European Commissioner Questions Fairness, Restrictiveness of National Online Gambling Laws

One of the heads of the European Commission recently expressed concern over gambling laws implemented by some European Union nations and, in what may come as a shock, her concern was that they were too restrictive. Answering a parliamentary question last week, European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs Elżbieta Bieńkowska said that the requirement of some countries that online gambling operators have a physical office in the country merits discussion.

The question was posed by European Parliament member David Casa of Malta on June 9th, 2015:

In a particular national gambling law that has been notified to the Commission it is being suggested that a remote gaming licence may only be provided to operators that have a land-based presence or intend to do so within a particular time-frame following the obtaining of such licence.

Can the Commission comment on the compatibility of this provision with the fundamental freedoms?

It took three months (she likely has a lot on her plate), but Elżbieta Bieńkowska finally responded:

Without prejudice to a specific assessment of any particular notified draft law, the Commission has concerns about the compatibility of national provisions subjecting the provision of online gambling services to establishing a physical presence in the recipient Member State and has been pursuing investigations into similar provisions to that described by the Honourable Member.

According to well-developed case-law of the Court of Justice of the EU, Member States may restrict the provision of gambling services within their territory. However, the restrictions must be compatible with the Treaty on the Functioning of the EU. In particular, they must be non-discriminatory with respect to nationality and justified by overriding reasons in the public interest.

Elżbieta Bieńkowska

The concern is certainly sensible. A person from one EU nation can travel to another to patronize a casino without any problem. The casino is there to have people come gamble, regardless of whether or not they live in that country. By nature, brick-and-mortar casinos are only going to accept customers located within the country where the casino has been built because physics (obviously, the actual nationality of customer doesn’t matter).

But the nature of internet gaming is different. Clearly, the internet knows nothing of imaginary borders and as such, an online casino in one country can easily accept players from around the world. It is only when people place legal and, in turn, technological restrictions on access that virtual boundaries are formed. It doesn’t make sense that internet poker rooms should have to have some (often meaningless) physical presence in a country just to serve players from the country and vice versa, that gamblers should have to be located within the country where an operator is setup in order to play on its site.

It mainly comes down to national protectionism. If a foreign game provider wants to come in, make them setup a physical office and pay taxes. Otherwise, let another entity already in the country operate the games (or…why not both?). It’s a similar situation in the United States. In the three states that have legalized online gambling – Nevada, Delaware, and New Jersey – the gaming operators must have a physical presence in the state.

In her answer to the question, Bieńkowska mentioned that the Commission has been “pursuing investigations into similar provisions,” marked with a footnote. That footnote provided a link to a November 2013 press release in which the European Commission announced that it had sent notice to certain EU nations, requesting information from them to ensure that they were in compliance with EU internet gambling laws. Related to the answer Bieńkowska gave last week, the press release stated:

Member States must demonstrate the suitability and necessity of the measure in question, in particular the existence of a problem linked to the public interest objective at stake and the consistency of the regulatory system. Member States must also demonstrate that the public interest objectives are being pursued in a consistent and systematic manner. They must not undertake, facilitate or tolerate measures that would run counter to the achievement of these objectives.

Sweden, in particular, came under fire for not following the rules and in October 2014, the European Commission referred Sweden to the Court of Justice “for imposing restrictions on the organisation and promotion of online betting services in a way which is inconsistent with EU law.”

The Commission specifically pointed out that Sweden’s reasons for restricting sports betting were not sufficient:

The Commission considers that the way that the Swedish exclusive right system for sport betting is organised is inconsistent with the aim of achieving the public policy objectives of preventing problem gambling and criminal activities and lacks the necessary state control. Changes to the Swedish gambling law in order to make it compliant with EU law have long been envisaged but never implemented.

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