Banks: the big winners of the online betting market opening?

The French gaming market opening has been expected and welcomed by many, but some pieces of information on means of payment contained in the draft bill must not go unnoticed.

According to the French gaming bill, online gaming operators will be submitted to a licensing process. Licenses will be granted on the basis of operators’ compliance with a cahier des charges (a set of rules and criteria).

This “cahier des charges” is still unknown since it is yet to be defined by decree and then implemented by the ARJEL (the future gambling authority). However the government has already made clear that the “cahier des charges” will contain a set of rules on “means of payment for stakes and earnings”.

As far as means of payment used for “payouts” are concerned, the draft bill requires players to establish a direct debit system with operators’ bank account information. It is therefore reasonable to predict that the “cahier des charges” will organise a system where payouts payments can only be made on players’ declared bank accounts and that cash payout payments will be forbidden.

Stakes payments will be capped as one of the measures of the draft bill to fight addiction. As a consequence it is expectable that the “cahier des charges” will have a provision aiming to limit the amount of money which can be spend with a same means of payment through the fixation of a monthly threshold.

However, the Ministry of Budget’s press release of March 5th did not raise the above mentioned measures but other measures aiming to prohibit anonymous means of payment or to require players to only use means of payments which are linked to a bank account.

One question still remains: will French players have to use a credit card in order to pay for their stakes? In many other countries authorising online gambling, a wide range of means of payment can be used by players such as credit cards, digital money accounts, prepaid cards, whether anonymous or not, etc.

Discussions are still in progress, consequently nothing is certain yet and many several different solutions can be adopted. The only piece of certainty is that it will be difficult to strike a right balance between:

– on one hand, protecting minors and fighting against money laundering, which justify the implementation of restrictive measures,

– and on the other hand, ensuring players’ privacy (stemming from the refusal that bankers should know whether their client like gambling) and applying E.U. competition law to payment service providers (especially at a time when the Single European Payment Area “SEPA” project is about to break through on harmonising rules on payment in the Euro-Zone and improving competition through the new integrated retail payment market).

Compatibility of the French draft law with EC law cannot be taken for granted

The European Gaming and Betting Association (EGBA) has stated that compatibility of the French draft law with EC law cannot be taken for granted.

The Association is concerned that a series of key provisions of the draft law envisaged by the French government would conflict with the EC Treaty and the European Court of Justice (ECJ) case law:

The EGBA referred to five points:

1. How can the reform and the opening of online sports betting only be consistent when sports betting in the offline environment will remain under the monopoly of FDJ and PMU?

2. Is “French tradition” an acceptable justification to limit the opening of horse betting only to pool betting – especially when fixed odds betting is offered for all other types of sports and is very much appreciated by French and European consumers?

3. Is a ceiling on the pay-back ratio (percentage of stakes paid back to players) to the same level of those currently applied by historical operators compatible with EU law? Given that such ceiling has no proved or known impact on consumer protection, what other objectives than protection of the French market and the position of historical operators can it possibly serve?

4. Will the French online gaming authority, in compliance with the jurisprudence of the ECJ, take into account the warranties and controls already offered by other EU licensing jurisdictions such as for instance UK, Malta or Gibraltar, in order to avoid the application of dual licensing and purely administrative restrictions in the single market?

5. Is the creation of a sports betting right granted to the French sport federations in the context of commercial agreements with sports betting operators in France a credible means to prevent match fixing? The majority of stakeholders have already developed partnerships and successful early warning systems to anticipate and prevent those risks.

For its part, the EGBA is particularly concerned about “the threat of the creation of a local Internet market for online betting and gaming services given the French authorities’ clear intention to adopt payment and ISP blockings and the continued criminal enforcement against EU established online gaming and betting operators”.

The Associated stated that this would be completely incompatible with the European dimension and the cross-border nature of this leading internet sector.

According to Sigrid Ligné, secretary general of the EGBA: “The notification procedure is a great tool to anticipate potential conflicts. We are convinced that the recommendations that will be addressed to France by June will facilitate the French Parliament’s discussions and prevent unnecessary litigation once the law comes into force.”

The French government notified its draft law recently to Commissioner Verheugen’s services in the context of a preliminary conformity test with EU Law. Member States and the European Commission have until the June 8 to examine whether the law is in conformity with the rules of the EC Treaty and to require, if necessary, amendments to be made so as to avoid future litigation.

South Carolina may legalise home games

There is a possibility of a new legislation coming in the state of Carolina which, if passed, could make poker gambling legal at home.

It is being said that in the wake of a recent court case declaring poker a game of skill, the state’s stance appears to be softening.

Glen McConnell (R-Charleston), South Carolina Senate President Pro Tempore, has introduced a bill proposing the legalisation of poker home games.

The bill would legalise poker play in the home or for a charitable cause, reported local media.

It has also emerged that members of the public have told a state Senate panel that South Carolina needs to ditch its anti-card laws. McConnell has offered two measures on the subject. One would overturn a 1802 law that could be interpreted to make any dice or card game of chance illegal. The other is a constitutional amendment to allow churches and charities to hold raffles, reported AP.

Jean-Francois Vilotte to lead new French online gambling regulatory authority

An official associated with the French Tennis Federation (FFT) has been chosen to set up France’s new regulatory authority for online gambling – despite the FFT chief’s previous role as a plaintiff in litigation against a number of would-be French licencees.

The government has appointed the FFT’s secretary general Jean-Francois Vilotte to be in charge of establishing the authority that will licence and regulate private companies in the newly-liberalised sector.

