Crime, Addiction and the Regulation of Gambling

Crime, Addiction and the Regulation of Gambling

Crime, Addiction and the Regulation of Gambling Edited by

Toine Spapens Alan Littler and Cyrille Fijnaut

LEIDEN / BOSTON 2008

Printed on acid-free paper.

Library of Congress Cataloging-in-Publication Data Crime, addiction, and the regulation of gambling / edited by Toine Spapens, Alan Littler, and Cyrille Fijnaut. p. cm. Includes index. ISBN 978-90-04-17218-0 (hardback : alk. paper) 1. Gambling--Law and legislation—European Union countries—Criminal provisions. 2. Gambling—Law and legislation—United States—Criminal provisions. I. Spapens, A. C. II. Littler, Alan. III. Fijnaut, Cyrille, 1946K3704.C75 2008 345.24’0272—dc22 2008045761

Published by Martinus Nijhoff Publishers. ISBN 978 90 04 17218 0 Copyright 2008 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Hotei Publishers, IDC Publishers, Martinus Nijhoff Publishers and VSP. http://www.brill.nl All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permission from the Publisher. Authorisation to photocopy items for internal or personal use is granted by Brill Academic Publishers provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers MA 01923, USA. Fees are subject to change.

Printed and bound in The Netherlands

Preface Cyrille Fijnaut

This is the third book to be produced by members of the Gambling Research Group – associated with Tilburg University’s Faculty of Law – concerning issues closely connected with the debate on the gambling policies that the European Union and its Member States are pursuing, or at least wish to pursue. The first book – Alan Littler and Cyrille Fijnaut (eds), The Regulation of Gambling: European and National Perspectives (Leiden, Martinus Nijhoff Publishers, 2007) – mainly considers the legal aspects of gambling regulation, at both European Union and Member State level. The second book – Tom Coryn, Cyrille Fijnaut and Alan Littler (eds), Economic Aspects of Gambling Regulation: EU and US Perspectives (Leiden, Martinus Nijhoff Publishers, 2008) – looks at research conducted in the United States and the European Union into the costs and benefits involved in the regulation of gambling. The contributions to this third book turn the spotlight on two social problems: crime and addiction, both of which play a significant part in the institutional debate in the European Union concerning whether gambling should be treated as a service that – like other services – should be subject to the laws universally applicable to the internal market. The importance of these two problems in this debate has much to do with the fact that many Member States invoke them – rightly or wrongly, I shall refrain from commenting on that – in order to maintain control of the supply of gambling on their territory, and hence also of a large part of the revenues, by means of a complete or partial, direct or indirect state monopoly. Precisely because of their political importance, one would expect there to have been a lot of academic research in the Member States on various aspects of these two topics in the past few years. This is not the case, however. Certainly not as regards crime problems related to gambling. Although addiction problems that can occur in this context may occasionally have been the subject of thorough academic research, this cannot be construed as a research tradition either. And since there has never been any internationally comparative academic research on these two hot topics, it is impossible to gain an overall picture of the research conducted in the European Union, let alone compare it with the work done in the United States.

Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, v–vi ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

This is why our third international symposium was primarily devoted to the research that has been conducted in several Member States into the problems of gambling-related crime and addiction. This choice – as may be clear from the above comments – was made not only with the intention of obtaining a better understanding of the approach and results of this research, and hence gaining greater insight into the problems themselves. Another objective was certainly to encourage further research on this topic in the European Union, not least internationally comparative research. Suppose that the betting and gaming sector were genuinely governed by the principles and mechanisms of the internal market at some stage: it would be important to know how these problems manifest themselves in the different Member States and what is done to contain them. Partly for this reason, the symposium also examined the developments in this sector at EU level. What policy is the European Commission currently pursuing? And what stance does the European Court of Justice take these days? This third international symposium also seemed an appropriate opportunity to take a first look at crime and addiction problems that can arise in the context of online gambling and at possible ways of keeping them under control. I would like to express my heartfelt gratitude to the speakers at the symposium – François Trucy, Erik Vagnhammar, Tilman Becker, Gerda Reith, Dick de Bruin and Toine Spapens – for their willingness to prepare their presentations for publication. I am also indebted to guest authors Nele Hoekx, Caroline Jawad and Stephen Griffiths. Without their valuable contribution, insufficient attention would have been paid to important aspects of the issues highlighted in this book. A special mention for my co-editors, Toine Spapens and Alan Littler – this is Alan’s third time! – for the tremendous amount of effort they put into ensuring that this book was of the highest possible quality in terms of content and form. And Lindy Melman, editor at Martinus Nijhoff Publishers, has once again done a superb job producing such a colourful edition of this book. Finally, I would like to point out that the organisation of this third symposium was only possible thanks to the donation made by the Dutch State Lottery to Tilburg University’s Faculty of Law a few years ago for the endowment of a special chair in the regulation of gambling.

vi

Contents

Preface Cyrille Fijnaut List of Abbreviations General Introduction Cyrille Fijnaut 1. Introduction 2. Crime and Addiction: their Role in the Debate between the European Commission and the Netherlands 2.1. The Questions Raised by European Commissioner Charlie McCreevy 2.2. The Defence of Justice Minister Piet Hein Donner 2.3. Commissioner McCreevy’s Unbelieving Response 2.4. The Defence of Justice Minister Ernst Hirsch Ballin 2.5. Placanica, or Unexpected Help from the European Court of Justice 2.6. The Questions Referred by the Dutch Council of State for a Preliminary Ruling 2.7. Crime and Addiction in the Proposed New Betting and Gaming Act 3. The Contributions to this Book 3.1. Developments on Various Fronts in the European Union 3.2. The Developments in a Number of Member States: the Netherlands, France, Germany and the United Kingdom Crime Problems Related to Gambling: an Overview Toine Spapens 1. Introduction

v

xiii 1 1 3 3 4 5 6 8 10 12 14 14 15

19 19

Crime, Addiction and the Regulation of Gambling

2. Illegal Forms of Gambling on Offer 2.1. Petty Gambling on the Street or in Bars and Eating Establishments 2.2. Illegal Sports Betting and Totes 2.3. Illegal Lotteries and Lottos 2.4. Illegal Casinos 2.5. Illegal Electronic Gambling Machines 2.6. Online Gambling 2.7. Loan Sharking 3. Penetration of Criminals into the Legal Betting and Gaming Sector 3.1. The Mafia in Las Vegas 3.2. The Electronic Gambling Machine Sector in the Netherlands 3.3. The Problem of Unknown Beneficial Owners 4. Improper Use of Gambling for Illegal Activities 4.1. Match Fixing 4.2. Predatory Crime 4.3. Using Gambling for Money laundering Purposes 5. Crime in Relation to Gamblers 5.1. Crime Committed by Gambling Addicts 5.2. Casino-related Crime 6. Concluding Remarks

The Proper Functioning of the Internal Market: Observations from Brussels Erik Bertil Vagnhammar 1. Introduction 2. Definition of Gambling in Community Law 2.1. Secondary Legislation 2.2. The European Commission’s 2006 Study on Gambling Services in the Internal Market 3. Why is the Commission Taking Action? 3.1. Approach 1 – Harmonisation and Something about the Relevant Secondary Legislation 3.1.1. The Need for Clear Definitions 3.1.2. The Need for a Clear Scope 3.1.3. Transposition of Directives 3.2. Approach 2 – Infringement Proceedings and National Restrictions 3.3. Justification and Evidence – Which Problem – What Evidence? 4. Final Observations viii

