equipment necessary to comfortably play games, and the attitude toward gaming suffered," Ungurs commented.

This was at a time when Latvia's economy was growing very fast and many local companies only wanted to make a fast buck without taking into account the long-term interests of the businesses. To change this situation, the Latvian Parliament, the Saeima, passed reforms in 1994 to handle lotteries and gambling, along with taxes and fees. These laws completely changed the gambling situation in Latvia and secured the civilized and regulated development of the market. The laws regulated licensing, taxes, locations, and conditions for gaming machines, casinos, and equipment.

Latvia joined NATO in 2004, and then the European Union (EU) alongside seven other Eastern European nations, including its Baltic neighbours Lithuania and Estonia. This brought a tremendous amount of foreign investment in the nation, and it for a time was the fastest growing economy in Europe.

To clear up any remaining gray areas for the nation's 2.3 million citizens and assist the industry in becoming more profitable and successful, the Latvian government passed the Gambling and Lotteries Law in 2005. This piece of legislation now regulates all online and offline market sectors except sales promotional services, which are regulated by the Goods and Services Lottery Law.

"It is good that the casino market in Latvia is being heavily regulated and monitored," said Andrejs Jerkins, the head of Olympic Casino Latvia's marketing department. "In this way, the market is becoming more transparent, and public opinion might improve in the future. At the moment, the public's opinion of gambling is much more negative than it should be."

Today, there are 19 gambling operators and state-owned joint stock companies in Latvia with total gross gaming revenue of 145.6 million euro. The latest legislative changes saw the decision as to whether gaming was to be permitted in a certain area put into the hands of local authorities, as it had been down to the federal government, which angered many people.

"Before this, there was no power for local authorities to decide, even though the situations in the regions were very different," Ungurs said. "There are more than 500 local authorities in Latvia, and four big regions, Kurzeme, Zemgale, Latgale and Vidzeme."

Last year, Latvia agreed to tough structural and economic reforms that would enable it to adopt the euro currency by next year, and many in the industry are eager to use this change to offer more to their customers.

"One of the particular positive effects could be that it would make it possible for casino operators to use jackpot systems that are linked across countries," Andrejs said. "For example, Olympic Casino operates in Latvia, Estonia, and Lithuania, and in all of these places we have Olympic Mystery Jackpot. Right now, with the different currencies, this game cannot be linked. There might be some legislative barriers that I am unaware of, but if all of these nations use one currency, we can basically increase the maximum value of the jackpot and make it possible to win it in any country."

Latvia now has 14 casinos - all in the Baltic's largest city of 800,000, Riga - 636 gaming halls, and 14,167 gaming-equipment units, including gaming machines, roulette, and card tables with gross gaming revenue of around 24 million euro. It would seem that most of this revenue comes from local players, although non-Latvians make up a considerable minority.

"Twenty percent of our players are non-Latvian, as both of our table casinos are located in hotels," Olympic Voodoo Casino General Manager Viktors Roznieks said. "So, this gives us some extra percentage points toward foreign visitors, and people of all nationalities come in and spend about the same. Given our geographical proximity to Russia, there are lots of Russian players."

Latvia is two-thirds the size of Ireland, with gross per capita income of just over £7,000, and large minorities of Russians, Belarusians, Ukrainians, Poles, and Lithuanians. Although the nation has a total unemployment rate of just over 8 per cent, it is falling, and the casino market will grow with the economy.

"I believe that the total gambling market in Latvia will grow as average incomes increase and as the public's opinion toward casinos shifts to the positive side as something that is entertaining and not something that is bad," Andrejs said.