How Latvia is embedding gambling oversight within its tax authority
Since 1 April 2026, Latvia no longer has a standalone gambling regulator. The Lotteries and Gambling Supervisory Inspection ( IAUI) has ceased to exist as an independent body, with all its functions transferred to the State Revenue Service (SRS), the country’s principal tax authority. On the surface, this looks like administrative streamlining: two agencies regulating the same market merged into one. In practice, however, gambling in Latvia has, for the first time in its regulatory history, been placed inside an institution originally built to combat money laundering and tax evasion.
The decision was taken by the Cabinet of Ministers in October 2025, as part of the same legislative package that introduced higher tax rates for gambling operators in 2026, a move that has already drawn criticism from the industry. The fact that both measures were approved together was no coincidence: the new supervisory model is designed so that financial oversight and licensing oversight now sit within the same authority. Leading the process is Agnese Rudzite, Director of the Non-Financial Sector Supervisory Department of SRS. Her department, the country’s largest non-financial sector supervisor with AML oversight of more than 10,000 entities, has absorbed the functions of the former gambling inspectorate.
Why the merger was necessary
The official government position frames the reform as a measure to reduce bureaucracy: two bodies with overlapping mandates are replaced by a single body, cutting administrative costs. Twenty-one staff from the former inspectorate transferred to the SRS, and two new units were created within the Non-Financial Sector Supervisory Department, one responsible for licensing and one for inspections and technical compliance, as iGaming Business reports.
Rudzite adds a further argument: the SRS’s technological capabilities. In her view, the tax authority is one of the most technologically advanced bodies in Latvian public administration, with modern data management systems and a high level of cybersecurity, which should improve its ability to respond quickly to industry changes.
Operators in a new framework
The department now overseeing gambling has spent years developing a risk-based methodology across other high-risk non-financial sectors, including real estate, luxury goods trading and professional services. That methodology will now shape the way the SRS views operators.
The very logic of supervision is changing. Instead of periodic compliance checks, the industry can expect in-depth audits based on monitoring broad datasets, which should allow higher-risk entities and transactions to be identified more accurately. Operators will now also be subject to the same standardised AML, counter-terrorism financing, and counter-proliferation financing requirements that apply across all high-risk non-financial sectors in the country, from estate agents to jewellers.
But the most significant change, according to Rudzite, lies in the enforcement toolkit.
“Drawing on the institutional powers and enforcement mechanisms of the SRS, a broader range of sanctions can be applied for compliance breaches – including account freezing, penalties for failure to cooperate and immediate suspension of operations – than was available to the former Inspection”
The previous sectoral regulator simply did not have those levers. The SRS does, and that changes its negotiating position in conversations with operators.
The risk patterns are now under closer scrutiny
Rudzite identifies several risk areas operators will need to address as a priority. These include peer-to-peer collusion on betting platforms and in multiplayer games, where deliberate losses are used to launder illicit funds or transfer capital between accounts with no formal connection. A separate category is the anonymisation of fund origins through alternative payment methods, such as layered digital wallets, virtual assets, and prepaid cards, which make it difficult to trace the actual payer.
A third category is mule accounts, the use of third parties or concealed identities to circumvent deposit limits, conceal beneficial owners, or evade tax. Finally, the SRS requires full, verifiable accuracy in the automated withholding and reporting of personal income tax on winnings above the set threshold to prevent parallel, undocumented financial flows.
The illegal market: beyond domain blocking
Even as the SRS builds its new model, there is already cause for concern. According to H2 Gambling Capital data cited by Latvia’s official legal portal LV Portals, unlicensed online gambling generated approximately €62m in gross gambling revenue for operators in Latvia in 2025, close to a third of the entire online segment. H2GC projects that the shadow market could cost the Latvian state budget around €90m in lost tax receipts over the period from 2025 to 2030. Rudzite has commented publicly on these figures, noting that the calculation of the shadow economy is based on foregone tax revenue and that the rate increase from 2026 will proportionally increase the scale of the loss.
This is not a uniquely Latvian problem. According to H2 Gambling Capital, around 27 per cent of all iGaming activity across Europe in 2025, approximately €18bn, took place on unlicensed platforms. Latvia is not an exception, but an instructive case.
On strategy, Rudzite describes a shift from targeted domain blocking toward more systemic pressure on the financial infrastructure of illegal operators: direct engagement with banks, electronic payment systems and payment service providers to block financial flows and systematically block accounts used for transactions with unlicensed operators. This is complemented by technical cooperation with electronic communications regulators to automatically block domains and mirror sites, as well as cross-border asset tracing and corporate structure analysis through international tax transparency networks.
“To combat the shadow economy and eliminate the provision of services by unlicensed offshore operators, the SRS is moving beyond peripheral domain blocking towards more assertive economic pressure”
For now, this is still a strategy on paper. How quickly the SRS can execute it will depend not only on its own tools but also on the willingness of relevant agencies to support further legislative changes.