21 22 24 27 28 31 32 34 35 35 38 39 40 41 43 44 47 47 52 54

55 55 55 55 56 57 57 61 62 63 63 64 67



Contents

Placanica: Combating Criminality vs. Reducing Gambling Opportunities as Grounds for Justification in the ECJ’s Jurisprudence Nele Hoekx 1. Introduction 2. Existing EU Case Law 2.1. From Schindler to Zenatti 2.2. Gambelli and Lindman 2.2.1. Suitability 2.2.2. Proportionality 3. An Analysis of the Placanica Judgment 3.1. The Facts 3.2. Disagreement Within the Italian Case Law 3.3. The Court’s Reply 3.3.1. Licences 3.3.2. Tender Procedure: Listed Companies 3.3.3. Police Authorisation and Criminal Penalties 4. Relationship Between Placanica and Existing Case Law: Is There Anything New Under the Sun? 4.1. Problematic Justification: Reducing Gambling Opportunities 4.2. Possible Justification: Combating Crime 4.3. Proportionality: Licences from Other Member States 5. EU Case Law and the Implications for National Legislation 5.1. The Objectives of National Legislation and the Goal of the European Court of Justice 5.2. Belgium 5.3. The Netherlands 5.4. France 6. Conclusion Regulating Illegal Gambling Markets: The Case of Illegal Casinos in the Netherlands Toine Spapens 1. Introduction 2. The Theory With Regard to Regulation 3. Gambling Policy in the Netherlands 4. Illegal Casinos in the Netherlands 5. Legal Casinos in the Netherlands 6. Repression and Regulation 7. Concluding Remarks

69 69 71 71 73 73 74 75 75 76 77 78 78 79 79 79 80 83 84 84 86 88 90 91

93 93 94 96 99 102 105 107 ix

Crime, Addiction and the Regulation of Gambling

Gambling and Addiction Problems in the Netherlands Dick de Bruin 1. Introduction 2. Gambling Addiction: Diagnosis, Taxonomy, and Risk Factors 3. Caught Up in More than a Game 3.1. Methodology 3.2. Results of the Study 4. Prevention of Gambling Addiction 4.1. Measures Directed Towards the Game 4.2. Measures Directed Towards the Players 4.3. Measures Directed Towards the Environment 5. General Conclusion

109

The Role of Crime and Addiction in the Gambling Policy of France François Trucy 1. Introduction 2. The Organisation and Regulation of Games in France by the State 2.1. The Traditional Approach of French Gambling Policy 2.2. The Government’s Creation: Three Distinct Sectors 2.3. The National Games Commission 2.4. The Ministries Exercise Sole Jurisdiction 2.5. Towards a New Policy 3. Fraud, Misdemeanours and Other Misappropriations 3.1. In Relation to ‘Old’ Games 3.1.1. In Relation to Horseracing 3.1.2. In Relation to Lotteries 3.1.3. In Relation to Games Machines 3.1.4. In Relation to Slot Machines 3.1.5. In Relation to Casinos 3.1.6. In Relation to Poker 3.2. Anti-Money Laundering Measures 3.3. Internet – New Games – Many Conflicts and the ‘Psychodrama’ between France and the European Commission 4. Gambling Addiction 5. Conclusion

127

x

109 110 114 114 116 120 121 122 124 126

127 128 128 129 131 131 133 134 134 134 134 135 135 136 137 137 137 139 139



The German Market for Gambling and Betting Tilman Becker 1. Introduction 2. Problems with a Legally Oriented Segmentation of the Market 3. Sales Figures in the Various Segments of the Gambling Market 4. Payout Ratio 5. The Market for Sport Betting 6. State Revenue and State Revenue Spending 7. The Number of and Spending of Players for the Various Game of Chance Formats 8. Pathological Gambling in Germany and the Regulation of the Gambling Market 9. Conclusions The Culture of Gambling in Great Britain: Legislative and Social Change Gerda Reith 1. Introduction 2. The Legacy of the 1968 Gaming Act 3. International Trends 4. The National Lottery 5. Late 20th Century Trends 5.1. Easing Restrictions 5.2. Industry Niche Marketing 5.3. New Forms of Gambling 5.4. Demographic Changes 5.5. Increased Expenditure 6. Problem Gambling in Britain 6.1. The Profile of Problem Gamblers 6.2. New Types of Games 6.3. Adolescent Gambling 6.4. Crime 7. The 2005 Gambling Act 7.1. The Purpose of the Act 7.2. The Reception of the Act 7.3. The Final Act 7.4. Vulnerable Groups, Social Responsibility and Consumer Protection

Contents

141 141 142 145 150 152 154 158 161 164

165 165 165 167 167 168 169 169 169 169 169 170 171 171 172 173 174 174 175 177 177 xi

Crime, Addiction and the Regulation of Gambling

7.5. Online Gambling 8. Concluding Comments

Preventing Problem Gambling on the Internet Through the Use of Social Responsibility Mechanisms Caroline Jawad and Stephen Griffiths 1. Introduction 2. The Expansion and Popularity of Internet Gambling 3. The Causes of Problem Gambling 4. The Containment of Underage Gambling 5. Approaches to Ensuring Fair Gambling 6. Responsible Gambling: Developing a Comprehensive Approach 7. Regulation and Protecting Consumers 8. The Social Responsibility of Operators 9. Responsible Gambling: What Does it Entail? 10. Why was the Legislation in the UK Changed? 11. The Challenge of Internet Ethics 12. Conclusion

178 178

181 181 185 191 197 201 201 203 205 207 208 209 212

Concluding Remarks Cyrille Fijnaut

217

Appendix

221

About the Authors

241

Index

245

xii

List of Abbreviations

AG

Advocate General

APV

Algemene Plaatselijke Verordening

CAD

Consultatiebureau voor Alcohol en Drugs

CAP

Casino Advisory Panel

COJER

Comité consultatif pour l’encadrement des jeux et de jeu responsible

CSR

Corporate Social Responsibility

DCMS

Department for Culture, Media and Sports

DSM

Diagnostics and Statistical Manual

EC

European Community

EEC

European Economic Community

ECJ

European Court of Justice

EGBA

European Gambling and Betting Association

EGM

Electronic Gambling Machine

EU

European Union

FATF

Financial Action Task Force

FBI

Federal Bureau of Investigation

FDJ

Française des Jeux

FNDS

Fonds national pour le développement du sport

FOBTS

Fixed Odds Betting Terminals

ICD

International Classification of Diseases

Crime, Addiction and the Regulation of Gambling

IPART

Independent Pricing and Regulatory Tribunal

IRS

Internal Revenue Service

LMP

Last Month Prevalence

LTP

Life Time Prevalence

LYP

Last Year Prevalence

MECN

Media & Entertainment Consulting Network

MICS

Minimum Internal Control Standards

NKL

Nordwestdeutsche Klassenlotterie

NODS

NORC DSM IV Screen

p.

Page

para.

