EU Parliament and member states act against illegal online gambling

As you have read before on our pages, many of the EU member states are already regulating the online gambling industry or are planning to do so very soon.

Belgium already has a very strict law on online gambling and, to name but one, Germany is working on a treaty between its member states that should regulate online gambling.

Today, the different national initiatives to regulate, limit and control online gambling and poker received help from the European Parliament, as several MEP’s called on the Commission to explore the possibilities for stronger cooperation to fight illegal online gambling and protect consumers. They called for more and stronger cooperation among Member States, based on common standards or a framework directive.

The intention of the European Parliament does not seem to be to harmonize gambling law in all member States,  as the MEP’s stressed that member states should be free to maintain their own rules on online gambling. They feel however that, due to the cross-border nature of online gambling, there is a need for EU-wide coordination in some areas, notably the fight against illegal gambling and protecting  consumers from gambling addictions.

According to the press release of the European Parliament this afternoon, about 10% of all gambling in Europe (a market of over € 10 billion), is done on the internet, via mobile phones or interactive platforms and the market is growing.

One of the essential steps according to the European Parliament is the  introduction of a licensing model.  Some member states, like Belgium already have a recent gambling law that contains such a license system, a system that in the case of Belgium is very strict and installs a closed circuit of a very limited number of licensed providers (due to the requirement to obtain a cooperation or license contract from one of the 9 land based casino’s in Belgium).

Meanwhile, in Germany the different Bundes Länder (member states) are still in the midst of negotiation a new treaty between them that should harmonize the (online) gambling law throughout Germany.

15 out of 16 Länder have agreed upon a draft treaty that takes into concern the earlier remarks of the European Commission.  The basic principles of the draft are:

  • a restricted access to licenses
  • for a limited number of 20 operators
  • a turnover based tax of 16.67%
  •  a monthly cap on bets of € 1000 per player
  • transmission of casino games and poker from land-based casinos is forbidden
  • online casino games poker games remain forbidden.

Meanwhile, one of the northernmost Länder, Schleswig-Holstein, has developed its own new legislation and is involved in long and lasting discussions with its 15 commander states.

Schleswig-Holstein borders Denmark. Denmark also has a new gambling legislation, a lot more liberal than the one being discussed by the German Länder, and it seems as though Schleswig-Holstein fears the Danish competition in its backyard and has therefore adopted a gambling law that does legalize online casino and poker games (with the exception of roulette, blackjack and baccarat), that provides in an unlimited number of licenses, that contains the same 20% tax on gross profits as in neighboring Denmark.

On top of the competition between member states, the Schleswig-Holstein example shows that even within member states local competition can arise. The proof? Schleswig-Holstein is attracting a wave of online gambling operators intending to apply for 2012 license, while other German member states are missing out on the tax revenues from this multi-billion business.

one might argue in favor of or against strong EU regulation of online gambling and betting activities, but one thing seems certain: harmonization of member states gambling laws, even if such would mean stricter rules, would no doubt be beneficial for most providers. The online gambling sector is a sector of international players, offering cross-border services through international websites. In other words, online gambling does not stop at the member states national borders…

The Schleswig-Holstein legislation is being loudly applauded by its Danish neighbors, who remain convinced, just like the Dutch government commission on the matter, that online poker and gambling will not go away and that in order to prevent the business of ending in the hands of black-market providers, shady businesses and untraceable providers, it is best to come up with an open and modern legislation that allows all bona fides  providers to obtain a license, a reasonable taxes and in this way contribute to the states income.

When compared to the Belgian example, where at this point in time exactly one provider has obtained a license, one could wonder which is the most effective way to go and the question remains if national initiatives that necessarily create competition  between member states (both in attracting businesses and generating tax revenue) should not be limited by European harmonizing initiatives…