Located in the northern part of South America, Venezuela is a country with a population of 28.3 million people and a GDP per capita of $1,691 as of 2020. The country’s economy has always relied on crude oil, so much so that Venezuela was the world’s biggest exporter of petroleum up to the 1970s. Things started to take a serious downturn during the presidency of Hugo Chávez, resulting in a severe decline in oil production and hyperinflation.
The Venezuelan economy suffered a collapse after oil prices declined in 2014, causing the country’s GDP to drop by a whopping 75% between 2014 and 2019. In turn, this resulted in what can only be described as a humanitarian crisis that deepened even further after the coronavirus pandemic hit the country in 2020.
Considering this grim economic landscape, it comes as no surprise more and more locals are beginning to turn to gambling as a means of making ends meet. Venezuelans try to earn a little extra on the side by exploring different options, from back-street wagering parlors and race betting to the lottery-style game Los Animalitos, which is all the rage among locals at the moment of writing.
The country legalized gambling back in 1997 but this is not to say betting was unavailable to Venezuelans before that. Gambling venues operated in Venezuela before 1997 with special permission from the authorities. However, the sector was plagued by corruption and largely dominated by organized crime groups.
The local gambling industry has been far from thriving even after the legalization. At the moment of publication, Venezuela is home to five landbased casinos, with most of the other venues closing down as a result of the coronavirus pandemic and the severe economic crisis the country has been battling over the past few years.
Laws That Govern Gambling in Venezuela
Gambling in the Bolivarian Republic of Venezuela falls under the provisions of Law № 36.254, also known as Ley Para el Control de los Casinos, Salas de Bingo y Máquinas Traganíqueles (Law for the Control of Casinos, Bingo Rooms, and Slot Machines). The legislation came into effect in July 1997 with the approval of the republic’s Congress.
It led to the establishment of the Comisión Nacional de Casinos, Salas de Bingo y Máquinas Traganíqueles (National Commission of Casinos, Bingo Rooms, and Slot Machines). The latter is a decentralized regulatory body that operates under the umbrella of the Venezuelan Ministry of Finance.
Licensing Conditions for Gambling Operators under Law № 36.254
Other Regulatory Requirements
Taxes Imposed on Licensed Gambling Operators in Venezuela
Licensing Conditions for Gambling Operators under Law № 36.254
Law № 36.254 outlines the licensing regime and requirements, along with the taxes imposed on approved licensees. According to the legislation, licensed operators must pay a special contribution to cover the expenses of the regulatory body.
Each licensee must pay its contribution within the first ten days of each calendar month of the fiscal year, or else a default interest rate will be in place. If a company uses capital from foreign investors, it should never exceed 80% of its capital stock. Candidates with previous criminal records are not accepted. The same goes for members of the National Commission and their relatives.
Venezuelan law dictates that casino gaming can only be operated on the premises of five-star hotels, located within tourist areas. It is the country’s central government that decides which areas are tourist zones and which are not.
Additionally, license applicants looking to offer gambling services in five-star hotels must provide proof of an investment of at least 300,000 tax units (TU) and operational capital of 200,000 tax units. The licensee must maintain this capital throughout its operation as otherwise, it will lose its permit. Companies looking to run bingo rooms must provide proof of minimum capital of 100,000 tax units.
Casino gaming and bingo permits are not transferable in Venezuela. Article 18 of Law № 36.254 states that each permit has a validity of ten years and is subject to renewal upon request. The operators must submit their renewal requests ninety days before their current licenses expire.
Other Regulatory Requirements
Operators who seek to offer casino games can do so only on the premises of five-star hotels on the condition that said hotels have a minimum of 200 rooms. As for bingo halls, they can operate within hotel buildings that have three, four, and five stars or in other facilities with special permission. We previously mentioned that casino gambling can take place only within designated tourist areas.
In line with this condition, authorities must conduct a referendum in the corresponding district so that its residents can determine whether or not they want a gambling facility in their region. If the majority votes against the facility, the referendum results are binding.
In the interest of social responsibility, the Venezuelan law prohibits operating casinos, slot machine parlors, and bingo rooms in the vicinity of schools, educational centers, churches, hospitals, and health centers. Title V, Chapter I, Article 26 stipulates the distance between the gaming venue and the above-listed facilities should be at least 200 meters.
Computer systems should be in place to monitor the financial transactions and the gameplay. The same article states that operating gambling facilities in national parks or wildlife reserves is in violation of Venezuela’s Organic Law of the Environment and the Organic Law for Land Management.
Also important is to specify that slot machines can operate exclusively on the premises of casinos and bingo halls in conjunction with the other gambling games offered there. In other words, there are no licenses for operating only the machines. Article 32 of Law № 36.254 also dictates that regulated slots must have theoretical return percentages of at least 80%. Venezuelan law strictly prohibits the recycling of gambling equipment and gaming machines.
