Banks: the big winners of the online betting market opening?

The French gaming market opening has been expected and welcomed by many, but some pieces of information on means of payment contained in the draft bill must not go unnoticed.

According to the French gaming bill, online gaming operators will be submitted to a licensing process. Licenses will be granted on the basis of operators’ compliance with a cahier des charges (a set of rules and criteria).

This “cahier des charges” is still unknown since it is yet to be defined by decree and then implemented by the ARJEL (the future gambling authority). However the government has already made clear that the “cahier des charges” will contain a set of rules on “means of payment for stakes and earnings”.

As far as means of payment used for “payouts” are concerned, the draft bill requires players to establish a direct debit system with operators’ bank account information. It is therefore reasonable to predict that the “cahier des charges” will organise a system where payouts payments can only be made on players’ declared bank accounts and that cash payout payments will be forbidden.

Stakes payments will be capped as one of the measures of the draft bill to fight addiction. As a consequence it is expectable that the “cahier des charges” will have a provision aiming to limit the amount of money which can be spend with a same means of payment through the fixation of a monthly threshold.

However, the Ministry of Budget’s press release of March 5th did not raise the above mentioned measures but other measures aiming to prohibit anonymous means of payment or to require players to only use means of payments which are linked to a bank account.

One question still remains: will French players have to use a credit card in order to pay for their stakes? In many other countries authorising online gambling, a wide range of means of payment can be used by players such as credit cards, digital money accounts, prepaid cards, whether anonymous or not, etc.

Discussions are still in progress, consequently nothing is certain yet and many several different solutions can be adopted. The only piece of certainty is that it will be difficult to strike a right balance between:

– on one hand, protecting minors and fighting against money laundering, which justify the implementation of restrictive measures,

– and on the other hand, ensuring players’ privacy (stemming from the refusal that bankers should know whether their client like gambling) and applying E.U. competition law to payment service providers (especially at a time when the Single European Payment Area “SEPA” project is about to break through on harmonising rules on payment in the Euro-Zone and improving competition through the new integrated retail payment market).

Compatibility of the French draft law with EC law cannot be taken for granted

The European Gaming and Betting Association (EGBA) has stated that compatibility of the French draft law with EC law cannot be taken for granted.

The Association is concerned that a series of key provisions of the draft law envisaged by the French government would conflict with the EC Treaty and the European Court of Justice (ECJ) case law:

The EGBA referred to five points:

1. How can the reform and the opening of online sports betting only be consistent when sports betting in the offline environment will remain under the monopoly of FDJ and PMU?

2. Is “French tradition” an acceptable justification to limit the opening of horse betting only to pool betting – especially when fixed odds betting is offered for all other types of sports and is very much appreciated by French and European consumers?

3. Is a ceiling on the pay-back ratio (percentage of stakes paid back to players) to the same level of those currently applied by historical operators compatible with EU law? Given that such ceiling has no proved or known impact on consumer protection, what other objectives than protection of the French market and the position of historical operators can it possibly serve?

4. Will the French online gaming authority, in compliance with the jurisprudence of the ECJ, take into account the warranties and controls already offered by other EU licensing jurisdictions such as for instance UK, Malta or Gibraltar, in order to avoid the application of dual licensing and purely administrative restrictions in the single market?

5. Is the creation of a sports betting right granted to the French sport federations in the context of commercial agreements with sports betting operators in France a credible means to prevent match fixing? The majority of stakeholders have already developed partnerships and successful early warning systems to anticipate and prevent those risks.

For its part, the EGBA is particularly concerned about “the threat of the creation of a local Internet market for online betting and gaming services given the French authorities’ clear intention to adopt payment and ISP blockings and the continued criminal enforcement against EU established online gaming and betting operators”.

The Associated stated that this would be completely incompatible with the European dimension and the cross-border nature of this leading internet sector.

According to Sigrid Ligné, secretary general of the EGBA: “The notification procedure is a great tool to anticipate potential conflicts. We are convinced that the recommendations that will be addressed to France by June will facilitate the French Parliament’s discussions and prevent unnecessary litigation once the law comes into force.”

The French government notified its draft law recently to Commissioner Verheugen’s services in the context of a preliminary conformity test with EU Law. Member States and the European Commission have until the June 8 to examine whether the law is in conformity with the rules of the EC Treaty and to require, if necessary, amendments to be made so as to avoid future litigation.

South Carolina may legalise home games

There is a possibility of a new legislation coming in the state of Carolina which, if passed, could make poker gambling legal at home.

It is being said that in the wake of a recent court case declaring poker a game of skill, the state’s stance appears to be softening.

Glen McConnell (R-Charleston), South Carolina Senate President Pro Tempore, has introduced a bill proposing the legalisation of poker home games.

The bill would legalise poker play in the home or for a charitable cause, reported local media.

It has also emerged that members of the public have told a state Senate panel that South Carolina needs to ditch its anti-card laws. McConnell has offered two measures on the subject. One would overturn a 1802 law that could be interpreted to make any dice or card game of chance illegal. The other is a constitutional amendment to allow churches and charities to hold raffles, reported AP.

Jean-Francois Vilotte to lead new French online gambling regulatory authority

An official associated with the French Tennis Federation (FFT) has been chosen to set up France’s new regulatory authority for online gambling – despite the FFT chief’s previous role as a plaintiff in litigation against a number of would-be French licencees.

The government has appointed the FFT’s secretary general Jean-Francois Vilotte to be in charge of establishing the authority that will licence and regulate private companies in the newly-liberalised sector.

The creation of a new regulatory authority for online gambling – l’autorité administrative indépendante de régulation des jeux en ligne, ARJEL – was confirmed by France’s budget minister Eric Woerth recently.

