Opinion: Spanish court gets tough with unlicensed egaming operators
The recent court rulings in favour of Codere shows that the Spanish authorities will not shy away from ensuring unlicensed operators are pushed out of the market, explain Alejandro Fernández de Araoz and Mavi Vilas of Araoz y Rueda Abogados.
A recent Madrid court order has summoned a number of online gambling operators to immediately stop their activities in Spain. This order was issued at the request of licensed online operators who successfully argued that the defendants had obtained an “unfair competitive advantage” by not paying domestic taxes and by not complying with local licensing regulations, including the posting of bonds or bank guarantees.
After many years of a regulatory uncertainty due to a combination of poor regulations and of Spain’s quasi-federal structure (which led to having 17 different laws depending on the region or Autonomous Community), May’s Gambling Act was intended to finally get rid of the legal uncertainty in the Spanish gambling industry; in particular in connection with the emergence of new electronic communications services and the widespread use of interactive gambling services via the Internet.
The traditional concept of gambling has recently changed in Spain as a result of the boom in online gaming, with the subsequent blurring of the territorial limits of traditional gambling activities, as well as the appearance of new agents in the market, like online betting websites or social networks. In this new context, pre-existing legislation did not provide an appropriate regulatory response and sufficient protection for the industry in order to ensure the necessary legal certainty for both the operators and gambling users.
This lack of adequate protection had become particularly sensitive with regard to those games in which physical presence is ancillary, therefore, the risk of the spread of illegal operators and the abuse of standard gambling practices through the internet had become a greater and real danger for the industry.
An additional problem was that the Spanish Constitution establishes that law-making powers on gambling activities correspond to Spanish regions so the issue was how to have a single, coherent and unified “federal” regulatory framework. The widespread access to Internet, thus to online gambling services, has unavoidably led to a need to regulate nationally the operation and management of gambling activities, without prejudice to the full recognition of regional competences.
Although the application of the Gambling Act is still very recent in Spain, gambling companies which have been compliant with the legal requirements for years have now found a clear opportunity to try to stop unlicensed operators from taking this unfair advantage. For many years, the regulators had been very lenient precisely because of the unclear regulatory status, which made it difficult to chase illegal operators for breach of laws, in addition to the fact that many of them operated from remote jurisdictions which entailed complex legal action.
Now that the regulations are clear and settled, licensed operators, who pay gambling taxes and incur other significant compliance costs, have decided to go to the commercial courts based on the unfair advantages obtained by their illegal competitors.
Therefore, on the grounds of the referred provisions, Codere brought an action against Sportingbet in which it requested a Madrid court to issue a cease and desist order by which the defendants would be barred from using any domain names with the ending dot.es and miapuesta.es, from advertising in Spain, and from contacting Spanish customers.
On 15 December last year the court fully endorsed Codere and another two Spanish operators’ requests for injunctive relief consisting of the immediate cessation and/or prohibition of illegal activities in Spain presumably carried out by the defendants. With this interpretation, Spanish Courts are sending a clear message that they are ready to grant an overall protection of licensed gambling operators; this will clearly have an impact on the activities of unlicensed online gambling operators.
The new Gambling Act now offers great opportunities to do business in a country like Spain which has a long tradition of sports betting and a passion for soccer. The regulatory framework is now clear and predictable for those who want to comply.
While the legal battle will continue and the application of the ECJ case law will raise interesting issues and controversies in the future, the Madrid Court Order is also sending a very clear message that the unfair competition from unlicensed online operators will not be tolerated in the future.