MAGAZINE OF THE EUROPEAN LOTTERIES, 2011, SEPTEMBER ...

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GAMBLING TECHNOLOGIES Gambling Technology is a fundamental topic today, especially in the light of the ongoing debate in the EU. Various notifications by Member States refer to IT aspects while also the EU Commission Green Paper consultation on the sector of online gambling is paying a particular attention to it. The actual debate on gambling technologies is driven by the way technology is used in a proper regulated environment in order to avoid the abuse of the principles of the Internal Market. Technology is often used to circumvent the principles of Internal Market rules, to avoid taxation and the application of anti-money laundering rules. In this regard, Advocate General P. Mengozzi, in its Opinion in the Stoß case, has highlighted the existence of some practises which do not allow mutual trust between the EU Member States (i.e. off-shore licenses) and therefore result as a violation of Internal Market rules. P. Mengozzi clarifies that the application of the principle of mutual recognition presumes a certain balance to be found between the different conditions imposed in the Member States. Consequently, the Member State in which the service is provided cannot impose on the operator the same conditions and controls to which he was already subject in his country of origin. According to AG P. Mengozzi, extraterritorial licenses do not fulfil these conditions. Since the authorities of the country of origin do not allow the provision of gambling services within their territory, it cannot be argued that the general interest objectives pursued by another Member State are already sufficiently protected. The Court of Justice did reject in several cases the possibility in the current status of EU law the application of the mutual recognition. According to the Court “a Member State is therefore entitled to take the view that the mere fact that an operator such as Bwin lawfully offers services in that sector via the Internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators.” It is clear that this does also apply to the technology requirements which vary among the different Member States. Member States do rightly believe that, in order to be able to uphold a proportionate and consistent gambling policy technology, means used should be subject to regular inspections and controls. This requirement is also foreseen in the Third Anti-Money Laundering Directive. Various systems are currently explored from a full (operational) server approach to a frontal system or a portal under control of the regulator. All those system are complemented by ISP and other blocking mechanisms to assist with the enforcement of the licensing regime. In the Dickinger case the question of mutual recognition and the difficulties LEGAL Philippe Vlaemminck 18 NEWS 37 SEPTEMBER 2011 relating to controls by the country of origin were again debated. In its opinion AG Bot expressed a rather critical view towards Malta regarding the abuse of Internal Market rules. According to Bot, Member States can impose strict requirements, including having a social seat within the territory of that Member State and a server to properly track and control the online gaming operations, in order to ensure a strict and more efficient control by the government of the operator’s policy. Consumer protection emerges here as the main issue in the debate. The absence of cooperation between Member States and of certain common IT standards creates some specific risks. In practice, self exclusions systems set up by a Member State, remain without effect in other Member States. More in general, a lack of understanding about technology can be detected, including at the level of the EU Commission.
FUTURE & CHALLENGES Fromitsside,theEuropeanCommission is opposing against Member State requirement to have technology systems location (server, frontal server, portal with ISP blocking…). The Commission has however no arguments to oppose against the positionoftheMemberStates.Moreover, in the secondary legislation, as in the AML directive, onsite inspections are foreseen as necessary requirement for the prevention and enforcement of Money Laundering (even though, for now, still only applicable to the casino game sector). Therefore, there is an urgent need for a very substantial debate among different stakeholders to find out which could be a proper environment to enable proper IT standards supporting the Member States policies. The gaming industries should focus on player protection and contribution to the society and therefore can only welcome that investigation on gambling technology will take place. In fact, only the cooperation among the stakeholders could lead to the definition of effective technical requirements and solutions. The current EU Regulatory and Legislative framework, as clarified by the Court of Justice of the EU and by a number of secondary EU legislative instruments, must form the backdrop to the discussion on the design of the gambling technology. What does it mean in practice for operators and different stakeholders? There is a need to discuss on how to get control over the expanding online market by adapting to the changing environment throughout a strongly regulated controlled expansion policy, by exploring new form of games and new form of distribution tools as long as the illegal market continues to flourish. The debate on gambling technology will have mainly to focus on defending, also legally, the market by mean of enforcement through ISPs, payment blocking, geo-location technology; researching & comparing what other industries set up (i.e. the music industry against illegal downloading) or the social media which have succeeded in offering and disseminating (notwithstanding the serious privacy implications) the use of Geolocation as commercial tool. A first step could be the exchange of views and information among stakeholders from the different Member States on the different IT tools, especially on key issues such as: server and cloud based technology, liquidity & open end white labels, consumer E-identification(government practices), consumer behavior tracking, controls and responsible gaming, online payment services, Money Laundering and “know your customer” tools, Mobile phones technology, …. Still many questions remain open as we move forward: How to define the standards for transnational (or if necessary also international) issues? How can the technical knowledge and expertise easily be acquired? How practical and effective are IP and Payment blocking systems? What data protection features to be put in place? How should facilities such as random number generator and other “gaming machine” features LEGAL 19 NEWS 37 SEPTEMBER 2011 be best regulated? Where do servers or other IT hardware be located to guarantee the regulatory control? What e-ID systems can be promoted? The list is long and will require different experts to talk to each other. The EU Commission does not know the answer, but is certainly willing to learn from the sector what tools are available and can help to find answers to get control over the online market. By organizing an innovation meeting involving legal, IT, security and marketing experts and suppliers, EL has taken the first step in this direction. Philippe Vlaemminck EL Legal Adviser
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