|
 Online
gaming has seen much turbulence this year. Not surprisingly online
gaming companies have faced nothing but opprobrium particularly from
cross-border challenges originated by state gambling monopolies
eager to stem competition. Apart from the deleterious effect of the
US ban we also saw major countries such as Germany take a
prohibitive stance. Germany’s Federal Constitutional Court ruled
that a state monopoly on sport betting is acceptable provided that
its objective is to limit addiction. Recently, the state of Saxony
moved against Bwin, an Austrian betting firm with a grandfathered
East German licence. Saxony warned Bwin that the licence allows it
to operate a single betting shop in Neugersdorf but not a nationwide
online network. Bwin’s shares on Vienna’s stock exchange plunged as
a result of government’s action. It came as no surprise that the
state of Hesse is attempting to close 80 betting shops in Frankfurt
whereas Bavaria closed 41 betting shops in Munich this year. The
German court went as far as giving an ultimatum to the state to
reconsider and amend the present law governing sports betting
activities by the end of next year. The importance of this judgment
is paramount, given that any ruling by the federal constitutional
court has direct effect in all German states.
This judgment was preceded by another homogeneous judgment delivered
by the Breda court in the Netherlands. Following the state’s refusal
to grant a casino licence to the Compagnie Financiere Regionale, BV,
proceedings were instituted against the Netherlands’ Ministry of
Justice and the Ministry of Economic Affairs.
In its landmark judgment the Breda court ruled that Dutch gaming
legislation and policies were inconsistent with the guidelines
established by the earlier Gambelli ruling (reaffirmed by the
Placanica case) by the European Court of Justice. Put in context,
this judgment seems to have also reflected the EU Commission’s
criticism to proposed amendments to the Dutch Gaming Act of 1964,
whereby the Ministry of Justice envisioned granting Holland Casino a
three-year licence to operate games of chance exclusively over the
Internet.
 An
Italian court has ordered that a Maltese-licensed remote gaming
company be taken off the list of Internet gaming companies, access
to which had been blocked by order of the Italian government.
Astrabet Limited was on the list of almost 800 Internet gaming
companies that were hit by the new Italian Finance law. Under this
law, widely regarded as a thinly disguised attempt to protect the
Italian gaming monopoly, the Italian Ministry of Finance can order
Internet service providers (ISPs) in Italy to block Internet gaming
sites that do not have a concession to provide their services by the
Italian gambling monopoly, the Autonomous Administration of State
Monopolies (AAMS). In handing down judgment, the Civil Tribunal of
Rome ordered both the Ministry of Economy and Finance and the AAMS
to ensure that the Website and domain of Astrabet Ltd are no longer
blocked.
Astrabet’s victory vindicates the stance taken by Malta’s Lotteries
and Gaming Authority (LGA), which has been advertising in prominent
Italian newspapers and offering access through the LGA’s Website to
the sites of Maltese-licensed operators which were being blocked by
Italy. This judgment comes in the wake of important developments on
a broader scale, which have spelt serious setbacks for the practices
adopted by European gambling monopolies.
For those following news on this fledging industry the same exodus
happened five years ago when UK zeroised its gaming taxes and lured
back home many Malta based licensees such as heavyweights Stanley
Leisure and Tote. Now the reverse has happened such that the higher
tax levied by the British Gaming Commission coupled with the
blocking of advertising from operators outside the EU has
re-enforced Malta’s advantages as a European hub. But in the
obstacle race there are more hurdles to jump.
There is clearly room for concern just when during 2006 Malta has
faced its gravest test. The friendly and neighbourly Italian
government then led by Signor Berlusconi has decreed that all Malta
licensed entities were illegal and cannot offer their bets to
Italian citizens. The bulk of licensees are Swedish and Italian. The
embargo remains to this very day although there may be cracks in the
paperwork under the Prodi government who appears to take a stand
against the law cocooning the Italian monopoly AMMS and already has
partially liberated the industry by offering multiple choice of
licenses which were snapped up last year by international operators.
 Similarly
Sweden has stopped a major Swedish owned operator in Malta from
offering Poker products to its citizens on the pretext that the
latter is operating on a non European license.
France had effectively stymied ZeTurf (a Malta licensed firm) last
year from offering horseracing bets to French citizens. It has
successfully won a court order restraining BellMed in Malta to
severe its bandwidth provision to ZeTurf. LGA has filed a protest
against the French monopoly PMU.
The stakes in this game are high for our tiny island, which has been
painfully transforming its manufacturing base into a service high
value-added industry and adding sports betting and remote gaming
licences to non-residents. At this stage one notes that a large
majority of the local gaming companies are based on the popular game
of poker. Perhaps this resulted from the participation last year by
LGA at a conference organised by Michael Casselli in Las Vegas. The
Lotteries and Gaming Authority had braved the waters and set up a
pavilion. It must have attracted a number of poker companies.
Unfortunately news from America is not so heart-warming. There have
been two sudden arrests of online gambling officials while visiting
the US. One prominent case was that of Peter Dicks chairman of the
British firm Sportingbet Plc. with a stock market value of GBP 1
billion. Company shares have been temporarily suspended.
Bloombergs reported that Peter Dicks has been detained for two
nights on a Louisiana arrest warrant for ‘computer gambling.’ Peter
was arrested at JFK airport on his way to board meetings in New York
unrelated to online gambling and was granted $50,000 bail in a New
York court while he is fighting extradition to Louisiana on criminal
allegations of illegal Internet gambling. Pundits count the days
when the next incarceration will hit Poker operators.
PartyGaming, a major listed Poker operator boasting over 19 million
registered players has been compelled to market its services
aggressively outside the US in the knowledge that lawmakers have
made it illegal to offer online gaming and gambling services to US
residents. Last October the US House of Representatives approved the
Online Gambling Prohibition Act.
The whole concept of the world wide web is about open access and
freedom to roam as conferred by the Gambelli and Placanica rulings. 
The issue for operators targeting the US market is complex and no
effort should be spared by LGA via its legal department to guide
investors who are bewildered in their choice of jurisdiction should
they have US clientele. Certainly it appears that they must draw a
distinction between sports betting firms, which clearly are in deep
trouble and may not survive the regulatory assault from the US and
the gambling/poker outfits who so far seem to have gone below Uncle
Sam’s sonar radar.
The news that 25 major operators including William Hill and Playboy
Casino have applied for a Malta license seems to have reaffirmed
Malta’s pole position. Now that we have scaled the summit let us do
our utmost to consolidate our gains especially in the light of
emerging competitors offering similar gaming opportunities such as
Spain, Italy, Latvia and later on Belgium.
George M. Mangion
gmm@pkfmalta.com
The writer is a partner in PKF an audit and business advisory firm
|