The creation of a new regulatory authority for online gambling – l’autorité administrative indépendante de régulation des jeux en ligne, ARJEL – was confirmed by France’s budget minister Eric Woerth recently.

Last year the Fédération Française de Tennis (FFT) had failed in its attempt to prevent online betting companies from taking bets on the French Open tennis tournament. The case, brought in the Belgian court, had aimed to prevent Ladbrokes, along with Bwin and Betfair, from accepting bets on the event from Belgian residents.

Interstate Treaty on Gambling: Blocking orders against ISPs and banks? What the experts say

TIME Law News 2 | 2009

A commentary by Attorney at law Dr. Wulf Hambach, Founding Partner, and Attorney at law Susanna Münstermann, Senior Associate, Hambach & Hambach Law Firm.

Berlin. – Under the patronage of the Verband der deutschen Internetwirtschaft e.V. (eco) (Association of German Internet Businesses), in cooperation with the law firm Hambach & Hambach, an experts’ conference was held on 26 March 2009, dealing with the legal and technical side of demands from politicians for blocking orders for the purpose of implementing the state gambling monopoly.

Prof. Michael Rotert, Chairman of the eco board, referred to a letter from the German Federal Government to the European Commission and said that the phrase stating that “ISPs and banks will accept this as justified on their own accord, and will support the German States in the implementation of their politics” has led to considerable irritation. He explained that the state gambling monopoly is questionable from his point of view. Private providers are excluded for reasons of addiction prevention, whilst the monopolists are permitted to advertise the high jackpot sums on state-run television networks during prime time viewing on a Saturday evening.

As announced by Prof. Rotert, the expert lecturers were able to explain why neither blocking orders against ISPs nor prohibition orders against banks issued by the gambling supervisory authorities can be used as a means to implement the Inter-State Treaty on Gambling:

• There is no statutory basis for blocking orders against ISPs. The relevant provision in the Inter-State Treaty on Gambling is not a statutory authorisation.
• From the technical point of view, blocking of internet sites is simply impossible. Legal and attractive online gambling offers provide the best level of protection.
• Blocking of online gambling offers involves considerable liability risks, as it is difficult to draw the line between illegal offers and legal online games of chance, legal games of skill and legal entertainment games, and also because the state monopoly most probably is unconstitutional and contrary to European law.
• Prohibition orders against banks based on the Inter-State Treaty on Gambling are also contrary to constitutional and European law.

Attorney at law Ms. Marberth-Kubicki (specialist in criminal law and author of the reference book “Computer- und Internetstrafrecht” [Criminal law aspects of computers and the internet]) summarised the latest studies on the topic of blocking orders against ISPs, and stated in her comparison of the legal analyses that the current political discussion regarding the blocking of websites with child-pornographic content has completely gone off the rails. Doubts and concerns are promptly answered with verbal abuse.

The topic of child pornography is meant to nip in the bud any kind of criticism, even though a particularly diligent establishment of a statutory basis should be the logical consequence. Ms. Marberth-Kubicki voiced the concern that other content may also be blocked once this instrument has become generally accepted. She therefore strongly recommends the ISPs not to conclude voluntary agreements, as these are highly problematic for the providers. The intervention by the blockings into legal positions which are protected by fundamental rights require a crystal-clear legal basis. The relevant provision of the Inter-State Treaty on Gambling is not suitable for this purpose. The latest judgment given by the BVerfG (Federal Constitutional Court) regarding the confidentiality and integrity of IT systems is also to be taken into consideration.

Mr. Schaeffer (Chief Security Analyst, TÜV Rheinland Secure iT GmbH) gave a pictorial description of the structure of the internet and came to the conclusion that the possibilities of bypassing blockings and censorship are endless, as the very idea of the establishment of the internet was for it to bypass blockings independently. Blockings will only contribute to improved concealment of the networks. Online gambling should not be prohibited, but rather regulated. Providing attractive up-to-date offers which are continuously refined, will intercept the users and prevent their migration to illegal offers.

Attorney at law Dr. Hambach (Founding Partner, Hambach & Hambach Law Firm) explained from the point of view of gambling law why there are substantial liability risks involved with the blockings. In addition to the pending infringement proceedings and preliminary proceedings against the German gambling monopoly before the European Court of Justice – which is why licensed EU providers should rather not be blocked – other questions regarding differentiation remain difficult. Therefore, horse betting, games of skills and games with low stakes must not be blocked on the internet, nor must mere entertainment games. The inconsistent German gambling law should be harmonised on the Federal level, and a gambling supervisory authority should be established which monitors the offers by private providers on the internet.

Prof. Dr. Ohler (University of Jena, Chair for Public Law, European Law, Public International Law and International Commercial Law) gave a lecture on the topic “Capping of the flow of funds – monitoring by order of the gambling supervisory authorities”, and expressed substantial doubts based on constitutional and European law.
Banks as uninvolved third parties may only be called upon to provide support in cases of the so-called “polizeilicher Notstand” (public emergency). From Prof. Dr. Ohler‘s point of view, the combat of illegal gambling cannot suffice to justify such public emergency. Also, the fact that the criteria for an automated filtering have not been defined, the lack of regulations in the Inter-State Treaty on Gambling in comparison with the act on money laundering, and concerns based on European law make it clear that the statutory regulation is inadequate.

Dr. Wulf Hambach, Founding Partner and Susanna Münstermann, Senior Associate
Hambach & Hambach