Our team of experts at 4H Agency has delved into the profound implications of the absence of a common EU framework in a new article for SiGMA News.
The European Union (EU) encompasses a diverse gambling market spread across multiple countries. However, the regulation of this market varies significantly at the national legislative level among EU member states. As a result, this requires additional efforts on the part of operators and players when engaging in activities within a specific jurisdiction. Consequently, the absence of a common EU framework raises important questions about its impact on operators, players, and individual countries.
Malta: A case in point
The accumulated experience of operators holding a Malta gambling license is noteworthy. Malta is widely regarded as an exemplary jurisdiction, offering operators the opportunity to conduct their business while assuring players that operators licensed by the Malta Gaming Authority (MGA) adhere to stringent regulations. The MGA has taken a decisive approach to defend its licensed companies against legal claims made by other countries that seek considerable payouts for violations of European law.
In recent months, Malta’s Bill 55 has garnered considerable attention. Introduced in April of this year, the bill proposed an amendment to the Gaming Act of Malta, with the primary objective of shielding gaming companies holding licenses from the Malta Gaming Authority (MGA) from legal actions initiated by foreign players or authorities. The unanimous approval of Bill 55 in June 2023 resulted in its incorporation as Article 56A within the Malta Gaming Act.
Article 56A explicitly stipulates that no legal action shall be initiated against a license holder, its officers, or key persons concerning the provision of gaming services. Similarly, no action can be taken against a player receiving such gaming services if it conflicts with or undermines the legal framework governing the provision of gaming services in or from Malta under an MGA license. Additionally, the article asserts that Maltese courts are mandated to reject the recognition and enforcement of any foreign judgment or decision pertaining to actions of this nature.
However, Article 56A has faced criticism from certain Austrian and German legal practitioners representing players who have sued Maltese gaming companies for allegedly offering services in violation of Austrian and German gaming laws, specifically with the aim of recovering lost funds. These lawyers argue that the amendment constitutes an effort by the Maltese government to undermine the rule of law within the European Union and impede the fundamental rights of EU citizens and residents. Expressing their concerns, they have communicated with the European Commission, urging intervention in the matter.
Impact of the lack of a common EU framework on operators
Within the EU, various jurisdictions employ different approaches to regulate aspects such as permitted verticals, taxation, etc. This variance becomes especially pertinent for operators when they seek to acquire a local license. To illustrate this with a specific example, let’s examine the case of an operator considering obtaining an online casino license in three jurisdictions:
Denmark: The online casino license costs 40,786 EUR; taxation varies from 8,157 EUR to 734,155 EUR; and the license is valid for 5 years.
Poland: The online casino license comes at a cost of 389,440 EUR; taxation involves a 50% difference between the sum of stakes paid and the sum of winnings paid out; the license is valid for 6 years.
Romania: The online casino license has a price range from 62,838 EUR to 314,191 EUR; taxation stands at 23% of income; and the license term extends to 10 years.
As observed, the market conditions across these jurisdictions are notably diverse. In such a scenario, operators are compelled to make comparisons among these jurisdictions, ultimately leading to an uneven distribution of operators across different regions.
Consequently, the absence of a unified market for gambling services affects operators in several ways:
- Market Inefficiencies: Various jurisdictions enforce distinct requirements for online casino operations, as well as other verticals, causing operators to perceive some jurisdictions as potentially lucrative markets and others as inefficient ones.
- Level Playing Field: The establishment of a common gambling market could promote equal conditions and requirements within the gambling sector.
- Unification of Legislation: When the rules are consistent and consolidated within a single piece of legislation, such as a common gambling act, it becomes more streamlined for an operator to enter the market.
- Monopolised market – reduction of the state’s monopoly position in the gambling market (for example, Finland is developing legislative changes to open the gambling market to licensed operators).
Impact of the lack of a common EU framework on countries and players
Changes in the regulation of the gambling market can have ramifications for specific countries within the EU and players:
- Reduced revenues to national budgets of: The redistribution of revenues will result in a sharing arrangement between the national budget and the general budget of the EU, potentially reducing the funds available to individual countries.
- Restrictions on the autonomy of countries in the gambling services market: The gambling services sector may come under the regulatory purview of EU institutions, thus limiting the individual autonomy of each country to regulate this sector.
- Presence of offshore gambling: The widespread popularity of offshore gambling hampers the EU states from fully realizing their potential in terms of regulation.
- Limited freedom of choice: Citizens of a country are restricted to accessing only the verticals authorized by their state, thus curtailing their freedom of choice.
- Reduced supply: Monopolized verticals hinder competition in the market, stifling its development and resulting in a diminished supply of options.
- Varied taxation: Winnings in different jurisdictions are subject to varying tax rates, giving rise to a phenomenon known as “gambling migration.”
- Diverse responsible gambling conditions: The level of requirements for responsible gambling varies among EU countries, leading to discrepancies in player protection measures.
The issue of a common EU framework continues to be a topic of ongoing debate, with both fervent proponents and critics of this concept. The establishment of a fundamental common gaming act for operators would offer clarity on fundamental legislation and requirements. However, achieving a fully unified legal framework across all areas is a complex task given the diversity of legal traditions and priorities among member states.
Additional restrictions, such as those pertaining to advertising and license allocation, should be determined at the discretion of individual national jurisdictions. This approach would ensure a fair assessment of the interests of operators, players, and specific EU countries.
