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The right to advertise gives the licensedoperators the ability to build brandawareness and acceptance for privateoperators in the public opinion, andslowly but surely the offering of bettingand online casinos is being recognizedas legitimate adult entertainment, andno longer something illegal which shouldbe avoided.Is Online gamblinginteresting for capital investors?It is a general misperception of thegambling industry that the operation ofonline gambling is like printing money.There are many operators availableonline and the competition is only a fewclicks away. Further, because manypeople including politicians still believethat it is easy to make a lot of money withlittle effort in the online gambling industry,the revenues derived from betting andonline gambling are heavily taxed. Finally,and possibly due to the history of thegambling industry and its previous linksto organized crime, the licenses and theoperation of betting and online gamblingare subject to detailed regulation and strictsupervision and control from the localgambling boards.In other words the industry is faced witha high level of taxation, high expenses oncompliance and low margins as a result ofstrong competition.This being said the operators that knowtheir business and run a smooth andprofessional operation are making money.The bigger operators and operators thathave been established for a longer period oftime and consequently have a known andpopular brand, do generate profits that areindeed attractive for investors.With the legislative reforms in Europe,the industry is beginning to enjoy muchhigher levels of acceptance as a legitimateentertainment industry. This also means thatthe number of potential customers for theprivate operators increase. As people beginto realize that betting and playing casinogames and poker online is not illegal, andthat licensed operators are under supervisionof the national gambling control board, theyconclude that it is safe to play. The formermonopoly operators typically are offeringfewer and less interesting products at ahigher price than the private operators.Yet, in certain European jurisdictionsprivate operators face huge challengescoping with competition from the stateowned former monopoly operators. This isnot due to the state owned operators’ abilityto run their operations at a more profitablelevel, but simply because the state ownedoperators have been given a huge and unfaircompetition advantage.In Denmark the state owned operator,Danske Spil, has been forced to split itsoperation between two different companies:one company to offer the games on whichDanske Spil continues to enjoy a monopoly(horse race betting, lotteries and bingo) andanother company to offer the games that areopen to private operators as well. However,the Danish authorities allow Danske Spilto use the same brand for both companies.This allows Danske Spil to contribute mostof the brand awareness marketing costs tothe monopoly company where the marginis not under pressure from competition,giving the licensed games company anunfair advantage against the privateoperators on the market for licensed games.The authorities have also allowed DanskeSpil to cross sell their licensed games tothe customers in their monopoly gamescustomer database.Competing with large state ownedcompanies requires a considerable amountof money. Although public opinion ischanging in the favor of the industry, banksand other financial institutions have provenreluctant to get involved with the onlinegambling industry, despite the fact thatlicensed operators are legal and regulated.However, for political reasons banks,at least in Denmark, refuse to have onlinegambling operators as customers withDanske Spil as the only exception. Thisapproach from banks and the lack of accessto opening a Danish bank account meansthat it is more difficult for operators licensedin Denmark to provide optimal customerservice to their Danish customers. .With increasing levels of competitionand increasing costs for taxes and licenses,it is not unlikely that at least someoperators will need external capital tomaintain their ability to compete in termsof securing customers through marketingand promotions and by developing andreinventing available products to keep theiroperation attractive to the market.Current trends make the online gamblingindustry a good option for capital investors.Capital investment ina gambling operatorAs a consequence of the detailed regulationsand compliance requirements, incorporatedinto most gambling legislation regimes,purchasing voting power and ownershipin a gambling operator presents obstaclesthat are unknown to most other industries.Many jurisdictions require licensingnot only of the entity which is legallyresponsible for the provision of gamblingservices, but also of the key individualsthat are part of management and/or whohold a certain size of the ownership ofsuch entities.Although licensing of individuals is notrequired yet under Danish law, the Danishgambling legislation also requires disclosureof ultimate beneficial owners and certaindata regarding such individuals.The Danish legislation sets two differentthresholds. The first level is defined asqualified ownership and includes everybodywith an ownership of 10 % or more. Thesecond level is 50% ownership or more.If a person owns more than 10% ofthe license holder/applicant, then thatperson must submit a personal declarationto the Danish Gambling Authority.The personal declaration must containinformation of marital status, place ofresidence for the latest 10 years, someaspects of that person’s career and financialstatus and criminal record.The same requirement applies forexecutive officers and board members incompanies that own 10 % or more of theshares in a gambling operator licensed inDenmark.If the 50% threshold is reached, additionalfinancial information about the natural orlegal person holding 50% or more of theownership interest in the gambling operatormust be submitted including operatingbudget audited annual reports covering thelatest 5 years.In situations where the above mentionedthresholds of ownership of a gamblingoperator, which holds a license in Denmarkand which has already initiated operationin Denmark, are reached the new ownermust be approved by the Danish GamblingAuthority before the ownership title to theEuropean Gaming Lawyer | Autumn Issue | 2013 | 33