Features of Online Casino Regulation in Europe

Legal Reader

17 June 2024

To protect minors and other vulnerable populations from illegitimate online casinos that would want to exploit them, the EU is promoting consumer rights.

Fun gambling requires fair rules. Casino Europe gamblers visit online casinos to have fun spending their money while having a fair chance of making some. If they suspect the rules of gambling are not fair, they will stop having fun and stop spending money on legal online gambling. That suspicion leads to a loss of trust that harms the entire gambling market, including casinos that play fair. To ensure a fair, fun environment for gamblers and build trust in online casinos, European bodies have created legal frameworks that regulate casinos:

licensing
cross-border cooperation
privacy & data protection
responsible gambling resources
marketing and ad regulations

The biggest challenge for casino legislation in Europe is the high diversity of cultures and legal systems in member states. Rules that work for Polish casinos may be unenforceable in Romania and vice versa. Rather than impose regulations, EU bodies, such as the European Commission, issue harmonization directives and recommendations. Each member state implements them in line with their own laws and the rulings of EU courts.

Historical context

The 2014 “Recommendation on Common Principles for the Protection of Consumers in Online Gambling” by the European Commission provides some historical context for gambling legislation in Europe. In the Recommendation, the European Commission lays out three goals for gambling regulation:

protection of consumers (minors in particular)
providing assistance to gamblers who want to quit
regulation of gambling advertisements

To that end, consumers will be asked to verify their identities and the gambling operator will ensure there is a prominent warning that gambling is addictive. As for ads, they must not be aimed at minors alone, associate gambling with youth-related activities, or exploit the inexperience of minors. All verified users must have the ability to self-limit their gambling by either putting a cooldown period between bets or limiting how much they can bet.

The implementation of national regulation and the licensing of legitimate online casinos is through bodies such as the EGBA (European Gaming & Betting Association). Operating from Brussels, EGBA was established in 2003 as a trade organization for licensed gambling operators and an online casino legal coordinator. It represents gambling operators from 22 European countries who serve 31.2 million customers. Other goals of EGBA are to promote safe sports and casinogambling experiences and develop new anti-money laundering guidelines.

In 2018, the European Commission issued the GDPR (General Data Protection Regulation) in an effort to increase consumer data protection. GDPR instructed online service providers to inform their users of how their data is being handled and to allow them the right to be forgotten. Online casinos that closely worked with EGBA were able to preview and implement GDPR with relative ease compared to those operating outside of EGBA’s purview.

How gambling regulation works in the EU

Every country in the EU regulates gambling in line with its national legislation and with the help of a gaming authority that represents national gambling operators. For instance, gambling operators registered in Malta are regulated by the Malta Gaming Authority (MGA). The main responsibilities of gaming authorities are to promote safe gambling and to recommend legislation to the government. In that way, the government of each European country can create gambling regulations that are in line with market demands and are achievable by any regulated online casino.

In legal disputes, a piece of gambling regulation will end up in front of the Court of Justice of the European Union (CJEU), which gives its opinion but lets national courts have the final say regarding gambling regulations. Governments that present their case in front of CJEU must prove that:

there is a legitimate reason for that piece of legislation
the reason is in the public interest
that public interest is systematically promoted
the promotion is through proportional, suitable, and necessary measures

In 2018, CJEU ruled in Sporting Odds Ltd v. Nemzeti Adó, in which the Hungarian tax authority fined the UK gambling organizer roughly $13,000 for not having a license. The court found that the Hungarian government created a licensing system that provided only “trustworthy casinos” with a license, meaning casinos with headquarters in Hungary and running for 10 years or more. The CJEU found that that restriction is unreasonable and gave the Hungarian government an undue monopoly that does not achieve the stated goal, namely the prevention of gambling addiction.

Current legislative frameworks

United Kingdom — The Gambling Act 2005

In the UK, the Gambling Act 2005 established the reasons for the Act as protecting minors, preventing gambling from being a source of disorder and crime, and ensuring a fair gambling environment. The Act established the Gambling Commission as the body in charge of promoting those objectives, investigating gambling offenses, and launching criminal proceedings related to them. The Commission issues guidance to local authorities and gives advice to the Secretary of State related to UK casinos and gambling, such as which regulations to introduce and the effects of gambling on society.

