European News Round-Up

Isle of Man
New Casino Green Lighted as Government Receives Assurances Over End of “White List”
As previously reported, the British government has announced plans to phase out the “white list,” a list of online gaming companies that are licensed in jurisdictions approved by the U.K. Gambling Commission. As part of the new proposals, offshore operators will be required to hold a Gambling Commission license to enable them to transact with British consumers and advertise in U.K. media. This comes under new legislation that will impose a 15 percent tax increase on profits made by offshore online gaming companies offering their services in the U.K.

The Isle of Man has around 70 online gambling companies based within its territory, including PokerStars, the largest dot-com Internet poker platform in the world, and the online gaming sector is a major contributor to the local economy. In the face of the new proposed legislation, the government of the Isle of Man has been reassured by the minister for tourism and heritage, John Penrose, that operators in “trusted jurisdictions” like the Isle of Man will receive “light touch treatment and … will not have to duplicate regulatory work” when it comes to the granting of licenses.

These statements have been welcomed by Allan Bell, minister for the Department of Economic Development in the Isle of Man, who responded by saying that this means the “ensured continuity of business throughout the period of change.”

This announcement comes when the land-based casino industry in the Isle of Man looks set to expand. The government has recently announced plans to grant a new large-scale casino license as part of a new five-star hotel on the island in order to increase the number of tourist attractions on the island.

EU Backs New Gaming Act Despite Controversy
The European Commission has given its approval of Denmark’s new gaming act. The act controversially sets a lower tax rate for online gaming operations than for land-based operators. The European Commission has ruled that the new law keeps within EU state rules. According to an EU press release, “This is because the positive effects of the liberalization of the sector outweigh potential distortions of competition.”

The European Commission first investigated the issue after receiving complaints from members of the land-based casino industry in Denmark who argued that the discrepancy in tax led to an unfair advantage for the online gambling sector. In reaching its decision, the EU took into account the fact that the unlicensed offshore gambling sector has, until now, paid no taxation and has come under no government supervision.

Arguing that the discrepancy in tax was outweighed by the advantages of a government regulated online-gaming sector, the commission also reached its decision because the new act seeks to actively restrict minors from having access to online gambling services.

In Denmark, gambling is overseen by the Ministry for Tax via a special authority called The National Supervisory Authority for Games and Lotteries. Under previous gaming law, foreign operators were prohibited from offering gambling services to Danes. The Danish government had justified this because gambling revenue is an important source of funding government programs, especially sports.

The protection of the gambling monopoly known as “Danse Spil” (Danish Games) has, in the past, led to a number of clashes with the European Union as the government has approved online sports betting via Danske Spil while banning any competition to the state-run monopoly. The new act and favorable decision by the EU marks an important turning point for the Danish offshore gambling market.

Schleswig-Holstein to Allow Online Gambling
The German state of Schleswig-Holstein has passed a law that opens up the online gambling sector to offshore operators. Located in the far north of Germany, the local government announced its decision in September after narrowly passing the new act in the state assembly. The new act has been met with a very positive response from European online gambling companies including, William Hill and Betfair, the shares of which all increased in value after the news. It is believed that the decision could have wide-sweeping consequences for the German online gambling industry as other states could soon follow suit.

Currently the German online gambling industry and the state-controlled monopoly over gambling is protected by a 2008 gaming law. The law banned offshore betting companies from operating or advertising their services in Germany, and also allowed for the blocking of IP addresses and financial transactions with e-gaming companies.

While Germany is seeking to relax its control over gaming, its most recent proposals were strongly rejected by the European Union as too restrictive and in breach of European law. The new national law proposes a steep 16.67 percent tax on sports betting turnover for only seven of the offshore betting companies that would be granted a license. According to the European Commission, this restricts the rights of European companies to trade freely in EU member countries.
Set to go into effect next February, the new law in Schleswig-Holstein puts in place a 20 percent gross profit tax on all gambling products and there is no restriction on the number of licenses. The new legislation also differs from the draft law put forward by the national government because it not only allows for sports betting, but also permits offshore gambling companies to run casino-type games. According to the draft legislation put forward by the national government, only those casinos already established in Germany would be permitted to run online casino games.

European Union
Green Paper Published but EU Still Divided Over Online Gambling
There is still deep division among EU members over the issue of online gambling. The publication of an eagerly anticipated green paper on the issue has highlighted the problems the European Union faces in monitoring the industry. As online gambling can cross borders, and rules on gambling differ between member states, the EU needs to provide a framework that provides adequate state supervision of the industry while protecting the rights of companies to trade freely across borders.

EU members are still divided over the issues of the protection of state gambling monopolies and the entrance of offshore gambling companies into new markets. While a number of members of the European parliament are in favor of liberalizing the market and creating an online gambling law that would be applicable for all member states, others believe that gambling is a special issue which should be dealt with by each government individually. The European Commission faces further problems because some members believe that gambling should be restricted along with advertising of its products, while many member states depend on state monopolies for a significant amount of tax revenue.

This debate is happening at a time when a number of significant European markets are ending state monopolies and putting legislation in place that allows for offshore gambling operators to offer their services within their borders—most notably is Spain. As previously reported in May 2011, the Spanish Senate passed a new act aimed specifically at regulating online gaming. According to the most recent figures released by the government, a newly regulated industry will provide the Spanish state with an additional 137.5 million euros and create an additional 120,000 new jobs.

Online gambling legislation is currently being debated by members of the Committee on the Internal Market and Consumer Protection of the European Union. Although it faces many obstacles, over the coming months the body will seek to gain approval of a draft law that will create a legislative framework for online gambling and promote the cooperation of member states to supervise and regulate the industry.

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