The European Court of Justice ruled that member states can prohibit Internet gambling firms from operating within their borders if their own national courts deem that such a ban combats fraud and crime on Thursday.
In separate cases, Britain's Ladbrokes and Betfair had challenged the Netherlands' state-run gambling monopoly De Lotto, claiming their British license which comes with strict rules regarding fraud and gambling addiction, should be recognized by the Netherlands because European Union law states that companies can offer business services across borders in other EU countries.
The Ladbrokes and Betfair rulings are consistent with the judgment the court made involving bwin and the Portuguese Football League in August, 2009. In that case bwin lost its challenge to Portugal's government run monopoly when the ECJ ruled gambling monopolies were legal if they existed to fight fraud and crime. As in the La Liga case, the ECJ found gambling is something that should be regulated at the national level, and not by the EU.
"A member state is therefore entitled to take the view that the mere fact than an operator such as the Ladbrokes companies lawfully offers services in that sector via the Internet in another member state is not a sufficient assurance that national consumers will be protected," the ECJ ruling reads.
"In addition, because of the lack of direct contact between consumer and operator, games of chance accessible via the internet involve different and more substantial risks of fraud by operators against consumers compared with the traditional markets for such games," added the court in its ruling.
The decision is a blow to Internet gambling companies, but some in the industry see a silver lining because the ECJ ruling said that if it were determined that "the Netherlands are pursing a policy of substantially expanding betting and gaming, by excessively inciting and encouraging consumers to participate in such activities … it would have to be concluded that such a policy does not limit betting and gaming activities in a consistent and systematic manner." As a result, a Dutch court will have to take a look at De Lotto's actions and see if they were excessively expanding gambling.
"The court has confirmed that if a member state wants to prohibit or channel gambling through a single operator it has to comply with strict features that we consider are clearly not met in the context of the Dutch legislation," said Sigrid Ligné, secretary general of the European Gaming & Betting Association.
The ECJ did leave plenty of wiggle room for De Lotto, however.
"It is possible that a policy of controlled expansion in the betting and gaming sector may be entirely consistent with the objective of drawing players away from clandestine betting and gaming – and, as such, activities which are prohibited – to activities which are authorized and regulated," said the court. "In order to achieve that objective, authorized operators must represent a reliable, but at the same time attractive, alternative to a prohibited activity. This may as such necessitate the offer of an extensive range of games, advertising on a certain scale and the use of new distribution techniques."