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David Newstead

 

Is Europe becoming the United States?

3 Jun 2010

By David Newstead
It was only a few years ago that online gaming took its biggest hit, with the US Government effectively closing the entire U.S. market. What emerged was an intense European focused industry that, with hard work from operators and affiliates alike, became more than viable. Now the speculation that individual US States are looking to open their virtual doors to poker can only be good news, but it is just that: speculation. At the same time EU States are looking to regulate, restrict and protect their own interests. Is Europe going US?

All these restrictions stem not from altruistic governments looking to protect vulnerable citizens, but from money, and, more specifically, from them not getting what they perceive as a fair share. The US moved to restrict online gaming as it saw US citizens pouring money into Eurocentric gaming firms – a slow drain of liquidity out of the country that couldn't be taxed efficiently. This was, understandably, an untenable situation, which, regrettably, was handled with a snap decision and the UIGEA. The blanket ban simply meant more inventive ways of allowing US customers to play were thought up and generally through insidious, backdoor means. It also meant a decline in a market that produced millions of US Dollars and brought into focus the issue of personal liberties in the USA. Instead of a solution they created more questions. But surely the EU wouldn't make the same mistake?

The recent Santa Casa ruling, whereby the Portuguese Government were given the green light to protect its state gaming monopoly by the ECJ (European Court of Justice), protectionism in Finland and Germany, France opening up and at the same time over regulating and introducing taxes and, more worryingly, the UK threatening a review of the Gambling Act, are all indicative of a change of mood in Europe. The catalyst for each is Governments trying to capitalise on gaming, possibly brought about by the hard economic times. However, where the US and the EU differ is that the EU was founded on a basic and primarily economic principle: the free movement of goods, people and services. Gaming falls firmly into the latter, and the European Court of Justice acting to limit and restrict gaming firms flies horribly in the face of that which is core to the EU. Worse, they have brushed aside this enshrined constitutional principle through the back door, claiming that states have the right to protect their monopolies from potential money laundering via gaming firms...

Anyone that has worked in this industry knows gaming is one of the most regulated online businesses. Compare licensing, compliance, KYC (Know Your Customer) checks against, say, of those employed by eBay or Amazon, and you'll know that gaming largely sits atop the online world when it comes to preventing fraud. Making an exception of a cornerstone principle for gaming sullies the EU, and may even set a precedent of nationalisation over free market competition, and the progress the latter fosters. Such rulings as the Santa Casa case may have even longer lasting repercussions for the EU. After all, what other markets will members states move to protect next?

EU member states changing the goal posts for online casinos won't bring an end to gaming in Europe, but it will make it harder for the smaller, sometimes more innovative casinos to compete fairly. They can't afford a license in every country, the additional taxes, the accountants, lawyers and auditors that will inevitably be needed, so they may disappear, leaving the big brands to dominate. That has nearly always led to industry stagnation. In gaming that may manifest in less generous promotions, a lack of technological innovation and more severe terms and conditions for players. Would we see new casinos like the excellent Jackpot Games/A> launch in an over regulated and restrictive g EU gaming market?

Hopefully the EU will see sense and keep the market open so that players/EU citizens have the full choice of casinos available to them. Hopefully the US will see that limited regulation and some tax revenue is better than none at all and we see that market flourish once again. Only time will tell.
 
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