Online gambling (Green Paper)

In 2008, gambling revenues reached EUR 75.9 billion. Online gambling is the fastest-growing gaming sector. This growth, and that of the Internet, makes monitoring these cross-border services difficult. National legal frameworks vary enormously from one EU country to another, imposing different rules for licensing, related online services, payments, public interest objectives, and the fight against fraud. The Commission therefore decided to launch a consultation to identify common practices which would facilitate the provision of cross-border services. The aim is to achieve a regulated internal market for online gambling.

ACT

European Commission Green Paper of 24 March 2011, on on-line gambling in the Internal Market [COM(2011) 128 final - Not published in the Official Journal].

SUMMARY

This Green Paper aims to launch a debate on the development of online gambling in the European Union (EU). There are currently two national models applied in this sector, namely:

a strictly regulated framework within which licensed operators provide services;
a strictly controlled monopoly.

However, the development of extensive illegal or “black” online markets (markets consisting of unlicensed operators) or “grey” markets poses a number of challenges. It is for this reason that the European Commission wishes to consult the various stakeholders in order to better frame the development of such activities at cooperative or cross-border levels.

Definition and current legislation

Gambling falls under Article 56 of the Treaty on the Functioning of the EU (TFEU) and is governed by service provision rules. The terms covers a wide range of service activities which individuals can access directly by electronic means, such as:

online sports betting;
casino games;
media games;
promotional games;
gambling services operated by and for the benefit of recognised charities and non-profit making organisations;
lottery services.

The Internet and other technological platforms (i.e. mobile telephones) are used in online gaming:

to offer gambling services to consumers;
to allow consumers to bet or gamble against each other (betting exchanges or online poker);
as a distribution technique (e.g. lottery tickets).

Communication techniques used by providers of online gaming services for promotion and supply

The main communication techniques used to promote online services are:

TV advertising;
printed press advertising;
online commercial communications;
sales promotions (e.g. premium offers);
direct marketing;
sponsorship agreements;
online banners and pop-ups on non-gambling sites.

Payment services and pay-outs

Generally, operators require customers to deposit funds on player accounts before playing by using:

credit cards;
e-Wallets;
bank transfers;
pre-paid cards;
cash transfers.

Customer identification

Customer identification is necessary for the protection of minors, the prevention of money laundering and fraud, and “know-your-customer” controls. However, the absence of mutual recognition of identification services across the EU raises difficulties.

Public interest objectives

The Commission identifies three public interest objectives which may be valid for Member States in defining their national online gambling policies:

consumer protection: this involves protecting gamblers against fraudulent services, particularly gamblers suffering from addiction. Member States already have available a number of instruments such as age limits, bans on the use of credit or restrictions on certain forms of games. The Commission proposes to discuss the effectiveness of such instruments in protecting consumers;
public order: Member States should seek to prevent fraud and unfair games, as well as money laundering. The Commission notes the application of certain types of measures such as customer due diligence, payment controls and operational controls in combating these practices;
financing of public interest activities: methods for channelling gambling revenues vary considerably from one Member State to another. The Commission wishes to examine more closely systems of revenue returns to event organisers, and the risks of “free-riding” revenue channelling schemes through the provision of online gambling services.

Payment blocking and liability regimes

Member States have a wide range of practices to manage the licensing, regulation and monitoring of online gaming. Through this Green Paper, the Commission wishes to analyse the actual role of regulatory bodies in the Member States.

Gambling authorities could cooperate with national and European stakeholders. The Commission wishes to strengthen this type of cooperation.

In some Member States, there are blocking schemes to limit illicit and cross-border online gambling services by:

Domain Name System (DNS) filtering;
Internet Protocol (IP) blocking;
Payment blocking, based on the operators’ Merchant Category Code (MCC).

The Commission intends to develop tools to foster this type of procedure at cross-border level, as well as other practices.

See also