Last year the Fédération Française de Tennis (FFT) had failed in its attempt to prevent online betting companies from taking bets on the French Open tennis tournament. The case, brought in the Belgian court, had aimed to prevent Ladbrokes, along with Bwin and Betfair, from accepting bets on the event from Belgian residents.

How close is France to opening up of its gambling market? – Legal Gaming Special

French Budget Minister Eric Woerth has said that the gambling market in France would be expanded to adapt “to Internet reality” and help France “get out of an unsustainable situation in which the state is losing a growing part of the betting market”.

All this may sound positive, but is the real “opening” of the market is still a long way to go?

ULYS’s partner Thibault Verbiest certaily thinks so.

“The presentation of the draft bill on 5th of March is a first step towards the opening of the French market but the harder part will have to be achieved within the next few weeks,” Verbiest told Bulletbusiness.com.

“The draft bill first has to be submitted to the Conseil d’Etat for an opinion, then presented to the French Cabinet, afterwards be notified to the European Commission in application of Directive 98/34 in (standstill procedure) and finally be discussed and voted by the French Parliament. Once the bill is enacted, the new administrative authority, in charge of enforcing the regulation of online gambling market, will need another few months to be efficient and begin to grant licences. In saying that France will start to grant online betting licences in the beginning of 2010, Eric Woerth was very optimistic,” shared Verbiest.

In an interview, Verbiest also spoke about the sort of legal access the private operators are expected to have, the possibility of a new legal battle regarding lotteries and slot machines monopoly in future and much more.

Woerth has said that illegal gambling generates €7 billion a year, and said that there were 25,000 illegal gambling websites in France, representing 75 percent of the market. Rather than banning 25000 websites, he said we’d rather give licences to those who will respect public and social order. What sort of legal access do you think private operators are expected to have in the French market considering the sign of opening up of the sector?

Since the announcement of the liberalisation last summer, Eric Woerth has repeated several times that the opening of the online gambling market will be controlled. In other words, it means that the opening will be limited and that gambling operators will have to satisfy a large number of specifications to obtain a licence. In the name of public order, operators will be required to give guarantees concerning their experience in the gambling industry, the transparency of their shareholding, the measures they will take against fraud and money laundering, and the security measures to certify online payment, protect children or process personal data, etc.

It seems that companies without experience in the gambling industry will have more difficulties to receive an agreement in France. The specifications required to obtain a licence will exclude a lot of operators.

It is being said that online operators, including non-France-based companies, will be granted five-year licences to take bets from French residents on sport and poker. Lotteries and slot machines will remain under state control. How do you assess this selective opening?

According to the draft bill, lotteries will remain under the Française des jeux monopoly and slot machines only available in terrestrial casinos. Moreover, spread betting, betting exchange or bets on virtual competitions will be forbidden. These games are known to be more risky (addiction and lack of control to avoid fraud and money laundering) than others and consequently are excluded from the opening.

Officially the European Commission has never criticised lotteries and slot machines state’s monopoly. The reasoned opinion sent to the French Government on October 2006 only concerned sports betting services. Therefore, the Government has decided to limit the opening of the market.

This restriction is not satisfying for gambling operators. Indeed, a lot of them operate sports betting services, online poker and lottery or virtual slot machines. Excluding lotteries and virtual slot machines to protect consumers, the Governmenent is being incoherent. If the Government wishes to ensure consumers’ protection, it should prohibit these games in general for both, public and private operators.

In application of EU law, the measures taken by Member States to restrict the free movement of gambling services have to be necessary, proportionate and non-discriminatory which is not the case when the market is closed in favour of public companies that do not particularly have consumers’ interests at heart. A new legal battle on the field of lotteries and slot machines monopoly could be declared by private operators in the next few months.

Industry leaders however have predicted the caveats in the bill would put off many operators. Woerth said he was proposing to impose a 7.5 percent tax on operators taking sport bets to maintain the €5bn a year it gets in receipts from the industry. He also intends to set limits on the ratio of bets that can be paid out to players in winnings. But according to the European Gaming and Betting Association, this raises questions about how economically viable the whole project will be for operators. What’s your opinion regarding the same?

The project will certainly not be economically viable for all operators as France gives priority to public and social order above all.

In theory, only operators located in uncooperative tax havens will be put off. Nonetheless, for practical purposes, in the draft law, especially the tax system and the limitations of wagers, winnings and the ratio of bets that can be paid out to players in winnings, we can infer that the liberalisation will only be profitable to gambling industry leaders.

The French Government has never hidden its objectives. The goal of the opening is not to authorise every operators to provide their services in France but to legalise the activity of honest companies offering financial and legal gurantees to ensure the respect of public and social order. The consequence is that many average operators will be excluded.

Recently, you had mentioned that according to the ongoing discussion within the French government, the draft bill requires that all operators should obtain a licence in France, without respect to the fact they may already have one in another Member State. Still how do you think online gaming companies especially ones from other countries can take realistic and swift action in terms of identifying opportunities and then acting in accordance with to the local licencing regimes?

European institutions promotes a principle of mutual recognition between Member states. It means that a licencee in a Member state could obtain automatically an agreement in France. Eric Woerth has explicitly rejected this principle. Nevertheless, once the regulation of the French market will be effective and consolidate, we can expect bilateral agreement between Member states to simplify proceedings to obtain a licence.

What do you recommend as far as the gambling tax issue is concerned? France has moved to open its gambling market, but insists all licenced Internet gambling sites will pay French tax, regardless of base location. How do you think this whole issue needs to be tackled?

It is impossible to give recommendations for the moment because decrees which will specify the content of the law have not been published yet and we still do not know how exactly the rules will be enforced.