The online gambling sector is growing constantly. Nowadays, according to current figures, about 10% – a figure which is rising – of all gambling in Europe takes place on the Internet or via comparable distribution channels such as mobile ‘phones or interactive television platforms, with a market volume in excess of EUR 10 billion.
The market for physical, location-based gambling and the online gambling sector are characterised by a wide range of products: traditional lotteries, but also sports betting, poker, bingo, and totalisator betting on horse and greyhound races.
By its very nature, the Internet is a cross-border medium. online gambling therefore does not stop at borders. As a result of ever increasing offerings and the increasing number of gamblers, the current market fragmentation in this area in Europe is also becoming ever more obvious. In a host of Member States, there are total bans or bans with the possibility of authorisation, while others have a completely open and liberalised market.
As the European Court of Justice has established in many judgments, gambling is not a normal service. Accordingly, it was expressly exempted from the Services Directive, though it goes without saying that freedom to provide services, under Article 56 TFEU, also applies to gambling. Inter alia on the basis of Articles 51 and 52 TFEU, Member States may largely regulate their markets themselves, provided that the regulatory arrangements are consistent with objectives being pursued, e.g. combating gambling addiction.
Because of the very great differences in traditions, however, the subsidiarity principle plays a particularly powerful role in this area. To a large extent, the Member States themselves determine how they want to regulate their gambling sectors. As regards the Internet, however, such considerable regulatory divergence also results in market distortions. Gambling service providers from Member States with open markets and low tax rates are accessible in countries in which online gambling is banned, too, or are in competition with licensed online providers. It is virtually impossible for those providers, and for providers of physical, location-based gambling services from those countries, to compete. Furthermore, there is a large unregulated black market on the Internet.
The central objective must therefore be to contain that black (and grey) market to a large extent. One option for the Member States to realise that objective would be to impose a total ban, which, however, would then have to be strictly enforced. The subsidiarity principle makes it possible for Member States to decide on that option.
However, it would be better to establish legal gambling offerings on the Internet. But under no circumstances must that bring about a (government) monopoly over gambling, since monopolies rarely ensure adequate supply. Accordingly, the market should be opened up and sufficient incentives should be created for firms to provide legal offerings. To do this, a licensing model is the best approach, provided that it is based on the principle of nondiscriminatory competition. In such a system, which has already been successfully introduced in some Member States, such as France and Italy, national regulatory bodies lay down the conditions for licences to be granted. In France, for instance, the proportion of legal providers has sharply increased since the introduction of the licensing system: licensed providers now account for more than 80% of the French online gambling sector. To prevent discrimination, there must be a sufficient or unlimited number of licences available. Furthermore, there must be no indirect discrimination, e.g. in the area of technical standards.
An open and regulated market for online gambling presupposes an independent and powerful national regulatory body. It must determine, and above all also be able to enforce, the environment for gambling. National regulators must therefore be given the necessary powers to penalise infringements and act against illegal providers.
Because of the cross-border nature of the Internet, however, Member States alone are not in a position to regulate all areas of online gambling. Much-expanded cooperation between national regulatory bodies is therefore essential. To date, collaboration has been on a small scale, e.g. through bilateral procedures. What is needed, however, are institutionalised collaborative arrangements, e.g. on the basis of the Internal Market Information System, in order to share information efficiently and quickly. An extended, Commission-coordinated network of regulators is also conceivable. Only through a common European approach can unregulated providers be prevented from exploiting regulatory gaps and playing national regulatory bodies off against each other. The challenge for the Commission and the Member States is to act quickly, therefore, in order to safeguard consumers in Europe against untrustworthy providers.
Gambling involves a risk of addiction. Studies show that, since online gambling was introduced some 10 years ago, there has been a significant increase in the number of people approaching support centres for gambling addicts. There are already many initiatives – both by regulatory bodies and in the form of codes of conduct and commitments – attempting to stem Internet problem gambling and gambling addiction. In this connection, however, it is not appropriate that different standards should apply in each Member State. In many Member States, both public- and private-sector providers of online gambling services operate exemplary safeguards. In many instances, however, they are based on purely national standards and are therefore not compatible with the notion of the internal market. In some Member States, for example, an electronic badge is required for identity checks on the Internet. Many foreign nationals do not have such a badge and are therefore debarred from online gambling – even if they are permanent residents in the Member State concerned. For that reason, European technical standards which could be jointly developed by the industry, consumer organisations and the Commission are important; they also lower market entry barriers for gambling service providers from other European countries. Lower market entry barriers are an important step towards establishing a legal and regulated gambling sector.
Safeguarding minors against gambling is a further universal objective; it is not governed by different traditions or cultures. What obviously needs to be done, accordingly, is to lay down pan-European minimum standards for safeguarding minors and for combating gambling addiction, but also for combating money laundering and other crimes associated with gambling. This could be done in a Commission proposal for a directive laying down minimum standards applicable across Europe and binding on all regulated online gambling service providers. Member States would be free to set further criteria. Resolute action by the Commission and the Member States is important in order to ensure, across Europe, a uniform and high minimum level of protection for consumers.
In most Member States, revenue from gambling is also used for charitable and publicly beneficial purposes and for the funding of sport. However, that only applies in the case of legal and regulated gambling providers. Illegal providers pay no taxes and therefore make no contribution towards society. If markets were regulated at Member State level, online gambling service providers would have to pay much of the gaming tax levied in the country of the gambler. That is important for ensuring that government revenue from gambling throughout Europe is available for the funding of sport and for other publicly beneficial purposes. With regard to horse race betting, for example, this can ensure that breeders receive a proportion of betting revenue so that breeding can continue to be funded.
Time and time again in the past, regrettably, there have been cases of betting fraud in sport; that calls the integrity of sport into question. It is in the direct interest of all stakeholders, i.e. sports associations, fans, gambling service providers and players, to safeguard the integrity of sport and prevent betting fraud. Betting fraud can best be combated at European level. The Commission should therefore develop a system, together with the Member States, which effectively combats betting fraud. Common action against betting fraud will also produce a greater impact vis-à-vis non-European criminal betting fraudsters.
In the interests of the integrity of sport, conflicts of interest between sports betting providers and sports clubs must be avoided. Advertising for gambling or sponsoring a sports club does not yet, in itself, constitute a conflict of interests, however. Accordingly, advertising and sponsoring bans should be rejected.
Report on online gambling in the Internal Market