Paragraph

PAF

Ålands Penningautomatförening

PMU

Pari Mutuel Urbain

SKL

Süddeutsche Klassenlotterie

SOGS

South Oaks Gambling Screen

TRACFIN Traitement du renseignement et action contre les circuits financiers clandestins TVWF

xiv

Television Without Frontiers Directive

General Introduction Cyrille Fijnaut

1. Introduction Gambling has long been in disrepute. If not because political elites thought it morally reprehensible to earn money without having to work or unacceptable to lose money through gambling, then because they believed that providing or taking part in gambling activities was a recipe for trouble, since one encouraged all kinds of crime and addiction problems. Nevertheless, for centuries national governments have permitted the organisation of gambling, specifically in Europe, under more or less stringent conditions, or they have entrusted the task, subject to certain conditions, to companies under their total or partial control. First of all, based on the awareness that the desire to gamble cannot be completely eradicated and that it is thus better to ‘canalise’ it in a safe environment.1 Secondly, based on the argument that the revenues generated by the organisation of gambling should mainly benefit institutions that serve the public interest or that raise money for charitable causes. With the establishment of the European Economic Community (EEC) and, even more so, with the creation of an internal market within this Community, which has the free movement of people, goods, services and capital between the Member States as one of its key basic principles, the idea that the organisation of gambling is a typically national matter has come under threat, however. In recent years the European Commission has propagated the view that the organisation of gambling is a service that, like other services, should be provided by entrepreneurs throughout the territory of the European Union, in accordance with the provisions of the EC Treaty.2

1 An exact translation of the original Dutch word ‘kanaliseren’ would be ‘channeling.’ However, the term ‘canalisation’ is used to express the fact that in Dutch ‘kanaliseren’ primarily refers to bringing a stream under control, rather than directing it. 2 Cf. the study it commissioned in 2005–2006 on the gambling market in the European Union: Swiss Institute of Comparative Law, Study of Gambling Services in the Internal Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 1–17 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

Many Member States, on the other hand, hold the view that there are valid reasons for making the organisation of gambling an exception to the general rule. In their eyes providing games of chance is not a service like any other. They therefore feel that the Member States should retain the freedom to decide for themselves, within the limits set by the EC Treaty, how they organise their national gambling markets. However, the European Commission invariably disputes the validity of the reasons put forward by the Member States to have the gambling market regarded as a unique case. As noted in the Preface, crime and addiction play an important part in this fundamental and heated discussion between the European Commission and the Member States. The insistent letters of formal notice that the Commission has sent to a number of Member States in the past few years show just how high tempers are running on these two topics.3 The message communicated in these letters is that the gambling policy of many Member States is not in line with their obligations under the EC Treaty. In the press releases concerning the matter, the Commission stressed that this relates only to: ‘the compatibility of the national measures in question with existing EU law. It does not touch upon the existence of monopolies as such, or on national lotteries. Nor does it have any implications for the liberalisation of the market for gambling services generally, or for the entitlement of Member States to seek to protect the general interest, so long as this is done in a manner consistent with EU law i.e. that any measures are necessary, proportionate and non-discriminatory.’4 The correspondence that the European Commission entered into with the Netherlands in April 2006 is a good example of this conflict. This will be discussed in detail below to demonstrate more clearly the specific role of crime and addiction in the current debate between the European Commission and the Member States. These comments should also be regarded as a continuation of the discussion on this matter in the general introduction to the earlier book edited by T. Coryn, A. Littler and myself: Economic Aspects of Gambling Regulation: EU and US Perspectives (Leiden, Martinus Nijhoff Publishers, 2008, pp. 1–12).

Market of the European Union: Final Report (Lausanne, 2006). 3 Letters of formal notice are the first stage of procedures under Article 226 of the EC Treaty. Referral to the ECJ is the last. 4 See the press release of 12 October 2006 concerning the requests for information that the European Commission – following the requests it had submitted in April 2006 to Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden – had sent that month to Austria, France and Italy (<europa.eu/rapid/pressReleasesAction.doc>). 2



General Introduction

2. Crime and Addiction: their Role in the Debate between the European Commission and the Netherlands 2.1. The Questions Raised by European Commissioner Charlie McCreevy In a letter sent by Commissioner McCreevy to the Dutch government on 4 April 2006, he states in no uncertain terms that several aspects of Dutch legislation and policy on betting and gaming restrict the freedom to provide services in the European Union and that it is debatable whether these restrictions are justified by reasons of overriding general interest, such as consumer protection and the prevention of fraud and incitement to squander on gaming.5 He immediately and explicitly further observes that – as also noted by the European Court of Justice in Zenatti – neither the financing of benevolent or public-interest activities nor objectives of a purely economic nature can be regarded as justification for restrictions on the freedom to provide services such as gambling. Such restrictions are acceptable only if the relevant – non-discriminatory – national measures applied: − are either justified by reasons of overriding general interest, in so far as this interest is not protected in the Member State in which the service provider is established;

− or are not disproportionate, i.e. are not excessive and not replaceable by less restrictive measures.

With regard to consumer protection and, in particular, the prevention of the spread of gambling addiction, McCreevy says in his letter that, in his opinion, it is questionable whether the restrictions referred to are acceptable in the Dutch situation with a view to protecting the aforementioned interests. He specifically points out De Lotto’s high spending (as he sees it) on advertising and its innovative advertising campaigns (such as unsolicited material sent by post and via the Internet, with free entry forms or money-back guarantees). With respect to the prevention of crime and money laundering practices, he comes to the same conclusion: the contested restrictions cannot be justified by these overriding reasons; nor are they proportionate to these reasons. After all, under the Money Laundering Directive, all Member States are required to take measures to combat money laundering practices. These measures mean, for instance, that all kinds of businesses are obliged to report suspicious activities to the competent authorities. In other words, operators established in another Member State may already be under an obligation to carry out specific checks

5 Commission of the European Communities, Letter from Charlie McCreevy to Bernard Rudolf Bot dated 4 April 2006, no. 2002/5443, C(2006)1081, unpublished (copy obtained from the Gambling Bureau of the Ministry of Justice). 3

Crime, Addiction and the Regulation of Gambling

for the purpose of crime prevention. McCreevy also draws attention to a Dutch report in which it is concluded that restricting the number of operators is not a remedy against crime and other unlawful practices. His final comment was therefore self-evident: would the Dutch government inform him of its views on his comments and conclusions within two months? 2.2. The Defence of Justice Minister Piet Hein Donner In his written defence of 12 July 2006 in response to McCreevy’s letter, the then Dutch Minister of Justice, Piet Hein Donner, argued that: ‘The Dutch government is of the opinion that the gambling market cannot be regarded as a normal economic market. Participation in any form of gambling may result in financial gain without necessitating any proportionate effort in return. Partly as a result of this, gambling entails the risk of addiction, fraud and deception. These aspects and side effects of gambling justify the special attention that the government devotes to the betting and gaming sector. … The main purpose of gambling policy is to regulate and control gambling, with emphasis on preventing gambling addiction, protecting consumers and combating illegality and crime.’ (our translation) For this reason, Donner continues, the Dutch government takes the view that it is right to invoke Article 45 of the EC Treaty in order to continue pursuing its own policy in this field in the future, since this article makes restrictions on the free movement of services possible for reasons of public order, public safety or public health, and for reasons of overriding general interest. Furthermore, he adds, contrary to what McCreevy thinks, efforts to combat illegal activities in this sector are not designed to protect the Dutch economy, as Dutch gambling policy is not based on any objectives of a purely commercial nature or on any economic motives: ‘Combating illegal activities should be placed in the context of the idea of “canalising” that underlies Dutch gambling policy. Illegal gambling entails dangers for consumers and the risk of addiction because of the associated uncertainties. Illegal gambling also breeds fraud and crime. For these reasons the Dutch government is of the opinion that everything possible should be done to combat it. This involves actively preventing illegal gambling whilst also providing limited, well-regulated activities that fill an obvious need for gambling. In so far as the Commissioner’s comment may be alluding to the fact that the proceeds from gambling should go to charity or into the public treasury, I would refer to what

