With ICE Gaming 2018 happening next month, let’s examine some of the online gaming laws around Europe and how they are evolving. As you might well know, the regulatory environment is a tangled mess of overlapping jurisdictional oversight, different rules for different games and a maze of rules to decipher.
There are country laws, state laws and even city laws that might apply. Online poker, sports betting, lotteries, horse racing and other games each have their own rules and regulations. On top of all this, the legislation is constantly changing or being challenged in courts, so compliance is constantly at top of mind.
As the internet is, by definition, the worldwide web, considerations about cross-border gaming, legal ramifications, and which laws take precedence, are all issues at play. Should gaming operators be responsible for restricting player access – and to what extent? Do the rules apply to the headquarters of the gaming operator or the location of the server?
All this is colored by the question of the ethics of gaming. Some look at gaming as a harmless, leisure activity. Others look at it as a moral hazard that should be guarded against at all costs. Regulators are given the task of creating rules that protect players, prevent money laundering and underage players, as well as ensure that social and taxation policies are met by licensees.
European Online Market
The European market is the largest market for online gambling worldwide, accounting for 47.6 percent of the total revenue. However, there isn’t a EU policy that offers regulatory guidelines for online gambling, therefore each member state has taken it upon themselves to regulate online gambling.
On December 7, 2017, the European Commission decided to close its infringement procedures and the treatment of complaints in the area of gambling. It is not a priority for the Commission to use its infringement powers to promote a EU Single Market in the area of online gambling services. National courts will now be the venue for these disputes and each country will be responsible for their gaming regulations.
Although the gambling regulations for each market are independent and distinct, one commonality shared is strict Know Your Customer (KYC) requirements; every player must be properly identified before playing. In addition, the Fourth Anti-Money Laundering Directive (4AMLD) that came into force last June, required gambling operators to implement a risk-based assessment on all players to mitigate the potential for money laundering and crime risks. In situations involving high risk individuals, enhanced due diligence must be performed. These procedures are also triggered on a threshold of EU€2000 for a single transaction.
As money entering the gaming system is closely tracked and there are numerous AML procedures, the threat of money laundering “is primarily linked to unregulated operators who are offering their services outside of the EU either with no or a very low degree of regulation and supervision,” according to The European Commission. “As for money laundering, there is currently very limited information or evidence suggesting that licensed online gambling operators in Europe are subject to money laundering activities.”
To help make sense of the different EU regulatory models, a framework that considers how easy it is to get an online license is helpful:
A license is granted as long as numerous specific licensing criteria are met (Malta).
The number of licenses is limited, but the process does allow for gaming companies (Belgium, Czech Republic, Greece).
Licenses are granted to only one (government owned) entity (Norway, Poland, Slovakia, Sweden, Switzerland).
The UK passed the Gaming Act of 2005, which was one of the first regulations passed that explicitly covered online gaming. In September 27, 2017, the UK Gambling Commission published Revised AML guidance for casinos, providing clarification on acceptable procedures.
Electronic identity verification (eIDV) is an acceptable method of verifying an individual’s identity, as long as certain standards are met. It must use data from multiple sources, and across time, or incorporate qualitative checks that assess the strength of the information supplied. The standard level of confirmation must provide one match on an individual’s full name and current address AND a second match on an individual’s full name and either his current address or his date of birth. Operators should be satisfied that information supplied by the verification provider is considered to be sufficiently extensive, reliable and accurate.
The UK has an open licensing model.
As opposed to the clarity of the UK model, Germany gaming laws are a mess. Germany regulates gaming on a state level, but there is an Interstate Treaty on Gambling, which most — but not all — states agreed to, but there’s an amendment to the treaty, which has potential conflicts with EU recommendations, and has various exit clauses, but that is being challenged. On top of that, election results bring in new state governments that then change their respective laws.
Speaking about the Interstate Treaty on Gambling 2018, Jörg Hofmann, senior partner at Melchers law firm, stated “The commission has accurately described the many weaknesses of the proposed new regulation. The failure of the inadequately modified Interstate Treaty is predestined. However, I am fearful that the responsible bodies in Germany will not take these concerns into account and that any functioning and expedient regulation will be a long time coming.”
While sports betting might be allowed, private online casinos will remain banned.
France, Spain, Italy, Portugal
These four major EU countries have clearly-defined regulations covering online gaming. Unfortunately, they have very high tax rates (up to 44 percent in France), and had employed ring-fencing, restricting players geographically to playing within their country. However, in October 2017 these four countries entered into an online poker liquidity-sharing agreement, creating a bigger pool of players and prizes.
According to Thompson Reuters, Alderny, a small non-EU island in the English Channel, is now widely regarded as the largest hub for B2B gaming services in the world and transmits more internet gambling traffic than any other location in the world.
Thus, the Alderney Gambling Control Commission (AGCC) is very proactive in ensuring their regulations are as acceptable as possible to as many jurisdictions as possible. They have already signed a memorandum of understanding (MoU) with over 10 regulators and major sports organizations such as FIFA and the IOC. Many prominent gaming companies base their operations in Alderney and sub-license to operators in other countries.
Alderney has several pieces of legislation that covers AML and are reviewing the steps to comply with the ATF recommendations published in February 2012.
In regards to identity verification, licensees must “incorporate robust and effective client identification methods and measures in order to adequately manage and mitigate the specific risks of non-face-to-face customer relationships or transactions inherent in the eGambling industry;” and “supplement identification verification software with additional forms of customer due diligence and identity verification procedures in circumstances which are appropriate and effective for the purposes of managing and mitigating the risks.”