The decline of the regulated remote gaming industry

Online casino

Online casino

Malta was the first country in the EU having introduced back in 2004 remote gaming laws regulating online gaming operations. Coupled with a very attractive fiscal regime for non resident company shareholders and a low gaming tax, Malta has since attracted many operators seeking to offer legal online gaming services mainly for the EU market. It is a fact that this industry is contributing a non negligible part to the local GDP: while the biggest part of their employees are expatriates now living in Malta enjoying usually a higher salary compared to the Maltese, thousands of Maltese employees are contributing indirectly to the GDP with the myriads of services the industry is requiring (accounting, legal, entertainment, IT, renting services, …).

While the favorable Maltese taxation regime was certainly a major driver for this industry to settle in Malta, the remote gaming license given to the operators by the LGA (Lottery and Gaming Authority) under very strict rules gave a legality to their operations and was allowing them to offer legally online gaming services to other EU member states. Unfortunately since 2004, the legal landscape for the offering of online gaming services in the EU has severely deteriorated. Many countries have introduced their own remote gaming laws, strictly regulating the operations of this industry on national markets. The nationally introduced gaming laws vary from country to country and forces operators to apply for national licenses in order to operate legally on the respective markets. These national gaming laws have heavily financially burdened operators wishing to offer their services on national markets, and one can witness that their operations are often financially not viable (a very good example is France where many operators have returned their licenses). Many operators have since 2006 instigated court cases against national governments and just recently the European Commission has been called to launch infringement proceedings against member states whose gambling legislation does not comply with EU law. The EC Treaty does not distinguish gambling from other services and it requires that all services must be treated in the same way. Article 50 of the Treaty defines what is meant by a service and the European Court of Justice (ECJ) has indicated that gambling is a service within the meaning of this Article. Article 49 of the Treaty prohibits, unless duly justified, restrictions on the freedom to provide services within the Community. This right is granted to nationals or economic operators established in EU Member States other than that of the person for whom the services are intended. Even if there is no secondary legislation on gambling at EU level, the internal market freedoms enshrined in these Articles of the Treaty are directly effective and grant access to the national markets.

The main argument for national gaming laws is the protection of the players. This is certainly a very valuable reason, but unfortunately none of the regulated markets have introduced such measures. While it is correct that operators have to offer very strict player protection measures such as self exclusion, limiting of losses just to name a few, these measures are only bound to one operator. There is no national player exclusion database for online gaming, similar to the system in place for land line casinos. A self excluded casino player will not be able to enter a casino in Monaco or Deauville for example. Furthermore, the player protection seem to be lifted for national operators like lotteries, where aggressive marketing techniques including children are often used. It is very clear that the ultimate motivation of national governments behind most of these restrictions is the protection of financial revenues- rather than the protection of consumers.

The recent report of MEP Ashley Fox acknowledges that gambling is an activity of a special nature and must be accompanied by strong consumer protection measures as well as improved cooperation among member states to combat fraud, money laundering and match-fixing in sports, while respecting the subsidiary principle.

While the recently voted EU resolution entitled ‘Towards a comprehensive European framework for online gambling’ certainly contains important suggestions like the EU-wide self-exclusion register, much more needs to be done. Indeed, the EU would rather need a EU Lottery and Gaming Authority regulating the EU market, whereas every operator established in one of the EU countries can offer its gaming services cross border.

If this is not addressed with urgency, operators will leave the regulated markets (which has already started) and they will offer their gaming services from outside the EU, creating less tax revenues for governments and player protection.

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