4



General Introduction

was said above concerning the fact that this should be regarded as a side effect of Dutch gambling policy.’6 (our translation) 2.3. Commissioner McCreevy’s Unbelieving Response Naturally, the European Commission does not agree with this argument. In his reasoned opinion of 21 March 2007, McCreevy informs the Dutch government that its gambling policy – and particularly its policy on betting on sporting events – may not, in theory, be aimed at generating revenues, but that this viewpoint is certainly not evident in the policy that De Lotto pursues according to its articles of association and annual reports.7 There it is plainly stated that its activities are aimed at maximum financial contributions to sport and other good causes. As regards the prevention of illegality and crime, McCreevy reproaches the Dutch government for not explaining: ‘why the contested restrictive measures, especially those aimed at canalising betting on sporting events, are necessary for preventing illegal and criminal activities such as fraud. In particular, the Netherlands’ response gives no indication why sports betting operators who have obtained a licence in another Member State, and who are obliged to oversee and prevent illegal activities in that Member State, would not be able to help achieve public order objectives in the Netherlands. Under these circumstances, the restrictions … are not acceptable.’ (our translation) Following on from this, McCreevy argues that the Dutch government has not provided a shred of evidence for its argument that the organisation of an appropriate, regulated supply of legal gambling services has reduced illegal or criminal activities. Besides, is it not the case, remarks McCreevy in this context, that – as a documentary seems to suggest – illegal gambling is thriving in the Netherlands? By which he is implying that the existing gambling policy is apparently not as effective as the Dutch government would have the European Commission believe. With regard to the prevention of gambling addiction, McCreevy first of all reproaches the Dutch government for the fact that – judging by the discretion that organisations like De Lotto have to pursue a policy of expansion using a variety of advertising media – its policy in this area in no way constitutes an inevitable response to the existing demand for gambling, but is in fact aimed at increasing participation in gambling. In his view, this is also demonstrated by the fact that

6 See the appendix to the letter that Justice Minister Piet Hein Donner sent to the Dutch House of Representatives on 29 August 2006 (2005–2006, 24557, no. 74). 7 Letter from the European Commission dated 21 March 2007, no. 2002/5443 – C(2007) 1036, to the Minister of Foreign Affairs, Ben Bot. 5

Crime, Addiction and the Regulation of Gambling

the Dutch government presents no analyses on the effect of increasing the supply of gambling services on the demand for gambling, on addiction risks and on the demand for both legal and illegal forms of gambling. McCreevy points out, however, that a market research agency has concluded that the proposal to give Holland Casino scope to provide online gambling services will inevitably boost demand for gambling and, consequently, will not replace illegal gambling. Commissioner McCreevy also raises the point that Holland Casino is pursuing a policy on gambling addiction, but that De Lotto fails conspicuously in this respect. According to the European Commission, it is impossible to judge the effectiveness of the Dutch government’s general policy on combating gambling addiction, since the study set up in 2004–2005 used completely different methods from the study conducted in 1996. For this reason the two sets of results obtained are incomparable. McCreevy therefore comes to the conclusion that, in this respect also, the restrictions that the Dutch government imposes on foreign gambling operators cannot be justified on the grounds of reasons of overriding general interest. 2.4. The Defence of Justice Minister Ernst Hirsch Ballin In a letter dated 13 July 2007, the Dutch government – partly on the basis of the European Court of Justice’s judgment of 6 March 2007 in the Placanica case (see below) – resolutely rejects McCreevy’s criticism of its policy in this second letter of formal notice.8 The new Minister of Justice, Ernst Hirsch Ballin, first of all argues that the Dutch government is not obliged to show what the extent of crime would have been without the restrictions of a licensing system: ‘This is simply impossible. The European Commission is placing an impossibly heavy burden of proof on the Dutch government. The fact that a policy is being pursued that is directed towards canalising the propensity to gamble and preventing illegality and crime is, in the Dutch government’s view, sufficient for the purposes of the principle of necessity. A specific threat of crime or illegality, from the Netherlands or one of the other Member States, does not, therefore, need to be demonstrated.’ (our translation) In relation to this, Hirsch Ballin explicitly refers to Placanica, in which, he says, the Court of Justice clearly ruled that curtailing illegal gambling activities can provide separate justifications for restrictions in gambling policy and that, in this context, controlled expansion of the availability of gambling may be justified. Totally in the spirit of this judgment, the Dutch government – so he reports – therefore cautiously allowed two more legal casinos recently, especially

8 Dutch House of Representatives, 2006–2007, 24557, no. 77 (with appendix). 6



General Introduction

in those parts of the country with proportionately the largest number of illegal casinos. Hirsch Ballin also emphatically dismisses McCreevy’s claim that there is a thriving market for illegal gambling in the Netherlands. According to the Minister, the documentary mentioned is now outdated and does not convey an accurate picture of the current level of enforcement of betting and gaming legislation. With regard to the issue of gambling addiction, Hirsch Ballin mainly points out a number of what he considers to be factual shortcomings in the European Commission’s argument. In his opinion, the Commission wrongly ignores the fact that De Lotto also pursues a preventive policy in this area. Secondly, according to Hirsch Ballin, it fails to appreciate that the decline in the number of gambling addicts in the Netherlands from about 70,000 to about 40,000 cannot only be inferred from a comparative analysis of the results of the two major gambling addiction studies that were conducted in 1996 and 2005, but is also evident from the statistics of addiction support organisations concerning the number of gambling addicts registering with them. Furthermore, Hirsch Ballin adds, one of the reasons put forward by the researchers for this considerable decrease is undoubtedly the long-standing policy aimed at preventing gambling addiction and providing addicts with proper support. Following on from this, Hirsch Ballin turns on the European Commission with regard to its explanation of the principle of mutual recognition. In his opinion, the Commission is quite wrong in invoking this principle, according to which a company that has been granted a licence in one Member State to provide sports betting can do likewise in another Member State under the terms of this same licence. Referring to the European Court of Justice’s judgment in the Läärä case, he points out that: ‘If a game of chance is regulated in a Member State where the operator is established (assuming it can be ascertained where that is), it certainly does not follow – given the case law of the European Court of Justice – that other Member States should automatically accept the services in question. The degree of protection falls within the discretionary scope of the Member States. … The legal validity of a licence does not go beyond the jurisdiction of the authorities that granted the licence. An inherent feature of a restrictive licensing system is that supply (regulated or otherwise) cannot be accepted from more liberal countries, since, if that were the case, a few liberal jurisdictions would be capable of undermining the restrictive Dutch gambling system – and many other European licensing systems.’9 (our translation)

9 For a detailed discussion of Läärä and other judgments of the European Court of Justice concerning the regulation of gambling, see: A. Littler, ‘Has the ECJ’s jurisprudence in the field of gambling become more restrictive when applying the proportionality principle?’, 7

Crime, Addiction and the Regulation of Gambling

The debate between the European Commission and the Netherlands is currently at a standstill. It looks very much as if all parties concerned are waiting to see what is going to happen. One thing is sure: we are certainly going to see answers from the European Court of Justice to questions put by national courts in various Member States. However, it is not known whether the European Commission will initiate an infringement procedure against one or more Member States before the Court of Justice in the near future. This does not alter the fact that it is important, certainly in view of the above, to briefly examine the view that the Court of Justice has articulated in Placanica on the role of addiction, but particularly crime, in the gambling policy that the Member States are currently pursuing. 2.5. Placanica, or Unexpected Help from the European Court of Justice Clearly, the judgment of the European Court of Justice in the Placanica case in March 2007 plays an important part in the debate about the compatibility of national, in this case Dutch, gambling policy with a few key provisions of the EC Treaty.10 This judgment centred upon the referred question of whether a gambling operator in Italy must comply with national legislation characterised by the following elements: ‘the obligation to obtain a licence; a method of awarding those licences, by means of a tender procedure excluding certain types of operator and, in particular, companies whose individual shareholders are not always identifiable at any given moment; the obligation to obtain a police authorisation; and criminal penalties for failure to comply with the legislation at issue’. Or, turning it round, the question of whether the EC Treaty precludes national legislation on betting and gaming, in so far as it contains such elements. In this judgment the Court of Justice first refers to a number of ‘reasons of overriding general interest’, such as consumer protection, the prevention of fraud and the need to preserve public order, which: ‘may serve to justify a margin of discretion for the national authorities, sufficient to enable them to determine what is required in order to ensure consumer protection and the preservation of public order. … However, although the Member States are free to set the objectives of their policy on betting and gaming and, where appropriate, to define in detail the level of protection sought, the restrictive measures that they impose must nevertheless satisfy the conditions laid down in the case-law of the Court as regards their proportionality.’

