Navigating the Complexities of Online Gaming in the European Union

Online gaming in Europe can be likened to a "gray market" due to the intricate and ever-changing legal landscape across different territories. Despite being a collection of separate countries, the European Union (EU) plays a significant role in shaping the online gambling laws of its 28 member states, which include influential nations like Germany, France, Belgium, and the Netherlands.

The Soaring Growth of Online Casinos in the EU

Online gaming stands out as one of the EU's fastest-growing sectors. In 2011, it amassed €9 billion in revenue, a figure expected to surpass €12 billion in 2015. Statistics from the European Commission reveal that around 6.8 million EU citizens engage in various forms of virtual gaming annually. This substantial player base, combined with the explosive growth of internet and mobile technologies, offers substantial profit potential for the EU market.

Diverse Gaming Frameworks Across the EU

Painting a comprehensive picture of how online gaming operates in the EU is a complex task, given the diverse regulatory frameworks. Some regions issue licenses to private operators, while others rely on public or private administrators. "Diversity" is the watchword when understanding the structure of virtual gambling in the EU.

The overarching goal of the European Commission in overseeing the diverse online gambling industry is to protect its citizens. This includes preventing crimes like money laundering and fraud, preserving the integrity of sports, and ensuring equal marketing opportunities for all member states. The EU promotes an open border policy, aiming to prevent any single nation from monopolizing the gambling sector. However, this system is not without its flaws, as demonstrated by Germany's ongoing struggles in this regard.

Germany has grappled with crafting an acceptable online gaming policy that satisfies both local stakeholders and the EU for years. In 2011, the "German State Gambling Treaty" was proposed, theoretically opening the market to competitors from other EU states. In practice, the treaty granted special privileges to German online operators with a monopoly, a stance opposed by the EU. In early 2013, all 16 German states ratified the treaty, allowing for 20 online sports betting licenses and unregulated online casino games. The EU, however, objected, claiming that the treaty provided unfair advantages to German operators. The German Federal Court indefinitely suspended its decision on the treaty in January 2013, further highlighting the complexities surrounding online gaming regulation.

Online gaming in France is still relatively new, with the activity becoming legal in 2010 when licenses were granted to companies such as Bwin Party and PartyPoker. These licenses were contingent on companies offering games of skill rather than games of chance. Skill-based games, including poker, horse racing, and sports betting, were permitted, while slot-type games were excluded.

Horse racing betting enjoys immense popularity in France, with virtual betting proving highly profitable. French live horse racing saw a 3 percent revenue increase in 2012, but the first half of 2013 recorded a substantial 20 percent revenue surge in virtual sports betting. These figures bode well for France and the online gaming industry as a whole.

In France, the Paris Mutuel Urbain (PMU) oversees gambling, regulated by a police force known as the "Sous Direction des Courses et des Jeux." After an 80-year tenure as the leader in French horse racing, PMU took on the role of globalizing French horse racing in 2010, further propelling the industry's growth.

Belgium: Stricter Regulation and Blacklisting

Belgium does not fully embrace the EU's philosophy of a free online market. While land-based casinos can apply for online gaming licenses, virtual companies consistently face rejection. The Belgian Gaming Commission has identified and blacklisted 78 unlicensed casinos that target Belgian online customers. Offending companies that disregard Belgium's regulations face fines of up to €100,000.

Certain smaller land-based casinos in Belgium have found ways around these regulations by partnering with larger international firms like Bwin Party. Online gaming companies in Belgium are subject to a 34 percent corporate tax and an additional 15 percent gaming tax. Once approved, these licenses do not expire.

Dutch Gaming Law in Transition

Dutch gaming law, overseen by the Netherlands Gaming Authority (NGA), is undergoing significant changes, with a complete regulatory framework expected by January 1, 2015. The Dutch Remote Gambling Act, still in draft form, outlines the new parameters for the online gambling market.

Under the tentative Dutch Remote Gambling Act, online casino taxes would be set at 20 percent, considerably lower than the land-based tax rate. Additionally, 1.5 percent of gross gaming revenue would be allocated to problem gambling programs. To operate an online casinos in the Netherlands, businesses must establish a subsidiary within the country before obtaining a five-year license. The scope of activities covered by the license includes sports betting, poker, and casino games. After one year of operation, these businesses must successfully pass a quality assurance audit by the commission.

As the 2015 deadline approaches, concerns have arisen about the proposed gambling act's ability to protect the public from addiction and ensure the industry's regulation to safeguard consumers.

Applying for an EU Gambling License

While an online gaming license obtained in one EU territory theoretically grants access to all other EU jurisdictions, the process of obtaining a license is far from simple. First, there must be available virtual space within a country's existing legal framework. Applicants must meet specific requirements, which can be a challenging task. In Malta, for instance, applicants must submit a comprehensive business plan, contract agreements, and software details to the European Commission. Not all applications receive approval, but those that do receive a letter of intent from the Malta Gaming Authority. After software certification, a five-year gaming license is issued, subject to fees and taxes that can amount to roughly €13,000 for fees alone, with an additional €7,000 or more in monthly taxes.

The Importance of Licensed Online Gambling

The vast and largely unregulated landscape of the internet increases the potential for corruption in online gaming. To protect both players and businesses, rigorous licensing practices are prevalent in most countries. Consequently, obtaining a gaming license for an online gambling business in the EU can be one of the more challenging aspects of operation. It is essential for online gamblers to choose reputable gaming companies, regardless of the country or continent, to ensure a safe and reliable gaming experience. Fortunately, the EU's online gaming market benefits from the robust support of the European Commission. As the EU market continues to expand, more lucrative opportunities will arise for gaming businesses and enthusiasts alike.