EiG: Legal Issues Still Dominate

24 September 2008

Lawyers, lawyers everywhere, nor any drop to drink! Legal issues dominated the second day of European i-Gaming Congress and Expo in Barcelona and with news coming from the United States of moves in Kentucky to seize gambling domain names it was no surprise that the morning’s opening session on the latest situation in North America was well attended.

Frank Catania Sr., past director of New Jersey's Division of Gaming Enforcement and president of Catania Consulting Group, began by giving the audience a summary of the recent bills that have been introduced and the progress (or lack thereof) that each has made. He noted that bills were being introduced by Congressmen from states across America but suggested that none would pass before the presidential election in November.

Mr. Catania went on to discuss what impact the political climate after November’s elections might have on online gambling regulation in the United States. He thought that any change to Unlawful Internet Gambling Enforcement Act, or UIGEA, would be unlikely if John McCain were to become president because it was originally a Republican-sponsored bill. Prospects might be better for delaying any further implementation of UIGEA were Barack Obama to win and/or the Democrats gain control of the House in the concurrent elections for both Houses of the Legislature.

Mark N.G. Hichar, partner at Edwards Angell Palmer & Dodge, focused his presentation on online intrastate wagering, which already exists for lottery products in a few states like North Dakota.

He addressed the attempts to bring legislation to allow online poker for residents in the state of California. The legislation has recently failed to be passed both through a lack of time in the legislative calendar and because of some ambiguity about whether customers would have to register in person rather than online to comply with the requirements for distributing problem-gambling literature that appeared in the legislation.

Mark L. Mendel, who has been a key figure in the World Trade Organization dispute between the United States and the Caribbean nation of Antigua and Barbuda, described the United States’ approach to gambling legislation as “irrational” and individual states had come to rely on gambling and lotteries too much as a source of revenue. Just as with monopolies in European markets, they are naturally reluctant to give up these revenues.

But Mr. Mendel believed that change is going to come “relatively quickly” in the United States simply because too much money is at stake. His fellow panelists were less optimistic about the prospects for change in the near term or for any clarification of the existing ambiguity, both on the federal Wire Wager Act of 1961 and UIGEA.

The final panelist was Jason Kellerman, the chief executive of PurePlay. He was not a lawyer but said that over the last few years working in the online poker market had meant he had to become a legal expert!

He outlined some of the legal business models that exist in the United States at the moment, particularly advertising and subscription-based models. PurePlay offers a subscription-based poker model and players pay $20 per month to play in tournaments for prizes and cash. Mr. Kellerman revealed the site has 1.5 million active users. Interestingly, PurePlay falls under sweepstakes laws in the United States and operates in 34 states that permit sweepstakes. PurePlay can advertise and take payments from United States credit cards.

Back on the European side of the Atlantic, Nicholas J. Nocton of Jeffrey Green Russell assessed the new regulations for advertising online gambling in the United Kingdom, which have been in force for just over a year now. He reviewed some of the recent rulings made by the Advertising Standards Authority in complaints against online gambling adverts, like those of Paddy Power, Wink Bingo and Intercasino, and provided some useful information for operators as to how to keep on the right side of the regulations.

France is another European market where change has been happening and Thibault Verbiest of Ulys provided an update on the latest developments. He had both good news and bad for operators looking at the market. The good news was that the judicial atmosphere in France is “quiet” at the moment with regard to gambling cases but the bad news is that there is now a new angle of attack that operators have to face.

Sport organizations in France have switched the focus of their attack to trademark infringements. There is also a little-used provision in the French sports code that recognizes an exclusive right of sports organizations over the events they put on. The argument now is that sports organizations own rights to bets taken by sportsbooks on the events they organize. The provision in the sports code is very broad and not fully understood and will require secondary legislation to clarify its implications. But it could mean that an operator will need two licenses –- a gambling license from the state and a license from the relevant sports body to take bets on its events.

Mr. Verbiest explained that a consultation on the technical aspects of online gambling is being conducted and that spring 2009 is perhaps a realistic date for seeing draft legislation in France. In answer to a question about the tax rate he said the probable aim was to “make it high but viable” and was unlikely to copy the existing regime in France for land-based gambling.

The afternoon offered something completely different for delegates. The EiG LaunchPad gave four startup companies the chance to pitch their businesses to a panel of industry experts who would then judge which was the best investment.

The four lucky companies to receive a grilling from Mark Blandford (Valhalla Investments), Leigh Nissim (St. Minver), Ken Arnold (CyberArts), and Paul Kanareck (FreemantleMedia Ventures) were egaming 2.0, Pikum!, Smarkets, and Fantasy Sports Betting Technology.

Concepts of social networking, community and Web 2.0 were prevalent in all the companies’ pitches and, interestingly, three of the four focused on sports betting. After the pitches and panelists’ interrogation the experts voted FSB Technology as the best investment, which matched the unscientific “show of hands” by the audience. Perhaps there should be an update on all four startups’ progress at next year’s EiG?

Another highlight of the day was the by now compulsory session in which Petter Nylander, chief executive of Unibet, takes on one of the state monopolies. Last year Rolf Sims, legal adviser to the Norwegian government, was on the receiving end; this year it was the turn of Jeanette Strom of Sweden’s Svenska Spel.

It could be hoped that a future EiG conference might not need to feature a single lawyer because at some point there will be a single, European Union-wide I-gaming license and the United States and China will be welcoming operators with open arms and sympathetic tax regimes. Based on today’s sessions that dream is some way from becoming reality and legal issues will continue to be a key operational issue for many conferences to come.

Lorien is a research analyst with Global Betting and Gaming Consultants, and currently resides on the Isle of Man. Prior to this, he spent three years at a leading United Kingdom gambling firm, providing regulatory and market research for its various international e-gaming ventures.