in: A. Littler and C. Fijnaut (eds), The Regulation of Gambling: European and National Perspectives (Leiden, Martinus Nijhoff Publishers, 2007), pp. 15–40. 10 Case C-338/04, C-359/04 and C-360/04 Criminal proceedings against Massimiliano Placanica, Christian Palazzese and Angelo Sorricchio [2007] ECR I-01891. See: Appendix. 8



General Introduction

Secondly, the Court of Justice notes that, in addressing the question of whether the objectives of a particular gambling policy justify restrictions on the free movement of services, a distinction must be made between the objective of reducing gambling opportunities and the objective of combating crime ‘by making the operators active in the sector subject to control and channelling the activities of betting and gaming into the systems thus controlled’. The Italian government argues that the latter objective is paramount in the contested betting and gaming legislation. The Court of Justice does not dispute this assertion and states that, in this case: ‘a policy of controlled expansion in the betting and gaming sector may be entirely consistent with the objective of drawing players away from clandestine betting and gaming – and, as such, activities which are prohibited – to activities which are authorised and regulated. As the Belgian and French governments, in particular, have pointed out, in order to achieve that objective, authorised operators must represent a reliable, but at the same time attractive, alternative to a prohibited activity. This may as such necessitate the offer of an extensive range of games, advertising on a certain scale and the use of new distribution techniques.’ It will now be apparent why the Dutch government was so eager to invoke Placanica to justify its gambling policy to the European Commission. This judgment is, in fact, completely in keeping with the policy that the Netherlands has been pursuing for decades. Of course, this is not the whole story regarding the importance of this judgment in determining the role that crime prevention should play in the gambling policy that the Member States are pursuing or wish to pursue. Placanica raises the important empirical question of the extent to which illegal gambling activities can actually be superseded by stepping up legal activities. And also the question that is very closely connected with this, i.e. whether, as a result of such reasoning, gambling policy does not become increasingly less restrictive of its own accord and unintentionally encourages participation in legal (and perhaps also illegal) gambling because more and more opportunities to gamble are (or have to be) created. The Court of Justice is, however, against a gambling policy that excludes from the betting and gaming sector operators in the form of ‘companies whose shares are quoted on the regulated markets’. This kind of measure is not necessary in order to achieve the objective of preventing gambling operators from being involved in criminal or fraudulent activities. This objective can be attained in other ways.

9

Crime, Addiction and the Regulation of Gambling

2.6. The Questions Referred by the Dutch Council of State for a Preliminary Ruling While Placanica may make Hirsch Ballin feel more sure of his ground with regard to the European Commission’s allegations that the objectives of the Dutch gambling policy are in conflict with the EC Treaty, the Dutch Council of State is not quite as sure as the Minister of Justice about whether one of the measures used to achieve these objectives is actually compatible with the Treaty. This refers specifically to the fact that foreign operators, who do not hold a licence issued by the Netherlands but are licensed in another Member State, are automatically excluded from the Dutch gambling market. As we have seen, Hirsch Ballin is of the opinion that this measure is applied for good reasons. The Council of State was faced with this issue in the appeal brought by the London-based company Betfair against the ruling of the District Court of The Hague on 8 December 2006 that Betfair may not provide any services in the Dutch market, via the Internet or otherwise.11 In its judgment of 14 May 2008, the Council of State contemplates the fact that it has not been able to find any direct information in the case law of the European Court of Justice on the subject of mutual recognition in relation to a closed licensing system in the betting and gaming sector.12 The Court’s case law that it has been able to track down has, however, led it to the conclusion that the service provision licence that Betfair holds in the UK ‘in all probability gives no entitlement to provide these services in the Netherlands without a licence issued under the Dutch Betting and Gaming Act’ (our translation). There is no certainty on this point, however. The Council of State therefore decided to ask the European Court of Justice: ‘whether Article 49 of the EC Treaty must be interpreted in such a way that application of this Article will result in the competent authority of a Member State, because of its closed national licensing system for supplying gambling services, not being allowed to prohibit an operator who has already been issued a licence in another Member State to provide those services via the Internet, from also providing these same services on the Internet in the first-mentioned Member State.’ (our translation). The Council of State also poses this question in light of the consideration that, at the moment, Member States like the Netherlands may opt for a one-licence system, provided that this choice is not disproportionate to the intended objec11 In this context, see also the complaint lodged by the Remote Gambling Association with the European Commission concerning the US ban on foreign internet gambling and its enforcement (Official Journal, 11.3.2008, C 65/5–7). 12 This judgment can be found at: <www.rechtspraak.nl> under number LJN BD 1483, Raad van State (Council of State), 200700622/1. 10



General Introduction

tive. According to the Council of State, this is the case in the Netherlands. At any rate there is no reason to assume that such a system is not an appropriate and proportionate means of achieving the specified objectives of the gambling policy: consumer protection, prevention of illegality and crime and of gambling addiction. In the opinion of the Council of State, it is even likely that: ‘allowing only one licence holder not only greatly simplifies checks on the holder of that licence, enabling more effective monitoring of compliance with the licence regulations, but also prevents competition between licence holders, which might increase gambling addiction.’ (our translation) Naturally, this is a challenging statement: in the betting and gaming sector, monopolies are preferable to competition in order to combat crime and addiction. It is just as challenging as the assertions of the European Court of Justice that legal gambling activities can help reduce illegal activities. Neither the Court of Justice nor the Council of State provides any empirical basis for its viewpoint. This does not, however, undermine the policy-related or even scholarly relevance of both assertions. It is just unfortunate that, as we shall see later, there is no research currently available that might serve to refute or confirm them. As a result of the dearth of academic research, policy relating to such a controversial growth market as the betting and gaming sector will mainly continue to rely on normative assumptions about the reality of the situation and about the effect of external intervention. In this context the second question that the Council of State referred to the European Court of Justice concerned whether the Court’s interpretation of Article 49 EC, and more specifically the principle of equality and the ensuing duty of transparency, applies to the procedure for granting a licence to provide gambling services within a one-licence system laid down by law. This question was prompted by the fact that the government, by Decree of 21 June 2005, granted a licence until 30 June 2008 to Scientific Games Racing B.V. – a subsidiary of an American company – to organise a trotting and horse-racing tote, without going through a tender procedure. It can be argued that foregoing this procedure ruled out any form of competition and made it impossible to assess the impartiality of the licensing procedure. The third and final question referred by the Council of State to the European Court of Justice is whether the renewal of the licence of the existing holder of that licence, when interested parties are not given the opportunity to compete for this licence, is an appropriate and proportionate means to achieve reasons of overriding general interest – such as fraud prevention and gambling addiction – that is accepted by the European Court of Justice as justifying the restriction of free movement when providing gambling services.

