A major setback for online gaming

The online betting industry has suffered a setback as the European Union said that member states could be allowed to ban gambling websites if its intention was to stop crime.

In a recent ruling, The European Court of Justice (ECJ) decided that a Portuguese state-run charity’s gambling monopoly is legal if it aims to combat criminal activity.

Referring to the recent case, which involved bwin and the Portuguese football league versus the Portuguese monopolist Santa Casa da Misericórdia de Lisboa, Sigrid Ligné, secretary general of the European Gambling and Betting Association (EGBA), said given the stringent anti-fraud regulations applicable to EU licensed operators which ensure a high level of integrity, transparency and traceability over online gaming transactions, “we do not believe those conditions are met”.

“Several jurisdictions in the EU already prove that it is possible to guarantee a high level of consumer protection and have a well regulated and competitive online gaming market at the same time,” said Ligné.

According to the Association, the judgment must also be seen in the context of the increasing number of Member States that are now in the process of rethinking and redrafting their gaming legislation. As has been obvious for all other consumer markets before, none of the Member States currently drafting legislation has chosen a monopoly model to regulate this modern Internet based market.

Overall, the sentiments have been fairly negative.

“It’s a bit disappointing because the hope was that the European Commission and the European Court of Justice were actually in favour of markets opening up,” said James Hollins, analyst of gambling stocks at Daniel Stewart & Company, according to Reuters. “It looks like (the ruling) would strengthen the hand of countries who want to continue to protect state monopolies, which include Portugal or Germany.”

Internet-based gambling operators are currently involved in a number of court cases and regulatory disputes over access to markets in Europe. The industry feels the recent verdict may adversely impact the pending cases.

Camelot asked to discontinue its email campaign

The Advertising Standards Authority (ASA) recently directed Camelot Group to drop its email advertising campaign for the National Lottery.

The Authority upheld a complaint that Camelot encouraged excessive gambling although it rejected the suggesting it implied gambling was indispensable.

According to Camelot, the ad was one of a series of e-mails which were sent to National Lottery players who had opted to receive marketing communications.

The advertiser explained that the ad did not imply that gambling was indispensable and reasoned that it merely suggested that, because of the advantages of playing the Lottery interactively, a good excuse was needed by recipients if they were to miss out. Also, it added that the ad was designed to stress some of the advantages of playing the Lottery interactively and mentioned features like automated ticket checking, advance play and win notifications. The ad did not encourage excessive play but provided information that helped recipients decide if they wanted to play Lottery games interactively.

But the ASA considered that the ad focused on the benefits of playing the Lottery interactively and invited recipients to use their interactive account repeatedly by stating “The more you play the more likely you are to win”.

It noted the ad suggested that recipients had a higher chance of winning if they bought multiple lines, across the numerous Lottery games on both the Wednesday and Saturday weekly draws, and concluded that, by referring to the greater chance of winning resulting from multiple entries, the ad encouraged repeated and potentially excessive gambling.

Violating laws by earning a living from gambling

The Danish Supreme Court has reportedly decided that an unemployed man, who allegedly had been earning a living as an online poker player, would have to be taxed as a professional gambler.

According to a report filed by the Copenhagen Post, the concerned player, whose identity wasn’t disclosed, earned nearly $28,000 playing online poker in one year. The court said in its ruling that the man violated the laws by using his poker winnings as his sole source of income and ordered him to surrender the money. The Court ruled that even though computer servers used to run the poker games are placed outside of Denmark, the individual computer used to play is located in the country and subject to Danish law.

The Supreme Court chose not to enforce a DKK5000 fine issued by a lower court.

Update Regarding EC Commission’s Position on Draft French Gaming Law

Following the notification procedure, the European Commission rendered its comments on the last Draft French Gaming Law as amended by the French National Assembly Commission works and after the French Government’s reply, on July 9th, 2009.
As a result, at this stage of the proceedings, the Draft Law has not yet been given green light by the EC Commission.

Following the notification (in accordance with Directive 98/34/CE) of the Draft French Gaming Law (hereinafter referred to as the “Draft Law”), the EC Commission rendered its detailed opinion on the above-mentioned Draft Law on June 8th, 2009. On September 1st, 2009, the EC Commission commented on the French Government’s reply, on July 9th, 2009, to the aforementioned detailed opinion and took into account the latest amendments of the Draft Law at the French National Assembly. As a result, at this stage of the proceedings, the Draft Law has not yet been given green light by the EC Commission.

Considering the European Commission’s comments, the latter and France are on the right way to reach a compromise regarding the Draft Law’s provisions which are alleged to be incompatible with EU law.

EC Commission’s comments on the French Government’s reply to its detailed opinion will be briefly summarized below.

• As regards Article 16 of the Draft Law providing for a licensing system with respect to online gaming operators, the EC Commission welcomed the proposal by the French Authorities to amend the wording of the Draft Law so as to take into account the requirements to which the requesting online gaming operator is already subjected in its country of establishment.

• As regards Article 52 of the Draft Law which provides for an obligation for all licensed online gaming operators to obtain consent from the operating right owner of the sport event, the EC Commission noted that the aforementioned provision applies equally to the use of French sporting events both by foreign and domestic online gaming operators. In these circumstances, the EC Commission would welcome a commitment by the French Authorities to carry out a business impact assessment two years after the entry into force of the provision in question, with a special emphasis on its impact on the free movement of services as well as the contribution of such a provision to sports development and the guarantee of integrity of the sport.

• As regards Article 8 of the Draft Law which provides for a maximum return per player ratio, the EC Commission noted that the aforementioned provision applies equally to both domestic operators and operators licensed in another Member State of the EU and the EEA. In addition, the EC Commission noted the concerns of the French Authorities relating to public and social order, but it would welcome further evidence of the appropriateness and proportionality of such a provision. In these circumstances, the EC Commission welcomed the proposal by the French Authorities to conduct a study to assess the benefits of this provision from the perspective of public and social order, within two years after the entry into force of the Draft Law.

• As regards Article 39 of the Draft Law which provides for an obligation to have a fiscal representative established in France, the EC Commission noted the response of the French Authorities about the lack of any form of assistance or cooperation in administrative levies on gambling (recovery of taxation affecting the operators of online games), and the intention to include such provisions during renegotiation of bilateral tax agreements so as to eliminate the requirement for the establishment in France of a fiscal representative.

In any event, the EC Commission will carry out an overall assessment of the Draft Law’s final version adopted by the French Parliament. The plenary session of the National Assemblee should take place the 7,8,9 October for scrutiny. Once the text is adopted by the deputees it will be transmitted to the Higher Chamber. The Government plans to see the final version of the law adopted by the end of 2009.

Furthermore, France will still have to notify the Draft Law’s implementing acts so as to enable the EC Commission to assess their compatibility with EU law. This should intervene in the beginning of 2010.

According to the Government’s expectations, the entire licensing system is likely to be operational before the Football World Cup starting in June.

Harris Hagan August Newsletter 2009

Inside this issue:

1. Sports Betting
2. Data Protection
3. Alderney’s New Licensing Regime
4. A Fair Deal for UK Licensed Operators
5. Gambling Regulatory Update

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