Feature: Falling Into Line (Part 1)

Between them Belgium, Bulgaria and Greece may only account for 4% of the EU’s total gambling spend compared to the 75% in the hands of Europe’s ‘Big 5’ member states (Italy, the UK, Germany, France and Spain) but crucially four out of the big five have already regulated ““ with the exception of Germany, which maintains its controversial State Treaty ““ while the other three are at varying stages of doing the same.

But they are not alone. An increasing number of European nations are emulating their larger neighbours and cottoning onto the fact there is significant revenue to be made from taxing and running a regulated online gambling market. The third wave of dot.country is well under way.

The good news is that offshore, unregulated sites and affiliates are being clamped down on, blocked and blacklisted; the bad news, however, is that the market is becoming increasingly fragmented and Europe is dividing itself into a patchwork of varying forms of taxation, regulation and piling additional costs, in varying forms, on private operators, in turn making it harder to compete and sustain business in these territories.

Each of the countries we cover in this feature are either using or intend to use a different model in order to tax and regulate operators, suppliers and/or players on winnings. Each one differs in terms of products allowed and those currently off limits, while in some operators are required to partner with local land-based entities, in others the situation remains more uncertain and the small print is blurred.

What is clear however, is that opportunities lie ahead for the right companies, those that can adapt to rapid change and, arguably, those that have experience in operating in evolving markets.

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Greece & Cyprus

Gambling regulations in Cyprus have been intrinsically linked to Greece ever since an interstate agreement was signed in 1969 and later renewed in 2003, allowing Greek monopoly operator OPAP to offer its games on the island. However, last month, when the Cypriot House of Representatives approved legislation that would regulate fixed-odds sports betting but ban all other forms of online gambling, the two countries became even closer.

The move to ban private operators from offering online games of chance, poker, casino games and exchange betting is one that echoes other European governments’ attempts to combat gambling-related crime. But the greatest controversy has been the proposal ““ under the terms of the decades-old bilateral agreement ““ to exclude Greek monopoly OPAP from the bill, leaving it as the island’s only legal operator.

OPAP’s dominance in Cyprus has often been questioned but now faces further scrutiny. The operator offers games of chance including Lotto, Proto and Kino, but claims that unlike unlicensed egaming operations in Cyprus often hosted in neighbourhood shops, these do not fall under current regulation as they are not played directly over the internet. Instead they are played through terminals and connected via OPAP’s central system.

Unsurprisingly, the new law has met with stiff and often violent opposition from Cypriots and operators alike. OPAP’s retail outlets have been subject to a series of arson attacks, likely instigated by consumers angry at the government’s perceived failure to broaden competition; police were even drafted in to guard all 168 OPAP betting shops in the country.

Lawyer Olga Georgiades calls Cyprus’s new regulations “flawed”, explaining that the agreement allowing OPAP’s Cypriot subsidiary to offer and advertise its games unchallenged is outdated as it was signed based on it being a state-owned operator, which is no longer the case.

OPAP will become fully privatised this year should a 29% state-owned stake be sold as planned, leaving the government owning just 5%. “Now the majority belongs to private entities it doesn’t make sense to have this kind of agreement,” Georgiades says.

“OPAP’s games are made by private suppliers that are competing with companies that have been banned. They are effectively making a monopoly which is breaching the competition rules of the European Union for no justified reason. They are protecting the monopoly of OPAP.”

In Greece, regulations for online gambling have attracted similar criticism. A draft law last year was questioned by the European Commission, which said it appeared to restrict the freedom to provide services. At one stage, in order to comply with EU laws, the Greek government was forced to alter plans to impose a six-month blackout period preventing foreign operators from applying for a licence, again designed to protect OPAP’s interests.

The exact legislation has yet to be clarified and it remains unclear as to exactly which forms of online gaming will be regulated beyond sports betting, bingo and lottery products. OPAP however, enjoys a monopoly in these areas and is also planning to roll out online casino and poker via a joint venture, should regulation permit it, later in the year.

For operators such as Betfair, which generates around 4% (£9m) of its total revenues from Cyprus, the legislation in these countries comes as a significant blow and it is likely to be one of many operators to renew complaints over the law in Cyprus and its compliance with EU law.

Teemu Lehtinen, Betfair’s public affairs manager for Greece and Cyprus, does not believe the regulation complies with EU law and says the company is preparing a legal challenge. “We believe that, in time, Cyprus will mirror the broader European trend of moving towards constructive and sustainable online gambling regulation. This is in the interests of all parties, including local government, customers and operators.”

Both countries have yet to fully enforce egaming regulation ““ Cyprus requires a betting committee to be established first, while clarification in Greece has taken a back seat amid financial ruin and the priority of forming a government ““ but their attempts to clamp down on gambling-related crime have already opened the door to an unpopular monopoly, a model that won’t go unchallenged for long.

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Greece

Adult population: 10.7m

Products allowed/ banned : OPAP monopoly plans to roll out online casino and poker via a joint venture ““ GTECH G2 has won the tender to provide the software. Exact legislation yet to be clarified.

Tax Model: 30% GPT across all products

Estimated tax take first full yearof regulation: (Source : H2) €48.8m

Deal: “Deal being cut for the sale of government’s stake in OPAP. Government attempting to strike a deal where it has an advantage but once it sells stake things could change.” (H2)

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Cyprus:

Adult Population: 1.1m

Products allowed/banned: Fixed odds sports betting allowed. All other forms of online gambling banned, including poker, casino games and exchange betting

Tax model: 10% of sportsbook revenues minus winnings, plus 3% of gross revenues towards vulnerable and problem gambling

Estimated tax take first year of regulation: N/A

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This article originally featured in the print edition of eGaming Review. To subscribe, click here. Parts two and three of the feature will follow later this week.