19 April 2006

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Business Today

The gaming phenomenon

Europe’s patchwork regulations on gaming are set to come under focus as interested partners debate the scene in Munich

It is reassuring to note that the Commission signalled its intention to reform the EU Gaming Market, by appointing the Swiss Institute of Comparative Law to evaluate how the differing laws regulating online and offline gambling services impact upon the smooth functioning of the Internal Market.
The development of e-commerce as an industry is the leading economic phenomenon of the 1990s. In monetary terms, Igaming commercial value in the world economy already stands at more than EUR200-billion, and the International Data Corporation (IDC) estimates that this number will grow to over EUR380-billlion by the year
Regulation is well in place in certain jurisdictions such as Malta and Britain so that government may access the potentially significant tax revenue of the industry while at the same time provide a fully regulated product to protect the consumer.
Obviously within these categories and modes of regulation we find many variations. To start with in Britain, for example, individuals are not prohibited from Internet gambling, provided the site is located outside the country. Conversely, Austrian and Dutch punters can only gamble on the Internet on sites owned and licensed by their own State and located within their country's geographic boundaries.
There is a pressing need towards some form of de-regulation in Europe and this will be discussed at a conference styled "The Case for Gambling De-Regulation in Europe" organised by PKF Malta. This is being held on the 27 April 2006 at the prestigious Bayerischer Hof, hotel in Munich, Germany.
Undoubtedly, Europe presents a patchwork of regulation and case law and the primary aim of this conference is to explore avenues how a practical road map for de-regulation can be drawn.
Starting with the British scene, 2007 is foreseen to be a very exciting year since the new Gambling Act may smoothen the path for offshore operators targeting the UK market to return back to the fold.
Yet, significant obstacles still remain. Many are asking whether an acceptable and affordable UK tax regime will be announced in 2007 when the first remote gaming licenses will be issued. Questions also arise as to what will be the effective rule on advertising in UK for non-licensed operators.
The conference is also tackling other topics such as the update on the impact of new money laundering rules, responsible gambling, latest threats in fighting remote gaming fraud, and last but not least the growth of mobile gambling, particularly on popular skill games such as poker, bingo and slots. No conference topic on gambling will be complete unless it covers underage Gambling. A keynote speaker will discuss the subject and put forward the concept that a strict system should be devised and implemented for player age verification prior to the player being entitled to register on the system.
This should provide a reasonably adequate assurance of the identity of the player, but should not be so impracticable as to render the system undesirable for participants.
Speakers from top law firms, together with two German ministers will discuss what are the prospects for a liberalised albeit well-regulated gaming market in Europe. Another appealing topic is the latest German Constitutional Court ruling on Oddset, the German state monopoly on sports betting and the extent to which this may impact on the industry at EU level. Oddset, the state monopoly boasts limitless win potential, forming part of an industry that spans exceeds EUR300 billion worldwide.
A major topic of the conference will concern the ruling by the Federal Constitutional Court of Germany which unequivocally declared Oddset unconstitutional in its widely publicised ruling on 28 March 2006.
In brief, the ruling stated that "Oddset" is operating without applying minimal checks and balances to prevent addictive gaming and as such it was declared a violation of the constitutional right of freedom of occupation for aspiring sport betting bookmakers. Delegates at the conference can hear the views of various experts on the possible two scenarios that may be the consequence following this ruling. The first scenario is that the German legislator may come up with new regulations to liberalise sports betting. On the contrary, it can also occur that Oddset will be upheld as a state monopoly but it has to robustly align its services with the desired goal to prevent addictive gaming and in the process abandon any disproportionate fiscal interests.
Many observers believe that the bettors deserve a liberalised and professionally operated sports betting offering and eventually they will be the winners of this landmark ruling of the Federal Constitutional Court of Germany. Another hot topic on the Munich conference agenda is the latest move by the Italian state monopoly to block over 900 foreign websites in Italy. In what is widely acknowledged as a protectionist move, the Amministrazione Autonoma dei Monopoli Di Stato (AAMS) has blocked internet gaming sites which they unilaterally labelled to be illegal.
This comes in the wake of Italy's recent budget, which decreed that all online gaming sites which are not licensed in Italy will be blocked.
Those ISPs who circumvent the action face stiff daily fines. The AAMS also claims that offshore websites not licensed in Italy do not comply with Italian law and therefore place the six Italian-based companies, registered under Italian law, at a disadvantage. The Italian regulator is alleging that such foreign websites are proving a threat to players by potentially stealing personal credit card details. This novel rule of protectionism will be discussed at the conference, both from a regulatory and an operators' point of view, in the light of the EU principles of establishment and free movement of services for those bookmakers outside of Italy who until the 24 February 2006 were allowed to accept bets from Italian nationals. This is also in the spirit of recent rulings of the European Court of Justice particularly the Gambelli and Lindman case and the burgeoning betting bonanza expected in the wake of the World Cup games in Germany. Surely a delegates may well ask why is the recently promulgated Services Directive not being instrumental to solve these cross-borders restrictions on the provision of gaming services. The answer may well lie is that while the intention of Member States is to increase competition rules in businesses, by expanding job opportunities they have agreed to exclude certain sectors such as online gaming services, communication networks and transport services.
Naturally, one of the subject matters to be discussed in a case-study will explore the background why online gaming services were excluded in the Services Directive and to propose remedies.
To start with the French have strongly opposed any liberalisation of gaming services which are a challenge to the existence of its state monopoly. They have a history of trying to protect their companies from competition. Where sports betting is concerned, the French are at the forefront to cocoon and protect themselves from foreign competition.
This reminds us of the stand- off by the French State syndicate PMU which is potentially hitting Malta's fledging gaming industry. Malta and other countries are suffering the full blast of protectionism of the French policies. Only last year PMU the French state horseracing monopoly successfully sued Zeturf a Malta licensed horseracing betting operator in a Paris court and succeeded to stop its operations over the internet. The Internal Market Commissioner Charlie Mc Creevy, who has congratulated PKF on taking this initiative for organising this conference, has written to seven European countries giving them a period of two months to amend any protectionist practices.
Unfortunately the Services Directive provides safeguards for competition to be on a fair basis yet it does not provide a good starting point to regulate an open market for gaming services.
In the midst of this state of conflicting laws and regulations PKF Malta have thought it is opportune to organise an international one day conference in Munich on the 27 April to delve deeper in finding solutions for the problem.

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