European Court Ruling Benefits Industry

MEDIA ROOM

An unexpected European Court of Justice ruling has dealt a blow to EU member states that have been restricting their gaming and lotteries’ market to keep out the online gaming industry, an area in which Malta has become a leader.

In the landmark judgment, the EU court yesterday ruled that the German state monopoly on most forms of gambling was “unjustifiable” and had be ended at once because it was neither consistent nor systematically applied. This can pave the way for online betting companies based in other EU member states to penetrate the lucrative German market.

“This is a big win for Malta’s gaming industry, which has been arguing against European monopolies for a very long time,” a representative of one of the biggest online betting companies based in Malta said when contacted.

“The decision makes the position of these monopolies untenable. The court asked how monopolies could be justified on grounds of public safety when they were investing heavily in advertising their games. This judgment confirms the points raised by the Maltese industry throughout the years,” the representative said.

A spokesman for the Malta Lotteries and Gaming Authority was more cautious but still felt the outcome of this case was positive. “It is still early to make a detailed interpretation of this ECJ ruling as we still have to go through the ruling,” he said.

However, the court’s conclusions that “German rules do not limit games of chance in a consistent and systematic manner”, among others, confirmed the authority’s contention that online gaming had to be regulated consistently and effectively and that prohibiting online gaming and maintaining state monopolies was not only an ineffective national policy but also raised questions on compatibility with the EU Treaty.

Under German rules, only the country’s 16 federal states or companies run by them can offer most gambling services, especially lotteries. This monopoly in the past brought billions of euros into state coffers and was partly used for social, cultural and sporting projects.

A number of private firms, including one based in Malta, challenged the German rules, arguing they were inconsistent because the 16 states exercised a monopoly on most forms of gambling but not on other forms, such as slot machines and casinos.

Following its recent judgments in similar cases over the past years, the ECJ had been expected to throw out the challenge as it had already ruled gambling monopolies in a number of other EU states were legal.

But the ECJ has now ruled that since “the German rules do not limit games of chance in a consistent and systematic manner… the monopoly ceases to be justifiable”.

Germany fell foul of the ECJ’s judges because public monopoly holders carry out “intensive advertising campaigns with a view to maximising profits from lotteries” and private casino operators are allowed to “encourage participation in those games”.

In such circumstances, the court ruled, the preventive objective of that monopoly could no longer be pursued. Germany had to end the monopoly immediately.

Calling the ECJ’s judgment a “landmark ruling”, European Gaming and Betting Association head Sigrid Ligne said the ruling would have a decisive impact on the much-needed reform in Germany. “It signals the end of the German online gaming ban and will bring legal security to EU online gaming operators and German consumers alike.”