11

Crime, Addiction and the Regulation of Gambling

The immense importance of these three questions for the future of Dutch gambling policy is obvious.13 If the European Court of Justice were to give a positive response to the first and second questions, and a negative response to the third, this would cause a policy upheaval. The fate of this policy thus lies in the hands of the Court for the moment, most certainly if the European Commission initiates an infringement procedure against the Netherlands and other countries before the European Court of Justice. The Court is expected to rule on the questions referred by the Council of State within two years.14 Nevertheless, this should not prevent the present Dutch Minister of Justice, Ernst Hirsch Ballin, from submitting to Parliament a proposed new Betting and Gaming Act, which was sent for comment to all interested parties in August 2007. Insiders think that the bill will shortly be presented to the Cabinet and then sent to the House of Representatives after the summer recess. It is interesting that – evidently influenced by the case law of the Court of Justice and the discussions with the European Commission – the bill devotes much more attention to the problems of crime and addiction than does the existing Act. Another factor, however, is that new administrative instruments have been developed in the Netherlands in the past few years to combat problems of organised crime, in particular more thorough screening of licence applicants in sectors such as gambling.15 2.7. Crime and Addiction in the Proposed New Betting and Gaming Act In the explanatory memorandum, the Dutch Minister of Justice ensures no misunderstanding concerning the aim of the new Act, which is – as it was before – ‘channelling’ of the supply of gambling services, especially with a view to preventing addiction, protecting consumers and combating illegality and crime. To achieve this objective – as the memorandum points out – an appropriate legal supply of gambling services is the necessary response whenever the public resorts to illegal gambling. On the one hand, this fulfils the need for gambling by offering a legal alternative to the illegal circuit. On the other, supply can be limited to the existing need.

13 It should be pointed out that courts in neighbouring countries have referred similar questions to the European Court of Justice. For Germany, See: D. Postel, ‘Glücksspiel im europäischen Binnenmarkt nach “Gambelli” und “Placanica” und vor “Winner Wetten”’, Europarecht, vol. 42, no. 3, 2007, pp. 317–348. With regard to France, refer to the questions formulated for the Court of Justice by the Conseil d’Etat in its judgment of 16 April 2008 (no. 287503) (<www.conseil-etat.fr>). 14 See: Ministry of Justice, Nieuwsflits Kansspelen, 29 May 2008, p, 2. 15 Ministry of Justice, Regels inzake kansspelen (Wet op de Kansspelen 200*), The Hague, 2 August 2007. 12



General Introduction

Everything must be done to prevent competition stimulating further demand and also to preclude people’s desire to gamble being exploited for personal gain; the proceeds from gambling should go to charity and into the public treasury. It is hereby assumed that the availability of legal gambling activities discourages people from opting for illegal channels, particularly since the legal option offers a number of safeguards and certainties for punters. This principle is interpreted in all kinds of ways in the bill. Firstly, it is reflected in the general organisation of the betting and gaming sector. The basic principle is and will continue to be that it is prohibited to offer any games of chance unless a licence has been granted to do so. The existing monopolies (the National Lottery, Holland Casino and various lotteries – Lotto, National Charity Lotteries) will be retained, because this ensures a reliable and controllable alternative to illegal gambling and makes it possible to get a handle on the risks involved in gambling. There will also be more scope for gambling machine arcades (these will be more clearly differentiated from the ‘real’ casinos of Holland Casino than in the past), promotional games and small-scale games at municipal level (bingo). Policy on betting and gaming will remain chiefly the responsibility of the Ministry of Justice. This prevents it becoming fragmented and ensures that it remains a decisive instrument. Another advantage is that the ministry implementing the policy will have no direct interest in the proceeds of gambling (Ministry of Finance). In this context it should not be forgotten that the Ministry of Justice is used to enforcing the law directly. If all goes as planned, a Gambling Authority is to be set up (instead of the existing Supervisory Commission). This body will not only be entrusted with a number of tasks designed to ensure implementation of the law, but will also have at its disposal some fairly heavy-duty administrative measures and powers to enforce compliance with the law. Certain infringements are to be made offences, however, and may be prosecuted, if necessary. With a view to preventing undesirable consequences, licensing will automatically be more strictly regulated than under the current legislation. For instance, it will be possible to check the integrity of licence applicants by screening them more thoroughly than is the case at the moment. It will be spelled out more clearly that licence holders must take measures to prevent excessive gambling. They must also conduct a balanced advertising campaign (aimed at target groups, as regards scale and medium). The requirements that such a policy must meet will be more precisely specified in this bill than they are in the present legislation. As already stipulated in the existing Act, operators must also guarantee fair-play and take measures to prevent improper use and fraud. It virtually goes without saying that licences can be revoked or amended if facts come to light justifying the fear that a licence represents a danger to public order, public safety or public morality.

13

Crime, Addiction and the Regulation of Gambling

3. The Contributions to this Book The individual contributions to this book can be divided into two main categories. In the first category, three chapters present a picture of crime-related problems at European Union level and discuss the policy pursued by key EU institutions: the European Commission and the European Court of Justice. The second comprises five chapters that tackle the problems of crime and addiction experienced in several Member States – the Netherlands, France, Germany and the United Kingdom – and the relevant policy that the competent authorities in these countries are pursuing. This series of country studies is followed by a chapter on the efforts that are being made, particularly in the UK, to prevent people becoming addicted to online gambling. A few concluding remarks round off the proceedings. 3.1. Developments on Various Fronts in the European Union The first contribution about developments in the European Union is written by Toine Spapens. Using the available literature, he shows how complex the relationship between crime and gambling is in practice. In the context of gambling, crime problems can be related to illegal gambling activities or to illegal control of legal gambling, but can also be linked with improper use of legally available forms of gambling, e.g. the phenomenon of match fixing, or with crime committed to support a gambling addiction. Given the multitude of types of crime that can be associated with gambling, it is all the more remarkable that, generally speaking, so little research into the crime problems in this sector has been conducted in Europe. The European research base on gambling addiction is not very large either, but compares favourably with the research on crime problems. For this reason, this book does not explore addiction problems as extensively as it does crime problems.16 The significant lack of empirical research exploring the crucial problems of crime and addiction in the gambling market certainly does not make it any easier to obtain a balanced picture at EU level of gambling regulation. This difficulty is the subject of a frank discussion in the chapter contributed by Erik Vagnhammar. He also points out, however, that any such difficulty should not prevent the European Commission from pursuing a policy in this area, since the internal market obliges it to develop a policy on gambling. Two approaches are vying for priority here. One is harmonisation of the relevant legislation in the Member States via directives. The problems that this entails are not insignificant, however, and include, for example, the definition of gambling and the transposition of

16 See, for example: H. Wardle, K. Sproston, J. Orford, B. Erens, M. Griffiths, R. Constantine and S. Pigott, British Gambling Prevalence Survey (London, National Centre for Social Research, 2007); Sénat, La lutte contre la dépendance aux jeux (Paris, 2007). 14



