Rules of the Game: Gerardo Ballesteros Félix Díaz's legal perspective on the Mexican gambling market

Gerardo Ballesteros Félix Díaz, a Gaming and Lottery Specialist and senior partner at the law firm LC Gaming, is one of the most knowledgeable individuals regarding the legal reality of the gaming market in Mexico.

To introduce ourselves to the topic, he explains that " As a lawyer specializing in the field, it is essential to address the regulatory framework of the gaming and lottery sector in Mexico with the precision it demands. The operation of a casino, whether physical or online, is subject to a series of legal requirements that, although clear, require a thorough understanding of the national legal system."

The legal framework

What are the main legal requirements for legally operating a physical or online casino in Mexico?

The Federal Gaming and Lottery Law of 1947 and its current regulations establish the framework. The fundamental and essential requirement is obtaining a permit from the Ministry of the Interior (SEGOB) , the sole authority competent to authorize, control, and supervise these activities.

The criteria for granting these permits include:

• Accreditation of Technical and Economic Capacity: The applicant, whether an individual or legal entity, must demonstrate financial solvency and proven technical experience to ensure safe and stable operations.
• Permit Validity and Nature: Permits are non-transferable and are tied to a specific location or event. Their validity cannot exceed 15 years .
• Specific Requirements for Online Casinos: Online operators must have a certified technological infrastructure that guarantees the integrity and security of operations, in addition to possessing a ".mx" domain for the national public.
• Security and Control Measures: It is mandatory to implement strict security protocols , civil protection plans, and Money Laundering Prevention (PLD) measures , in compliance with the Federal Law for the Prevention and Identification of Operations with Illicit Proceeds (LFPIORPI).
• Access Restrictions and Prohibited Games: Access is strictly prohibited for minors and persons under the influence of alcohol. Furthermore, current regulations expressly prohibit the use of slot machines based solely on chance, with specific exceptions.
• Advertising: All advertising campaigns must incorporate warnings about responsible gaming and prohibit participation by minors.

The SEGOB (Ministry  of Economy and Finance) and gambling industry leaders are discussing a project to modernize the current 1947 Gaming and Lottery Law. What's your opinion on this?

The 1947 Act , while proving its ability to provide a framework for legal certainty, is outdated in the face of the current dynamics of the industry, especially in the digital sphere. Discussion of a bill to modernize it is, in my view, essential.

Adapting the regulatory framework would allow:

• Regulatory Clarity: Current ambiguities would be eliminated, establishing clear rules for new game formats.
• Responsible Competition: An updated legal framework will attract serious investors, filtering out operators that do not meet the highest standards.
• Consumer Protection: More robust measures could be incorporated to protect players, including the prevention of gambling addiction.

What types of operators or companies typically approach LC Gaming? Is there a common profile?

Generally, operators seeking to enter the Mexican market are international corporations and large business groups with a well-established track record in the industry. Their profile is characterized by:

• Financial Strength: Sufficient capital to cover the necessary procedures, operating costs, and investments.
• Proven Experience: A successful track record operating land-based casinos and online platforms.
• Commitment to Compliance: Their main objective is to operate within the legal framework, so they tend to be proactive in regulatory compliance.

These investors are mostly represented by specialized lawyers and consultants who act as strategic guides in the process of requesting permits from SEGOB.

The Secrets of the Mexican Market

What factors make Mexico an attractive market for investors in the gaming industry?

Despite regulatory complexities, Mexico presents itself as a highly attractive market due to:
• Market Size: A population of more than 126 million people with an expanding middle class.
• Digital Growth: High internet penetration and smartphone use have boosted the online gambling sector.
• Legal Security: The existence of laws and regulations, although outdated, provide a framework that offers certainty for long-term investment.
• Strategic Position: Its proximity to the United States and high-level tourism attract a constant demand for entertainment.
 

What advice do you offer to international entrepreneurs looking to invest in this sector in Mexico?

My advice to international business owners is to approach the Mexican market with a comprehensive strategy that includes:

1. Specialized Legal Advice: It is essential to have a legal team that is familiar with the Federal Gaming and Lottery Law and its Regulations, as well as AML regulations.
2. Robust Business Plan: The SEGOB requires detailed proposals that demonstrate financial and technological viability, as well as an operating model that strictly complies with regulations.
3. AML Compliance: The industry is considered a vulnerable activity, so a robust compliance system and adherence to the LFPIORPI are non-negotiable.
4. Technological and Security Investment: The General Directorate of Gaming and Lotteries (DGJS) requires auditable systems that allow for real-time monitoring.
5. Patience and Long-Term Planning: The administrative processes before the SEGOB are thorough and extensive, so planning must be long-term.
6. Collaboration Strategies: Considering partnering with local operators can be a strategic shortcut to navigating the political and social environment.

Finally, Ballesteros explains that, “In short, success in the gaming and lottery industry in Mexico is not limited to capital, but to the ability to operate with a firm commitment to legality, transparency, and business ethics . ”