Tax burden and channellisation
The supervisory reform has coincided with a shift in the tax load. From 1 January 2026, the tax rate on interactive gambling in Latvia rose from 12 per cent to 15 per cent of gross gaming revenue, on betting from 15 per cent to 18 per cent, and on bingo from 10 per cent to 12 per cent, with fixed rates on gaming machines and tables also increasing. The Ministry of Finance estimates this will generate approximately €9.2m in additional budget revenue, according to Latvian Public Service Media (LSM). At the same time, Rudzite openly acknowledges the risk.
“If the tax burden undermines the commercial viability of licensed operators, players may migrate to the unregulated ‘black market’, where higher payout rates and aggressive bonuses are offered without any regulatory constraints”
In her view, maintaining a high channelling rate, the share of players remaining within the licensed market, requires combining rigorous tax enforcement with a reduction in administrative burden: efficient licensing procedures, automated reporting and a predictable regulatory environment. A second, less obvious factor is player education. Rudzite observes that many users of unlicensed platforms are not aware they are gambling illegally or do not understand the risks involved.
Where the blind spots are
Despite the institutional change, some functions of the former LGSI have been transferred to the SRS unchanged, a deliberate choice. Rudzite identifies three technical elements where continuity is critical for market confidence: unbroken operation of the centralised data processing system connected to all gaming equipment and interactive platforms in real time; timely certification of platforms and software to avoid avoid creating bottlenecks that could hinder market competitiveness; and zero downtime for the self-exclusion register, through which operators are required to verify player details in real time before granting access to a platform.
The full staff of the former inspectorate, she says, has transferred to the Non-Financial Sector Supervision Department and continues to perform their previous functions. This is intended to ensure continuity of expertise and institutional knowledge.
But here Rudzite also names the principal structural risk of the new model:
“The SRS’s statutory core mission is tax collection. Until now, it has not had experience in public health expertise, or the social mandate required to address gambling addiction, implement responsible gambling standards, oversee sports integrity or combat match-fixing”
Lacking targeted supervision focused on public safety, she warns that consumer protection tools risk being treated as a formality within a broader tax apparatus rather than as critical public health measures.
How Latvia compares to other markets
Integrating gambling oversight into the tax administration is not a Latvian invention. A comparable structure operates in Bulgaria, where the National Revenue Agency combines gambling regulation with tax supervision and, in 2025, tightened financial controls and advertising rules in the sector. Rudzite cites the Bulgarian example as the closest functional equivalent.
Other countries have taken a different approach. In the United Kingdom, gambling oversight sits with a standalone commission, the UKGC, which is independent of the tax authority and focused exclusively on consumer protection, crime prevention, and market integrity. In Denmark, Spillemyndigheden formally reports to the Ministry of Taxation but operates as a highly autonomous body with a separate mandate balancing tight market control with strong responsible gambling mechanisms. Similar models exist in Spain (DGOJ) and Malta (MGA), where technical and financial oversight are combined with responsible gambling within a single specialist agency. Rudzite is candid about the limits of her own knowledge regarding why Latvia chose the tax authority model: “The integration of the LGSI into the SRS was not an SRS decision; it was politically initiated. I therefore do not have information on whether comparisons were made with other regulated gambling markets”.
Formal international validation of Latvia’s AML system already exists: in June 2025, international specialist bodies found that Latvia had achieved a high or substantial level of effectiveness within almost all areas. This formally favours the new model. International assessors already have confidence in Latvia’s AML infrastructure; the question is whether that confidence will extend to the gambling sector.
Rudzite adds one further point: regulators will increasingly need to adjust to technological change, including algorithmic betting, Web3 platforms, and AI-based behavioural analytics, as research by the European Association for the Study of Gambling (EASG) confirms, she says. She considers building that capability to be part of the SRS’s role.
What comes next
Formally, Latvia has had no standalone gambling regulator since 1 April 2026. The industry is now overseen by a tax authority with expanded powers. The model has clear advantages: access to data the former inspectorate never had, a risk-based methodology refined across other sectors, and sanctions that did not previously exist. But there is a cost: specialist expertise in gambling addiction, responsible gambling and sports integrity is is an area in which the SRS itself acknowledges it has historically lacked.
The real test of this reform will not be how many unlicensed domains the SRS blocks in its first year. It will be whether the new structure can combine two distinct mandates, fiscal and social, without player protection taking a back seat.
This article was first published on the Russian SiGMA News page on 6 July 2026.
Rome wasn’t built in a day, but your next deal could be. From 02 to 05 November 2026, the city becomes the heartbeat of global iGaming when SiGMA World opens its gates. With 30,000 delegates, 1,200+ sponsors and exhibitors, and 550+ expert speakers, history is calling at the mother of all conferences.
