In an effort to regulate the country's runaway gambling industry, the Finance Ministry has ordered 52 casinos nationwide to close by the end of the month, and announced it will look into closing 50 more early next year.

Two casino chains, both with establishments in Prague and nationwide — Euro Gold Way and Seven Stars Casinos — are accused of numerous violations of the country's lottery law, including failure to videotape live games, failure to register clients and various accounting irregularities.

Euro Gold Way, the smaller of the two, has already closed its 10 casinos, and Seven Stars must shutter 42 of its own by the end of the year.

"After years of benevolence, a major turning point has come, a true start of the process of state supervision," says Petr Vrzáň, director of the State Supervision of Gaming and Lotteries (SDSHL), a department in the Finance Ministry in charge of monitoring gaming establishments.

Vrzáň says the crackdown is also meant as a warning to the wider gambling community that the ministry is no longer willing to sit and watch as the industry continues its unchecked expansion.

"The time of turning a blind eye to operators in the gray zone has ended," he said.

Vrzáň has reconfigured the SDSHL since coming on board in September. He set up an analytical department of five to improve the collection of fees from the gaming operations licensed by the ministry. Previously, the SDSHL had barely enough staff to handle licensing.

Also, plans are under way to overhaul regional monitoring by replacing some 400 part-time inspectors with 126 full-time ones.

Rapid growth

All this comes at a time when the gambling industry in Czech gambling is threatening to boom out of control and calls for tighter regulation are increasingly hard to ignore.

Last year, 90.6 billion Kč ($4.3 billion) were wagered in the Czech gambling industry, a 7.2 percent increase from 2004 and 50 percent higher than in 2000. If growth continues unchecked, the Finance Ministry projects that wagers will increase 26 percent in 2008, to reach 114 billion Kč.

As of Sept. 1, there were 178 casinos nationwide, 48 of which are in Prague. There were 45 in the whole country in 1999.

That's not counting the 3,500 herna bars that are in operation nationwide. These smaller, stripped-down pubs with betting machines are not allowed to hold live games. There are also about 5,000 other places nationwide, such as gas stations and restaurants, with gaming machines.

Herna bars do not fall under the full jurisdiction of the SDSHL: Authorities only license certain gaming machines in these establishments, not the establishments themselves. Therefore, in any given herna bar, you can have, say, electronic roulette and dice machines under SDSHL regulation, but slot machines are under the regulation of local authorities.

Facing stiff odds

The government is not the only one calling for tighter casino regulations. Many gaming establishments themselves hope Vrzáň will follow through with his reforms: They see an industry growing out of control as a threat to their profit lines.

Will Vrzáň, 40, have the clout to turn things around? It's too early to tell.

Already he has come under some fire for his past ties to the gaming industry. He worked, briefly, at a casino company called Happy Day and has been accused of using his new position to close down Happy Day's competitors — a charge he denies.

Vrzáň faces other challenges:

Disputes over licensing restrictions

Legislative loopholes that make it easy for casinos and other gaming operators to avoid paying millions in fees each year

An entrenched gaming lobby that could use its clout — gambling operators funneled almost 1.6 billion Kč into Czech sports clubs last year — if he goes too far with reforms

A national lottery law, last amended in 1998, that does not cover recent technical advances in gaming technology

Concerns over the legitimacy of some casino owners since an Aug. 1, 2004, grenade attack outside a Prague casino that injured 18

Moreover, some local communities want the Finance Ministry to give them more say in the licensing and regulating of new forms of electronic gaming, not just slot machines.

Still, Senator Josef Novotný, the country's most vocal advocate of stricter gambling regulations, welcomes the SDSHL's recent moves as a step in the right direction.

"After 15 years, regulation of the gambling industry is being introduced," he says. "Until now, the Finance Ministry only issued permits and supervision was absolutely formal and ineffective."

Jan Šnajdr, president of the Association of Distributors of Gaming Machines, is more reserved.

"It's an attempt ... of which we know not whether it will succeed," he says.

More herna bars coming?

Meanwhile, Radek Nechuta, a co-owner of Seven Stars Casinos, one of the two chains being cited, says the ministry action is futile. According to him, operators will find a way to maintain their businesses, even if the ministry closes them down.

Nechuta says he will consolidate the core of his business — some 14 casinos — under a different casino company. He says the other establishments are likely to be taken over by herna bar operators.

"It's nice that they started with some checks, but really the only [result] will be fewer casinos, but the number of hernas will increase, as they will take their place," he says.

Vrzáň remains determined.