CJEU Rules against Hungary iGaming Licensing Framework

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Monday, July 17th, 2017 | Written by Charles Washington

Hungary legalized online gambling back in 1998, and over the past two decades has made several changes to its regulations governing online poker, casino games and sports books. The latest set of amendments to the law has proven controversial, though, as foreign operators have accused the country of showing favoritism to domestic companies. Now, a ruling from the European Court of Justice agrees, leaving Hungarian lawmakers forced to revamp their current legislation.

Free and Open Trade

As a member of the European Union, Hungary has agreed to allow for free and open foreign trade within its borders. However, the state’s online gambling laws fly in the face of the agreement as a 2014 update to the country’s gaming laws only allows companies with a brick and mortar presence in Hungary to receive a license to operate online casino and poker sites. In addition, the law establishes a single state-run operator for online sports betting.

As a result, many gambling operators have taken issue with the country’s gaming laws, but it was European sports betting operator Kindred Group, formerly known as Unibet Group Plc, that sued Hungary over the legislation. Their attorneys argued in front of the European Court of Justice that Hungarian gaming laws are biased against foreign operators, and blocking them from conducting fair trade in the country.

Lawyers representing the interests of Hungary, however, countered the arguments by saying that the current law was established to protect Hungarian consumers. Supporting their stance, lawyers have stated that the country’s gambling regulator has been unable to verify the trustworthiness of sites that operate from outside of Hungary, and that allowing the state to manage online sports betting helps to combat fraud.

ECJ Unconvinced

Ultimately, the European Court of Justice found the Hungarian government’s argument to be unconvincing. In an official statement, the court said that while the Hungarian government’s concerns over consumer safety were warranted, it was the responsibility of regulators to find ways to protect gamblers while providing equal access to foreign operators. The court went on to say that Hungary would need to repeal its law and come up with a transparent, non-discriminatory set of criteria that would give equal access to foreign and domestic operators. As the ECJ ruling explains:

“The Court considers that such a requirement constitutes a difference in treatment because it places at a disadvantage operators of games of chance established in other Member States in comparison with national operators, who may more easily meet that condition. For that reason, the Court rules that the
legislation being challenged is discriminatory and, therefore, contrary to the principle of the freedom to provide services.”

Shortly after the decision was handed down, the European Gaming and Betting Association issued a statement commending the action and calling for all European Union member states to establish free, transparent online gambling laws.

Wider Repercussions

The ramifications of the European Court of Justice’s ruling against Hungary go further than the online gambling industry within the country. Several other countries in Europe are either considering or have already passed similar laws that give priority to domestic operators, or established state-run online gambling monopolies. In the meantime, countries that have yet to pass their laws may now think twice before doing so, and revise their bills to avoid costly time-consuming legal battles.

For those with such laws on the books, there may be incentive to amend or revise the existing statutes to avoid legal action. At the very least, the European Court of Justice establishes a precedent that could encourage foreign operators to sue other European Union member state governments that are failing to provide equal market access to companies located outside of their borders. Commenting on the situation, Said Maarten Haijer, the Secretary General of European Gaming and Betting Association (EGBA), explained:

“The Court’s ruling is a clear message to other Gaming Authorities, including the Dutch Gaming Authority, that they must not enforce regulation that does not comply with basic EU law. We expect these Member States to reconsider and lift these enforcement measures as they are acting in violation of EU law. Their actions do not serve the interest of consumers, they fail to channel the consumers to reliable providers, instead they merely prop up failed regulation.”