CJEU Ruling Impacts Segregated Player Pooling

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Tuesday, August 2nd, 2016 | Written by Adam Brown

Over the last few years, a number of member nations of the European Union have passed laws restricting online poker. These laws include banning residents from accessing legal sites that are licensed by other EU nations, prohibiting the pooling of players from multiple EU nations on a single site, or placing licensing barriers on foreign online providers. Now, however, a ruling from the European Court of Justice may make it possible for poker providers, or even players to challenge these laws.

What’s at Issue?

The European Union operates under a free trade treaty designed to encourage international commerce across the European continent. Under EU law, any operator licensed in an EU member nation should be free to provide services to any person who is living in any other EU member nation. However, online poker laws may currently contravene this requirement for free international commerce.

What the CJEU Ruled

In July, the European Court of Justice, the high court of the European Union, passed down a ruling on a case related to slot machines in Austria (case C-464/15 re Admiral Casinos). While the case did not deal directly with online poker, the language in the ruling could easily be applied to disputes regarding restrictions that are currently being placed on the game. In the ruling, the CJEU stated that countries may only legally restrict international gambling operators from “trading” or providing services if four criteria were met:

– Genuineness. The law must be passed with genuine concern for consumer protection, not primarily to generate tax revenue. EU member nations would need to show that the law was passed to solve a specific safety concern that is evident in the legislation.

– Consistency. It’s not enough for the law to simply state that it’s being passed for consumer protection. The law must actually address the problem and provide a means to solve it. In other words, a country couldn’t pass a law simply requiring operators to pay a 20% tax and say it’s to protect consumers from fraud if there were no anti-fraud measures included in the law.

– Proportionality. The law must be reasonable in nature and not restrict trade unless there is no other way to solve the consumer protection problem.

– Evaluating. The ruling states that laws must be systematic, meaning that lawmakers would be responsible for monitoring the situation. If the law became unnecessary in the future, the country would be expected to repeal or amend it.

Potential Impact

The CJEU ruling, as regards Article 56 of the Treaty on the Functioning of the European Union (TFEU), now makes it possible for challenges to restrictive online poker practices to be successful in court. Commenting on the situation General Secretary of the European Gaming and Betting Association (EGBA), Maarten Haijer stated:

“This is why we acknowledge the importance of this judgement, as it reminds Member States that restrictions to the activities of gambling providers must be in place only and as far as a public policy objective is at serious risk. We hope that this judgement will make some Member States reconsider their gambling policies, and to assess whether they are still relevant by means of periodic ex-post assessments.”

One area that appears to contravene the ruling’s requirement for proportionality is the segregated player pools imposed upon poker players living in EU nations such as France, Italy, Spain, Portugal, and Sweden. Furthermore, neither do such restrictions appear critical for improving consumer protection, or reducing crime. In the meantime, France, Spain and Italy have directly contributed to the decline of their own online poker markets by restricting liquidity, and in the process have negatively affected consumer protection by driving players towards unregulated black market operators.

A Long Process

Poker players and operators shouldn’t expect changes to be universal or fast. It could take up to a decade for any single case to get far enough to change a law. Plus, a law being struck down in one country would not mean that similar laws would be struck down in every country, as separate cases would be needed to challenge every law individually.

In the meantime, major poker operator PokerStars could be tempted to test the waters by ending the segregation of poker players at its ring-fenced Italian, Spanish and French websites. It would then remain to be seen whether authorities of these countries would risk opposing the CJEU and try for a prosecution, instead of simply falling in line with the new ruling.