European Commission pushed to get back to regulating gaming sector

In 2017, the European Commission decided to wash its hands of the EU’s gaming sector, saying it was “not a priority” to enforce EU Single Market rules for that sector.

Eight years later, the Commission is now facing calls to get involved once again to restore order to a growing regulatory mess. 

In a letter addressed to the EU’s Internal Market Commissioner Stephane Sejourne, MEP Peter Agius warned that the Commission’s reluctance to regulate the gaming sector was allowing illegal gaming operators and predatory litigation pitches to flourish.

“The current situation is the direct result of the Commission’s inaction,” Agius told Sejourne. “This state of affairs is now weighing heavily against consumers, EU competitiveness, EU jobs and freedom of movement.”

Agius’ call will be closely watched by Malta’s gaming sector, which is among the world’s largest and which, according to the Malta Gaming Authority, contributes roughly 10% to Malta’s economy.

Problems in Austria

The sector has been embroiled in a years-long legal battle in Austria, which imposes a monopoly on gambling in the country.

On the basis of that monopoly law, some gamblers in Austria who lost money while playing on Malta-licenced online casinos subsequently filed court cases to recoup their losses.

Austrian courts found in their favour, effectively placing Malta-based companies on the hook for gamblers’ losses in Austria. Litigation-focused firms quickly pounced on those rulings and began advertising to Austrian gamblers that they could “get their money back”.  

The issue was serious enough for Prime Minister Robert Abela to raise with his Austrian counterpart in bilateral talks concerning the two countries.

In February, a Maltese court ruled that Austrian courts could not force Malta-based gaming companies to compensate gamblers for their losses in Austria.

The court ruling was celebrated by Malta’s gaming sector as it appeared to shield them from Austrian court rulings.

But according to industry sources, Austria’s Supreme Court has taken the Maltese court judgment to mean that enforcement of the Austrian ruling in Malta is impossible.

They say that Austria's top court has now used a rarely cited clause in Austrian law to allow Austrian courts to enforce their decisions in such gaming-related cases domestically, ordering an Austria-based bank to pay a gambler who lost money at a Malta-based online casino.

While the EU promotes its free internal market as one of its key pillars, gaming is one of a handful of sectors where member states are allowed to restrict competition.

Until 2017, the European Commission played an active role in policing the sector and opened infringement proceedings against member states it believed were abusing that exception.

But that year, the Commission led by Jean Claude Juncker decided to close all ongoing infringement proceedings and announce that it would now leave it up to member states’ national courts to interpret and enforce EU law in the gaming sector.

While national courts can refer issues to EU courts for guidance, in practice they rarely do.

Agius said the result is increasingly fragmented regulation for the sector, with different countries enforcing opposing court judgments.

“The resulting fragmentation is reaching an unbearable point with some jurisdictions now declaring competence for enforcement against operators established in other jurisdictions, which, on the other hand, refuse to enforce judgments in other Member States’ citing EU fundamental freedoms,” he wrote in his letter to the EU Commissioner.

The biggest winners of the regulatory mess are illegal operators, he said, citing studies which suggest illegal gambling sites dominate the market in countries like Hungary, Germany, France and Finland.

Agius said the Commission had to act to restore internal market freedoms in the online gaming sector, as well as act to regulate so-called Third Party Litigation Funding – the practice of commercial entities funding lawsuits in exchange for a cut of eventual damages awarded by a court.

“The European consumer stands to gain from a regulated gaming market with high player protection rules, fending off the high risks of an illegal gaming offer,” he said.