GPWA Times Magazine - Issue 19 - February 2012

By apparently succumbing to the increasingly common “local regulation” model, rather than advocating harmonization and stan- dardization of what is an inherently cross- border industry, the governing institutions of the EU once again missed the opportu- nity to have a positive impact on the ever- growing online gambling market in Europe. Going for the jackpot – the benefits of a harmonized approach to the regulation of online gambling across the EU In his speech before the European Parliament in November 2011, Michel Barnier, European Commissioner for Internal Market and Services (and the man behind the Green Paper), announced his intention to publish an “EU online gambling action plan” by mid-2012. Potentially, this could take the form of a White Paper advocating EU legislation to govern certain aspects of the regulation of online gambling. Realistically, against the backdrop of the Green Paper and of the Creutzmann report, it seems safe to assume that any call for action from the European Commission on this issue will be a far cry from full harmonization of the regulatory framework applicable to online gambling. That is unfortunate, as harmonization of the normative framework applicable to online gam- bling will ultimately contribute to growth of the regulated industry, to player confidence in the integrity of the industry and to eradication of the “black market” of online gambling services. Fragmented regulation of the online gambling industry unavoidably results in soaring compli- ance costs for operators, regulatory redundancy (both for operators and for regulatory authori- ties), and a loss of “economy of scale” advantag- es. Furthermore, subjecting operators and con- sumers domiciled in different Member States to disparate legal frameworks with regard to identical services (often to advance protection- ist ends), is a form of commercial discrimination entirely foreign to the most basic principles of EU law. Conversely, regulatory uniformity and cross-border cooperation between and among Member States’ authorities will ultimately allow licensed operators to offer consumers through- out the EU the best product at the lowest price and under similar conditions, embodying the core objectives of the EU Internal Market. There are concrete areas in which practical ben- efits may be achieved through harmonization: • Player protection – pan-European regu- lation will give both operators and regulators better practical tools to combat the risks of fraud and money laundering and to prevent the abuse of online gambling platforms by criminal elements. Operators will also be subject to uniform standards of player pro- tection. Together, these will contribute to consumer confidence and make the regulat- ed online gambling market a safer and more attractive one. • Prevention of problem and under- age gambling – the identification and treatment of problem gamblers, as well as the exclusion of minors and other vulner- able groups, would benefit immensely from harmonization. It would make it easier for operators to identify and handle those for whom gambling is unsafe or unhealthy (e.g., through the creation of pan-European exclu- sion lists, or age verification databases) and will also make it more difficult for those who should not be gambling to circumvent the barriers put in place to prevent them from doing so. • Regulatory oversight and control – uniform regulatory standards (e.g., techni- cal standards, internal control standards, reporting and auditing standards, customer verification standards, etc.), along with the sharing of information between and among Member States’ authorities, will allow for far more efficient regulatory oversight by the latter, thereby reducing costs and contrib- uting to the trustworthiness of the industry. For example, regulators across Europe could rely on each other to oversee the integrity of technical infrastructure located in other Member States, removing the need for dupli- cate IT deployments. • Liquidity – allowing operators to pool play- ers throughout the EU is not only commen- surate with the principles of the EU Internal Market, it also allows operators to offer players far more attractive products (e.g., large player pools for poker tournaments, larger jackpots and more attractive pricing schemes, etc.). • Marketing – the disparate regulatory re- gimes adopted by EU Member States create immense practical difficulties for operators and media outlets alike, given the increas- ingly cross-border nature of electronic and print media in the EU. Harmonization would subject operators and the various media to similar standards with regard to marketing of online gambling services. It would also contribute, inadvertently, to mitigating the prevalence of problem gambling by imposing socially responsible advertising standards. • Payment processing – a uniform regula- tory landscape will allow European financial institutions to provide payment processing services to online gambling operators across the EU, without legal hindrance or uncer- tainty and at significantly lower costs. • Revenue collection – the creation of a uniform regulatory regime for online gam- bling and a single European market for online gambling services lends itself to streamlined collection of revenue by the treasuries of the Member States, while sub- jecting operators to a uniform tax structure and reporting requirements. Furthermore, a uniform tax regime will help alleviate the un- fair double taxation situations some opera- tors are exposed to under the present array of disparate regulatory frameworks. Finally, the inevitable growth of a uniformly regulat- ed market will lead to increased tax revenue for Member States’ treasuries. Harmonization may well require some Member States to accede to a regulatory model that may not entirely reflect their traditional values in re- lation to gambling, and this will be a challenge for EU legislators to overcome. It may require some creativity in shaping the particulars of a pan-European normative framework for this industry. However, it would hardly be the first time the EU adopted legislation in socially sensitive areas, nor would it be the first time Member States parted with parochial values to promote the single-market ideal. A growing number of European jurisdictions regulate the online gambling industry through local legislation. Already, we are witnessing the emergence of ad hoc cooperation between European regulatory authorities (the MOU signed recently between the regulatory au- thorities of Italy and France is one example and Denmark’s bilateral agreements with prominent European regulators are another). It stands to reason that as more and more Member States regulate their domestic on- line gambling markets, such cooperation will intensify, as authorities realize the benefits to be gleaned from joining forces. These benefits, some of which have been listed above, can eas- ily be magnified through full harmonization of the European law of online gambling. As the dominoes of regulation fall around the European Union, the window of opportunity for pan-European harmonization is rapidly closing. Though the eleventh hour is upon us, it is not yet too late. With appropriate determination, the Green Paper could reig- nite the optimism of those hoping for a truly European online gambling market. Without it, the Green Paper will become just another missed opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yehoshua Gurtler is a partner in Herzog Fox & Neeman’s gaming practice, where he heads the regulatory and licensing team. Yehoshua advises clients on a range of issues related to the law of online gaming, concentrating primarily on matters pertaining to licensing, regulation, lobbying and litigation. In addition, Yehoshua advises clients on the regulation and licensing of other forms of eCommerce, with a specific focus on online currency trading, binary options, etc. This article does not constitute legal advice. COVER STORY 37 Thanks for nothing