Third-Party Lottery Services Threaten Legal Fight Against Pending UK Ban

Third-Party Lottery Services Threaten Legal Fight Against Pending UK Ban

Four prominent third-party lottery services are planning what appears to be an uphill legal fight in the United Kingdom over that country’s soon-to-go-live ban on such activity, in which the operators offer wagers on draws being conducted in other countries and jurisdictions. The four operators — WorldLottery Club, Lottoland, Jackpot.com and Multilotto — have come together in an unofficial coalition called the “Lotto Betting Group,” and according to a recent statement, they have filed a “letter before claim” with the UK’s Department for Digital, Culture, Media and Sport (DCMS).

The letter, sent to DCMS culture secretary Matt Hancock, seeks to block the pending ban on such offshore lotto services being offered to UK gamblers. That ban is set to go into effect on April 6th, and in this case is centered on the popular EuroMillions lotto draw, which remains available to many Brits through such non-government operators.

Online Border-Crossing Lottery Services a Profitable Niche

Such services, also called synthetic lotteries or, by their opponents, “fake” lotteries, have taken advantage of legal blank areas to build up a decent market niche. Yet they’re increasingly under attack by national governments who seek to protect their own lotteries, a traditional governmental provenance. The loophole that firms such as the Lotto Betting Group four have exploited is that it’s always been natural for governments to deem their own government-associated lotteries as exclusive offerings, meaning no private companies can participate, except as vendors of the tickets.

However, it’s never really fallen on the lotto-offering governments (via the official, state-affiliated lotto providers) to try to block sales related to other country’s draws, since, of course, those draws are taking place in other countries. That’s where the UK’s pending ban comes in. The third-party lottery operators have had a decent niche, too: Given the historically awful payouts offered by official lottery services, plus the fact that little operational overhead is needed, the synthetic lotteries can offer better prices on many draws than the official lotteries provide.

All this activity is very much the online version of the old numbers racket from pre-internet days, and governments and official lottery providers hate it every bit as much now as they did a half century ago.

But should it be abolished, in an international sense? The Lotto Betting Group argues no. In the letter, the group stated that there is no “econometric evidence to support the claim that betting on non-UK Euromillions draws is having any statistically significant impact on UK EuroMillions tickets sales.” That counters a claim made by the DCMS and UK gaming officials as a whole that synthetic lotteries take away at least some traffic from official lottery providers, if only in the sense that gamblers wagering on those sites might have less disposable income to spend on their own country’s official offerings. That in turn might deny the official lottery and the government some revenue intended for other causes and uses.

Shaky Legal Framework for Planned Challenge

However, the Lotto Betting Group might be arguing its case on rationales that have already been struck down in previous legal challenges. The group’s letter to the DCMS also argues that the pending ban is “irrational, in that is was unreasonable for the Secretary of State to impose a licence condition prohibiting betting on EuroMillions draws.”

However, that runs counter to the assumed rights of a country to determine what is and isn’t legal behavior for its citizens. It also runs counter to the whole idea of the “point of consumption” model, which was the central principle behind the whole series of changes made to the United Kingdom’s online gambling laws over the past few years.

Worse, for the group’s chances, the threatened legal action bases its claim on Article 56 of the TFEU (Treaty on the Functioning of the European Union). That Article 56 claim already had its legal day when a handful of Gibraltar-based online gambling firms challenged the UK’s point of consumption tax. Those cases, brought by the GBGA (Gibraltar Betting and Gaming Association) ended up losing in both English courts and the Brussels-based European Court.

It doesn’t even matter that at some point, the UK won’t even be part of the European Union. Regarding the Article 56 claim, to borrow an old American South expression, that dog don’t hunt.

Future Change Likely for Synthetic Lottery Operators

It’s also not the first such legal blockade facing third-party lotto services. Last year, we reported on Lottoland Australia’s troubles there, and its need to pull back some of its offerings in the face of a pending legal crackdown in Australia’s Northern Territory, where the company is registered.

However, all this is indicative of a larger firewall defending government-run lotteries from such third-party activity. It’s very likely that all these governments, spread ’round the globe, will enhance their own regulations and work together in an attempt to drive the synthetic operators out of white-label markets. That will either force the synthetic lotteries underground, in a closer parallel to organized crime’s dominance of the old numbers rackets, or into shifting their services and products into something different than what the official lotteries provide.

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