General Introduction

directives into national law. The other approach involves monitoring that the policy pursued by the Member States in this sector is in conformity with the principles underlying the free movement of services in the internal market, but this is not without its problems either. For example, how far should the Member States go in terms of furnishing proof that restrictions on free movement are justified in this area? The European Commission is currently using both approaches in its attempts to channel the gambling policy of the Member States. Another major player in the regulation of gambling in the European Union is the European Court of Justice. Case law emanating from the Court constitutes an important guide to the extent of the powers and obligations of the European Commission and the Member States in this area. In the past few years the Court has delivered a number of important judgments on the subject, for example that the provision of gambling may come under the free movement of services in the European Union, but that this does not mean that this specific form of service knows no bounds. There may be all kinds of reasons that justify restricting this movement. In this context, many observers eagerly awaited the Court’s judgment in Placanica. Would the Court provide the clarity that many interested parties were craving by defining the limits of the free movement of services in the gambling market? In her discussion of this judgment, Nele Hoekx shows that the Court fails in this respect and, in fact, offers no opinion on whether deregulation or harmonisation is the right course to steer when trying to organise this market. And she adds to this conclusion by perceptively commenting that perhaps no more can be expected of the Court of Justice. Rather, it is up to EU politicians to make the next move. 3.2. The Developments in a Number of Member States: the Netherlands, France, Germany and the United Kingdom One of the problems evoked by the European Court of Justice in Placanica concerns the relationship between legal and illegal gambling markets. Many Member States argue that the supply of legal gambling services is necessary in order to curb the availability of illegal gambling. In the Placanica case, the Court adds that, under certain conditions, this objective may justify a policy of expansion in the betting and gaming sector in the Member States. One of the few studies to examine the validity of this thesis – a sociological variant of the scientific principle of communicating vessels – is that of Toine Spapens on the spread of illegal casinos in the Netherlands and efforts to combat them. In this chapter he first explores the theory underpinning this thesis before going on to explain that the continual increase in the number of Holland Casino establishments failed to stop numerous illegal casinos from springing up. He then discusses the fact that the only way to combat these illegal businesses effectively was using a mixture of punitive measures. His explanation for the fact that the expansion of Holland Casino by no means automatically went hand in hand with the disappearance 15

Crime, Addiction and the Regulation of Gambling

of illegal casinos primarily relates to the social and psychological characteristics of those who participate in illegal gambling. The chapter by Dick de Bruin on the problem of gambling addiction in the Netherlands and the policy that the government is pursuing with private parties with a view to doing as much as possible to curb this problem nicely complements Spapens’ analysis. De Bruin chiefly reports on a large-scale study on gamblers and participation in gambling in the Netherlands. This was carried out over the period 2004–2006 and included a national survey, in which 5,575 people took part, as well as fairly extensive interviews with 450 gamblers. On the one hand, the study revealed who participates in which forms of gambling and to what extent; on the other, it shed light on the number of addicts in the Netherlands (40,000) and the types of gambling to which they are particularly addicted. De Bruin ascribes the fact that the number of addicts turned out to be much lower than hitherto assumed to the prevention policy pursued on a number of fronts to combat gambling addiction. It seems plausible to him, however, that other measures, such as the barring of electronic gambling machines (EGMs) from bars and eating establishments that are easily accessible to young people, have also played a more or less significant part in reducing the number of addicts. How the gambling market in France has traditionally been organised is the first main question discussed in the contribution by François Trucy. Complementary to this, he explains how the French government directly and indirectly controls the development of this market. He follows this up by commenting that crime and addiction problems undoubtedly also occur in France in the betting and gaming sector, but that these problems are not a particularly significant factor in the policy that is pursued. He concludes by saying that the main issue currently concerning the French government is the spread of online gambling, especially as it is not well-prepared for this new trend. With hindsight, it can only be concluded that this comment displays remarkable foresight on the author’s part. At any rate, Le Monde reported on 7 June 2008 that the French government, in consultation with European Commissioner McCreevy, is willing to liberalise gambling on the Internet during the latter half of 2009. Lotteries, casinos and EGMs will therefore be excluded from this opening up of the gambling market to free competition. A gambling authority is to be set up to ensure that online gambling is steered in the right direction. It is estimated that this market is worth between five and seven billion euros. Consequently, there are a large number of interested parties keen to try their luck there.17 Things have not yet reached this point in Germany. Here, government – at federal state and national level – and private gambling operators, both domestic and foreign, are still waging an intense battle for control of the gambling market.

17 See the article by F. Bostnavaron and L. Girard in LeMonde.fr dated 7 June 2008 (La libéralisation des jeux en ligne aiguise les appétits). 16



General Introduction

The substantial growth of this market is of course fuelling the conflict, as there is potential to make a great deal of money. Tilman Becker first discusses the supply side of the gambling market in Germany: the organisation of the market by the government, the types of gambling available and the operators involved, the scale of the supply and the revenues generated for operators, government and punters. Only then does he turn his attention to the demand side of the market, in other words the people who gamble. He has worked out not only how many people indulge in which forms of gambling, but also how much they spend. In relation to this he also gives us an idea of the number of gambling addicts in Germany per sector of the gambling market, revealing that EGMs in amusement arcades and casinos are once again causing most problems. The statistics on gambling addiction do not, however, lead Becker to the conclusion that the gambling market should continue to be regulated as it is at the moment. On the contrary, he argues in favour of fundamental and consistent restructuring. Gerda Reith examines the phenomenon of gambling in the United Kingdom from a more sociological point of view. After concisely outlining the fairly turbulent history of gambling in the UK, she first devotes due attention to problem gamblers: what is their personal profile, which games do they mainly play, to what extent are they guilty of committing crimes? She then discusses the UK Gambling Act 2005 and the highly critical public debate on the subject. In commenting on the latter, she focuses on two important points: the protection of vulnerable groups of gamblers and the expansion of online gambling. In her conclusion, Reith stresses the fact that, although the culture of gambling in the UK has changed drastically in the past few decades, an appropriate public health policy to combat gambling addiction as much as possible was not envisaged when the new Gambling Act was introduced. Following on from this, Caroline Jawad and Stephen Griffiths conclude by discussing the question of how pathological gambling on the Internet can be prevented by appealing to the social responsibility of all parties concerned, particularly online gambling operators. The relevance of this question is obvious given the rapid growth of various forms of Internet gambling: casinos, bingo, sports betting, poker rooms and so on. At the moment it is difficult to determine the scale of the problem of addiction to gambling available on the Internet, but the authors feel that this should not prevent attention being devoted to this issue, the more so since the operators in question are deploying numerous resources to promote online gambling. This chapter therefore mainly discusses the measures that these companies are already taking, but could or must still take, to minimise the problem of gambling addiction, especially among adolescents. At the very least, this would demonstrate their willingness to take their social responsibility seriously.

17

Crime Problems Related to Gambling: an Overview Toine Spapens

1. Introduction The focus in this chapter is on the relationship between crime and gambling. For most readers this will immediately conjure up images of the mafia in Las Vegas, due in no small measure to the global success of Mario Puzo’s The Godfather and the films based on his book. However, this is by no means the only way in which gambling and crime can be interwoven. We shall discuss four possible ways in which these two phenomena are linked. First of all, gambling activities may be offered illegally. This possibility arises when legal operators are not permitted to enter the market because they are legally barred from doing so. Alternatively, illegal gambling operators may focus on niche areas in the market where legal forms of gambling are not available. Secondly, criminal organisations may attempt to penetrate the legal betting and gaming sector. The activities of the Italian-American mafia in Las Vegas are one example of this. When the operation of gambling comes under the control of criminals, they can seize the opportunity to launder money and also use the proceeds to fund other illegal activities. Thirdly, criminals can also try to make improper use of legal forms of gambling. One possible way is by fixing matches in organised sports and then placing bets in legal betting shops. Legal gambling channels can also be used for money laundering. Another option is for criminals to try and cheat legal gambling operators. Finally, there may be a link between gambling addiction and crime. In order to carry on gambling or pay off their gambling debts, addicted gamblers may commit acquisition crime to fund their habit. This chapter gives an overview of the different ways in which crime may be related to gambling. It has to be said straightaway that there is little in the way of academic literature that examines this issue. Relatively speaking, most of the studies available concern the United States. Topics tackled include illegal Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 19–54 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

gambling activities, such as lotteries and sports betting, or video poker. A lot of research has also been conducted in the US on the effects of opening new, legal casinos on local or regional crime problems. Naturally, the activities of the mafia in Las Vegas have also attracted attention.1 In Europe illegal forms of gambling, or the possible penetration of criminals into the legal betting and gaming sector, have attracted little academic interest to date – or at any rate the lack of internationally accessible publications would tend to suggest that this is the case. Studies have been published in the Netherlands and Germany, for example, but are only available in Dutch and German.2 Policy studies have also been conducted in recent years in several Member States of the European Union.3 The reports were not always widely circulated, however, or made available online. A systematic overview of studies of this kind is therefore not available. Compared with illegal forms of gambling, addiction problems have been the focus of a relatively significant amount of academic attention. The literature does, however, primarily concentrate on the issue of how to diagnose and treat gambling addiction. Following on from this, prevalence studies to determine the extent of the addiction problem are carried out on a fairly regular basis. Here, however, the link between gambling addiction and crime is usually not discussed, or only indirectly. We shall start our analysis by examining the way in which gambling is offered illegally (Section 2). The penetration of criminals into the legal betting and gaming sector will then be explored (Section 3). Section 4 discusses in detail how criminals can make improper use of legal gambling channels. Section 5

1

J. Skolnick, House of Cards, The Legalization and Control of Casino Gambling (Boston/ Toronto, Little, Brown and Company, 1978).