Taxes Imposed on Licensed Gambling Operators in Venezuela
It makes sense that all licensed gambling operators in Venezuela must pay taxes on their profits. According to Article 38 of Law № 36.254, companies that operate casino games are subject to tax rates of 10% of the gross gaming revenue (GGR). The taxes imposed on bingo halls, on the other hand, are 12% of the gross profits. In this context, gross revenue means the cumulative amount gamblers have staked minus the amount paid by the operator as winnings.
On top of that, casinos must pay monthly royalty fees of 40 tax units for each gaming table they operate. Respectively, nickel slot machines are subject to fees of 10 tax units each. Under Venezuelan law, operators must pay their taxes and royalty fees within five calendar days, counting from the end of the respective period. The tax proceeds paid by the licensees normally go toward various programs for the improvement of local infrastructure and tourism.
However, casinos and bingo halls are not the only ones to pay taxes in Venezuela. The country imposes a withholding tax of 34% on all player profits derived from gambling. There is an exception for profits generated through horse race betting and lotteries, in which case the tax rate is more than twice as low at 16%.
Online Gambling in Venezuela
Venezuela has had online gambling since 2012, which is a rare thing to see in countries devastated by extreme poverty, economic collapse, and hyperinflation. In such regions, the gambling sector either goes unregulated or is altogether illegal. Venezuela is one of the few exceptions to this rule but there is no clearly defined legislative framework that governs such activities.
Venezuela’s Online Casinos
Crypto Gambling in Venezuela
Venezuela’s Online Casinos
Venezuelan authorities granted two licenses back in 2012 to the Casino Bar and CasinoOnAir online gambling platforms, based on Isla de Margarita. However, the two platforms are no longer in operation. There are several explanations for their bankruptcy, starting with the fact 96% of Venezuelans live below the international poverty line, earning less than $1.90 per day as of 2019.
Figures by Statista show that around 72% of the local population accessed the cyberspace as of 2017. However, internet access is sporadic due to frequent power outages, not to mention this luxury is only available to the denizens of the big cities. People in the countryside rarely, if ever, have internet access.
Despite the lack of locally authorized options, Venezuelans are free to explore offshore gambling sites without fear of prosecution. Many foreign operators welcome real-money play from the country, with some even accepting payments in the local currency, the Venezuelan Bolivar (VEF).
Crypto Gambling in Venezuela
Speaking of payments, Venezuela is one of the few countries in the world to try and officially replace its nearly worthless fiat currency with a cryptocurrency. Back in 2018, the Latin American country launched the Petro (PTR) cryptocurrency in an attempt to combat hyperinflation.
In April of the same year, the Official Gazette of the Bolivarian Republic published the Constituent Decree on Cryptossets and the Petro Sovereign Cryptocurrency (Decreto Constituyente Sobre Criptoactivos y la Criptomoneda Soberana Petro). The constituent decree endows the president with power regarding the issuance and use of cryptocurrency assets in the country.
Venezuela prohibits other virtual currencies but interestingly enough, legalized Bitcoin mining in 2020. The same year, current President Maduro authorized the launch of a new casino in the capital Caracas. Located in the prestigious Humboldt Hotel, the new casino accepted exclusively the Petro cryptocurrency, which, in turn, means that crypto gambling is legal in Venezuela.
Sports Betting in Venezuela
Hundreds of off-course wagering points were strewn all around Venezuela, but many of them had to close shop following the economic collapse. Illegal wagering on sports is regrettably rampant in Venezuela, with some industry experts estimating it is almost 60 times the size of the legal market.
One possible explanation for this tendency has to do with a legislation that restricted the maximum sports bets to VEF1,000. As a result of the devastating hyperinflation, this is equivalent to a meager fraction of the USD, and more specifically to 0.0000000024029686 US dollars. Said legislation was repealed later on but it pretty much wrecked Venezuela’s legal sports wagering industry.
Another reason why Venezuelans prefer to bet with unauthorized sportsbooks is that they can pocket their profits in the US dollar and use it as a currency instead of the highly devalued bolívar. In fact, many sports betting parlors in the country take action solely in the USD.
Finally, betting on horse races is also legal in Venezuela. It falls under the regulatory remit of the Tourism Promotion Ministry, and more specifically its division the National Superintendency of Equestrian Activities (La Superintendencia Nacional de Actividades Hípicas).
Conclusion
The severe economic collapse and hyperinflation have significantly slowed down the progress of Venezuela’s gambling industry. While both landbased and online gambling are legal in the country, economic instability and high tax rates have caused many authorized gambling operators to go bankrupt. Because of this, unauthorized gambling is booming in the country, greatly surpassing the legal market in terms of volume.
On a more positive note, the industry has seen some developments recently such as the introduction of crypto gambling via the Petro currency. Last but not least, Venezuelans have the option to engage in online gambling activities at offshore-licensed sites that accept registrations from the country and work with the local currency, or the widely preferred US dollar. Hopefully, Venezuela’s gaming sector will see better days once the country emerges from the economic crisis that devastates it.