Raising Online Gambling Stakes In Europe

Published: Wednesday, October 25, 2006 Online-Casinos.com

RAISING THE STAKES IN EUROPE

Bloomberg report says US players will find a way, and European potential is growing

The U.K., Italy and Belgium are all opting to regulate Internet gambling, rather than outlaw it, as gamblers turn increasingly toward the Web for their entertainment reports Bloomberg business news this week.

Making for a more attractive climate for online gambling companies, the European Union is pushing countries to scrap any measures that protect domestic companies when those nations open their markets, the report continues, highlighting the warning by EC regulators to EU members such as France and Austria to stop discriminating against international bookmakers and casinos.

The changes may give U.S. gamblers more ways to evade the ban on Internet wagers at home, says William Eadington, a professor at the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno.

"A sub-industry in circumventing the rules will evolve,'' Eadington says, pointing to the failure of Prohibition, which banned the sale of alcohol in the 1920s. "American gamblers may find themselves pushed into a market that's in the hands of Europeans.''

Italy next year will let companies offer online lotteries, bingo and betting on sports or games of skill. The U.K. will begin licensing private Internet gaming sites in September. Belgium is working to change its legislation as well, and private companies are already allowed to offer sports betting in Austria.

After recapping on the damage caused to European companies by the recent US legislation interfering with financial transactions, the Bloomberg article comments that New York-based gaming consultant Christiansen Capital Advisors LLC expects the global market to double to $24 billion by 2010, although the analyst has not yet revised its outlook to take into account the U.S. measures and their likely effect on the business.

Julian Easthope, an analyst at UBS AG in London, says it's too early to say which companies will be able to take advantage of opportunities in Europe because the regulations are still developing. The EU's gambling market is valued at about $70 billion.

Paul Renney, a partner specialised in the Internet at law firm Addleshaw Goddard LLP in London, says he expects lobbying to increase to open the EU market further.

"European countries like the U.K. that take a more enlightened approach of regulation, not prohibition, stand to gain,'' he says.

There are still pockets of resistance. The leaders of Germany's 16 regions last week proposed banning all private betting companies, including Internet and traditional operators, and to extend the government's betting monopoly to almost all forms of gambling.

France on Sept. 15 detained the co-CEOs of Vienna-based Bwin Interactive Entertainment AG for three days on charges of violating gaming laws. A court in the Paris suburb of Nanterre will decide whether to charge them within a year, according to the company, which says its Gibraltar license gives it the right to operate across Europe.

"Money games in France are very strictly regulated,'' French Budget Minister Jean-Francois Cope told reporters on Sept. 19. "It's not an economic activity like any other, and it's out of the question to let it explode in an unconscious manner.''

The government may jack up fines on international firms that advertise their services in France from 4,500 euros ($5,655) to five times ad costs, possibly including sports sponsorships, he said. The French soccer league has banned Bwin from putting its logo onto AS Monaco's jerseys, while stopping 888 from backing Toulouse FC, citing the risk of legal proceedings.

The French state's role in controlling the country's $24 billion gambling market has evolved little since 1539. That's when King Francois I established a lottery in Paris to stamp out "charlatans'' so his subjects didn't "spend their time, labor, virtues and necessaries in games of hazard,'' according to the Web site of La Francaise des Jeux, France's state-controlled lottery.

Challenges to its authority, however, have multiplied.

Paris-based Groupe Partouche SA, operator of the Cannes Palm Beach casino, in March filed a complaint with the European Commission alleging unfair competition by La Francaise des Jeux, which is allowed to operate on the Internet. Partouche is considering going online in Belgium when the law changes there.

"We just want to do our job online as a casino operator,'' says Frederic Vinzia, head of Partouche Interactive. He estimates there are 2 million French people who gamble online. "It's a tremendous opportunity.''

PartyGaming's CEO Mitch Garber says countries like France and Germany will only be able to hold out for so long. PartyGaming is developing multilingual Web sites and putting together marketing campaigns in new markets, Garber said. He declined to be more specific.

"The gaming and lottery monopolies are the last to fall, and they are falling and will fall,'' he said. "You're going to see a lot more tolerance in Europe.''

Paddy Power Plc, Ireland's largest bookmaker, may open gaming Web sites in Italy, Spain and Poland to take advantage of the legislative changes, Chief Executive Officer Patrick Kennedy said in an interview in Dublin on Oct. 24. The company started a German language service in April.

The European Commission put Italy, Germany, Hungary, the Netherlands, Sweden, Denmark and Finland on notice in April for letting state lotteries offer online sports betting, while barring rivals. On Oct. 12, Financial Services Commissioner Charlie McCreevy targeted France and Italy for shielding domestic sports bookmakers, and scolded Austria for restricting advertising by foreign casinos.

"Internet gaming is here to stay,'' says Andrew Lynch of Schroder Investment Management, which owns more than 5 percent of Groupe Partouche. "There's going to be plenty of sabre rattling and fighting talk by the government monopolies, but it's a trend that's going to happen.''

The U.K. Gambling Act approved last year will extend the Internet licenses from bookmakers to gaming companies. Chancellor of the Exchequer Gordon Brown may include fiscal incentives in the 2007 budget for offshore operators to seek the new licenses.