The Commission licenses gambling providers while charging them an annual fee, and may issue indefinite or limited licenses. Those gambling providers who, in the Commission’s opinion, breach the terms of the license are obliged to pay a penalty. Individuals can request a license as well and use specified premises to organize gambling. Persons convicted of a crime may have their license revoked.

Germany — Interstate Treaty on Gambling

The 2021 Interstate Treaty lifted the total ban on online poker, online casino games, and online slot machines that was in effect. The stated goals in the Treaty are allowing orderly gambling, protecting minors, and protecting the integrity of sports.

Gambling operators must uphold the principles of transparency and accountability, ensuring that all funds used for gambling come from legitimate sources. Online casino games licenses are issued only to operators of actual casinos in Germany. That restriction does not apply to sports betting, online slot machines, or online poker. The gambling operator license is valid for five years on first issuance and seven on renewal.

France — ARJEL (now ANJ)

The French National Gaming Authority (ANJ) is an independent administrative body charged with approving gambling operators who contribute to an orderly society and fight fraud. The only legal types of online gambling in France are sports betting, online poker, and horse racing. In 2010, ANJ contacted foreign gambling providers who allowed French residents access to forbidden gambling types and demanded that they cease and desist. When that did not produce the desired outcome, ANJ sued French ISPs, who were ordered by the court to block the offending websites or pay $10,000 a day.

ANJ has the authority to ban sports betting on any given sports event. The given rationale can be anything from social media rumors that the event is fixed to unusual betting patterns and secret alerts provided by international partners.

Hungary — Supervisory Authority for Regulatory Affairs (SZTFH)

Besides overseeing gambling activities, the Hungarian gambling authority (SZTFH) deals with mining supervision, tobacco control, and cyber security, giving it significant resources to deal with illegal gambling operators. Non-licensed gambling organizers can run raffles, remote games of chance, and card rooms. Every other gambling type is in the hands of state-controlled gambling organizers, but there are efforts to liberalize the market to generate more tax revenue.

In 2021, Hungary received $189mm in tax revenue from gambling providers serving 1.1 million Hungarian players. As of 2023, Hungary allows telegaming (televised gambling) and is on a clear trajectory of loosening the restrictions for non-licensed gambling operators.

Italy — AAMS (now ADM)

AAMS is the Italian government agency responsible for enforcing gambling laws, which were, up until recently, against all forms of gambling. That is not surprising, seeing how in Italy the mafia is commonly behind gambling. However, in the past 20 years and following complaints by European gambling organizers, the Italian government has relaxed the gambling regulations. They now allow for games of skill but still prohibit games of chance. For example, Texas Hold’em is allowed in real life, but its online version is banned (players can keep track of cards in real life but cannot do the same online).

AAMS issues up to 120 licenses for gambling operators offering services to Italian residents. To qualify, the gambling operator needs to fulfill a list of restrictions and also pay a $380,000 fee to AAMS.

Future trends and potential changes

Online gambling has become a widespread source of fun thanks to increased internet access and mobile device proliferation. Anyone can access an online casino and gamble on a variety of games, but that doesn’t mean the games are fair. If the gambling service providers are not legally required to be fair and act in a way that benefits society, they will start exploiting legal loopholes for their own gain.

To protect minors and other vulnerable populations from illegitimate online casinos that would want to exploit them, the EU is promoting consumer rights. That is a trend that will continue in the future, with harmonization directives focusing on greater gambling provider transparency and more user control. EU’s efforts so far have focused on non-European service providers who seek an unfair advantage in the EU market and harm online casinos legit.

Novel, unfair forms of gambling that target minors come in the form of video games, in particular those with loot boxes and other microtransactions. Video games such as GTA Online, FIFA, and Fortnite provide minors with immediate access to a fun environment where they can pay real money to buy virtual assets. Some social media influencers promote rampant purchases of those assets by creating “loot box opening” videos that feature them scoring incredible results from loot boxes. The trick is that those influencers may log into a special account provided by the game developer, where their loot box chances for a win are much higher than normal.

As of 2023, European countries such as Belgium and Austria have taken a soft stance on banning loot boxes and the deception associated with them. The legislators are aware of the dangers but are not willing to equate loot boxes with online gambling. That led to some conflicting court decisions that increased uncertainty in the market and created consumer suspicion regarding video games and their monetization models.