Belgian Regulator Naessens Creating Clarity Over Loot Boxes, Instant Lotteries

In the first of a series of profiles of the world’s leading gambling regulators, GamblingCompliance has spoken to Belgian Gaming Commission (BGC) director Peter Naessens about loot boxes, advertising and the trouble with state lotteries.

Already well known in gambling circles, Naessens' star burned more brightly this year as he and his office became the centre of global attention for its stance on loot boxes.

Along with the Netherlands, Belgium took a firm line on the video game digital prize boxes, releasing a report in April naming three of the most popular games on the market as offering unlicensed gambling.

The next day, Naessens was fielding calls from as far afield as the United States and Australia — the BGC having become a lightning rod for worldwide discontent over the pervasive phenomenon of loot boxes.

It was a new experience for the regulator, he admitted, and one he feels vindicated a decision to pool the BGC’s limited resources into creating a preparatory report.

Alongside its announcement that games such as FIFA 18 and Overwatch were in breach of gambling laws, the BGC produced a short report outlining its reasoning. Naessens said that after some consideration the regulator decided to release its report publicly, including the names of the games and companies involved.

"That way the public then has the same information and data that we have," he said.

It proved to be a savvy move. Its frankness drove media coverage around the world and, feeling the pressure, a number of the companies implicated agreed to remove or change the way they use loot boxes in Belgium.

Those that refused may yet face criminal charges. The BGC referred the results of its investigations to public prosecutors who are now considering their next steps. The case could move to a full court trial, be sent back to the BGC to issue a fine or dropped entirely, said Naessens.

Belgium’s forthright position on loot boxes has, however, opened divisions between the BGC and its fellow gambling regulators.

At a recent conference, 16 watchdogs signed a letter calling for more action on the "increasingly blurred lines" between video games, social gaming and gambling.

Naessens refused to sign, and although he believes that regulator focus on these issues is a "good sign", in his view the letter places too much responsibility on parents.

"For me it’s never a parental responsibility to decide if something is a gambling product or not. If we [the BGC] have to study for four to five months to come to a conclusion, and even then be criticised for it, then you cannot ask that from parents," he said.

"Secondly, they did not clarify immediately that loot boxes are gambling. They said 'yeah, maybe’," he said.

"If we had started from that position in negotiating with these [video game] companies they would still be offering paid loot boxes in Belgium."

"If you have a regulator and he’s only responsible for one public operator, who is quite powerful and who has a lot of political relationships, then you’re a regulator … who is not really regulating," said Naessens.

Away from loot boxes, Naessens proved no less afraid to take a strident position on other aspects of Belgian gambling regulation.

"There is an imbalance between online regulation and offline regulation," he said, noting that the controls on internet gambling companies are "weak", in part due to a lack of understanding among lawmakers and the fact that it is "easier [for them] to control land-based gambling".

On issues such as anti-money laundering (AML), Naessens said that "for years casinos have done what online companies never have, so I think there is an imbalance there that will have to be corrected".

Given the land-based industry’s contribution to the national economy in the form of jobs, he further believes that tax rates should be tilted in its favour.

Live betting is also on Naessens’ radar, which he says now makes up 60 percent of online bookmakers’ income in Belgium.

"Betting has always historically been seen in Belgium as a product at the same level as a lottery, but I think that you have to reassess that, because live betting is more of a slot machine," he said.

"At a regulatory level we have already put live betting at the level of a slot machine, there is no discussion."

However, Naessens’ ability to act is limited by legislation, and although his influence over policy flows primarily through frequent contact with minister of justice Koen Geens, it is complicated by a byzantine layer of politicians with a stake in the regulator.

In addition to the minister of justice, there are five other ministers, a chairman and a magistrate which advise and hear reports from the BGC. Each minister has two appointed representatives, one Dutch-speaking and one French-speaking.

There are also regional governments to contend with. Belgium’s regions have competence for setting their own tax rates and each of the three regions has two ministers that regularly interface with the BGC.

"So we are faced with such diverse potential political interest that we are obliged to find a good synthesis of the situation," he said, "and that becomes a bit too difficult to handle, I admit."

Naessens also made repeated references to underfunding and understaffing at the commission. He has previously called for both regulations and the regulator to be reformed.

"We are a confronted with under-investment," he said, adding that "if I compare our staff with the UK regulator, with the Netherlands or with the French, then we are also at our limit".

Naessens wants the BGC to grow to oversee the country’s entire gambling sector. Currently, Belgium’s lottery monopoly Loterie Nationale, including its online scratchcards and keno products, are regulated by a function of the Ministry of Finance.

"If you have a regulator and he’s only responsible for one public operator, who is quite powerful and who has a lot of political relationships, then you’re a regulator … who is not really regulating. You can only confirm decisions made by the public company," he alleged.

"So I think the next logical step is that there is one regulator covering the entire gambling industry. It’s a logical step, but it’s not an easy step, because there are politicians involved and it has direct budgetary implications for the state."

Naessens also hinted that he hopes to overturn the traditional Belgian view of lotteries as benign.

According to government figures, there around 500,000 gamblers that fall under the BGC’s remit, he said. However, the national lottery claims that 6m people use its products every year.

"The problem has become that they have started to offer other products, and the amount of that product they are offering has increased as well."

Loterie Nationale sells instant win scratchcards both over the counter and online.

"Over half of the public contacting our helplines are people that have a problem with lottery products," he said. "People expect that there is one regulator, but this is not the case."

Naessens also challenged the lottery and its government regulators to release its risk assessment. "We have come up with a risk analysis for the private sector [which is publicly released] and then you have the risk analysis for the national lottery and that is secret," he said.

Fast new lottery products and Belgium’s continued regulatory confusion are not helping to shift bitter public sentiment towards gambling that, as in other parts of Europe, is largely stoked by advertising, said the commission director.

The Belgian government recently passed a law that will massively restrict the ability for online casinos to market their services, but Naessens noted that this was largely a technical change, rather than one driven by any specific policy.

"The legal department of the Ministry of Justice has come to the conclusion that there exists no authorisation for online gambling marketing," he said.

However, he was not ready to cast out political motives completely. "On the other hand, it’s not such a coincidence, because most of the publicity that people are confronted with is for online companies."

Distaste for gambling advertising is increasingly expressed by young people in Belgium and without action by key stakeholders the country could soon match trajectory with Italy, he warned.

In particular, sports organisations have a major role to play in calming public concern over advertising and match-fixing, he said, but all have so far been very resistant to input from the BGC.

"We have tried to work together with them, but they are so afraid of public authorities. They talk about the 'autonomy of sports' and that it has to be protected, but what that means is they have their own sanctioning power and they have their own prosecutors," he said.

"So they always try to arrange things themselves, but it’s very difficult to do if you can’t guarantee that it’s performed in an objective way.

"It doesn’t work. They cannot guarantee there is no match-fixing, for example. Young people no longer believe sports are offered in an honest way."

In a world of double-regulation, grey markets and blurring lines, Naessens primary appeal is for clarity. A goal that, unlike some, he feels is eminently achievable.

Asked about the concept of "blurred lines" in gambling regulation, he said: "For me that’s a blurred analysis."

"As the regulator if you have a certain experience you, of course, need to have time to make an analysis, but [ultimately] you can see the difference between gaming and gambling."

Naessens cited the controversy over virtual sports or recent cases involving supermarket slot machines, defended on the grounds that they had approvals from the state lottery and were, therefore, lottery products.

"So you see, it’s an abuse of gambling products by stating that it’s a 'blurred line'. But, in fact, the problem was the regulator did not have the competence to intervene."