2

See: A. van ’t Veer, H. Moerland and C. Fijnaut, Gokken in drievoud, facetten van deelname, aanbod en regulering (Arnhem, Gouda Quint, 1993); U. Sieber and M. Bögel, Logistik der Organisierten Kriminalität (Wiesbaden, Bundeskriminalamt, 1993); H. Moerland, Kansspelen in kaart gebracht (Deventer, Gouda Quint, 1997); T. Spapens, Joker, de aanpak van illegale casino’s in Nederland (The Hague, Boom Juridische Uitgevers, 2008).

3

See: C. Fijnaut, F. Bovenkerk, G. Bruinsma and H. van de Bunt, Eindrapport georganiseerde criminaliteit in Nederland (The Hague, Sdu, 1996); M. Bottenberg, F. Bovenkerk, A. Hartmann and E. Slooff, Criminaliteit in de branche van de amusementscenters? (Utrecht University, Willem Pompe Institute of Criminal Law, 1997); Regioplan, Verkeerd gokken, oriënterend onderzoek naar aard en omvang van illegale kansspelen in Nederland (The Hague/ Amsterdam, 2001); A. Pemberton, A. Oostdijk, J. Wils and C. van der Werf, Een spel met grenzen: de Nederlandse casinomarkt (Leiden, Research voor Beleid, 2002); F. Trucy, Rapport d’information fait au nom de la commission des Finances, du contrôle budgétaire et des comptes économiques de la Nation (1) sur la mission sur les jeux de hasard et d’argent en France (Paris, Sénat, 2002); F. Trucy, L’Évolution des Jeux de Hasard et d’Argent (Paris, Sénat, Commission des Finances, no. 58, 2006).

20



Crime Problems Related to Gambling: an Overview

focuses on crime committed by gamblers and gambling addicts. The chapter ends with some concluding remarks (Section 6).

2. Illegal Forms of Gambling on Offer For as long as gambling has existed, it has attracted the attention of the authorities, and some games of chance have been curbed or completely outlawed, in some cases temporarily or locally. Back in 14th century Italy, for instance, the permission of local rulers was needed to be able to offer a particular type of game of chance, which was apparently played at funerals.4 As early as 1364, the French government banned ‘tout jeux de dez, de tables, de palmes, de bailles, de quilles, de palet, de soule’.5 Gambling was also prohibited in Britain during the same period. The reasons underlying these restrictions were mainly practical. Gambling often led to serious fights and breaches of the peace, which the authorities were anxious to avoid. Moreover, the money that members of the upper classes gambled away could not be used for other purposes deemed more useful – such as war funds, for example. As time passed, however, ideological motives also took on a growing importance. The clergy had long opposed gambling, because it would only lead to unethical and sinful conduct, and to various forms of deception. The Protestants were the most categorical in their opposition: they believed that gambling was contrary to the Calvinist and Puritan work ethic. Prosperity ought to result from one’s own efforts and not from gambling winnings, which involved no quid pro quo. Other reasons to curb gambling were the personal excesses and addiction that could result from it. In the 17th century, for example, the well-known Dutch jurist Hugo de Groot already recognised that his fellow countrymen had almost made a virtue of a game of dice: ‘They played dice as a serious pursuit, with such recklessness in winning and losing that, when they had lost everything, they staked their liberty and their own person on the very last throw.’6 With the emergence of modern nation states, from the late 19th century on, governmental authorities in Europe and North America began imposing more and more restrictions on gambling. This did not have the effect of lessening people’s

4

B. Polders, ‘Gambling in Europe: Unity in Diversity’, in: W. Eadington and J. Cornelius (eds), Gambling: Public Policies and the Social Sciences (Reno, University of Nevada, 1997), pp. 64–100, p. 73.

5

G. Schotel, Het maatschappelijk leven onzer vaderen in de zeventiende eeuw (Amsterdam. J.G. Strengholt’s uitgeversmaatschappij N.V., 1905), p. 83.

6

Cited in G. Schotel (1905), p. 82 (our translation). 21

Crime, Addiction and the Regulation of Gambling

propensity to gamble, however, which left the way open for illegal gambling operators to enter the market. Initially, this happened on a small scale. Then, as a result of the industrial revolution, towns steadily grew in size, and the extent of illegal gambling increased accordingly. Gambling addiction among the proletariat became as big a problem as alcohol abuse. The trade unions, which were formed during this period, were just as opposed to gambling as was the clergy – and for good reason. New technical developments, such as the telegraph, led to a scaling up of activities. For example, it was now possible to bet illegally on horse races in other cities. Not only were more illegal gambling activities available, they were also organised more professionally. As it was illegal, gambling developed into a significant form of crime, particularly in the United States, but also in various European countries. 2.1. Petty Gambling on the Street or in Bars and Eating Establishments According to the laws of economics, whenever there is sufficient demand with a high spending potential, supply will follow, even though it is an offence to use or offer the product or service in question. Historical publications therefore abound with descriptions of gambling activities on offer in taverns or on the street. Unfortunately, it is not always specified whether these were legal or illegal practices. ‘Gambling dens’ were already around in the 16th and 17th century. People could play dice or wager, for example, in taverns,7 and later card-playing was added to the attractions. Around the same time, gambling games were also offered on the street during annual markets and fairs in the cities. Some of those responsible were members of organised gangs, who also broke into and stole property from dwellings for miles around.8 One characteristic feature of many gambling games was that they primarily served as a way of conning naïve locals. This involved, for example, cheating by sleight-of-hand, by switching playing cards or slipping them into the deck. All kinds of aids could be used as well, such as loaded dice or marked cards.9

7

P. Zumthor, Het dagelijks leven in de gouden eeuw, deel II (Antwerp/Utrecht, Het Spectrum, 1962).

8

F. Egmond, Op het verkeerde pad, Georganiseerde misdaad in de Noordelijke Nederlanden 1650 –1800 (Amsterdam, Uitgeverij Bert Bakker, 1994).

9

E. Villiod Modern bandietisme, hoe ze berooven, hoe ze moorden (1905, The Hague, A.W. Segboers Uitgevers-Maatschappy, Dutch translation), p. 159. Villiod also wrote a standard work on card cheating techniques, which is still available today. It was published in English under the title: ‘How They Cheat You at Cards, or Mr. Rakeoff in the Provinces’ (RGE Publishing).

22



Crime Problems Related to Gambling: an Overview

Another example of a street game designed to con any takers is known as ‘Cups and Balls’, or variants thereof.10 It is played with three cups. A little ball, a coin or something similar is placed under one cup. The cups are then shifted around very fast. To win, the player must identify the cup with the ball. Anyone who watches carefully can point to the right cup relatively easily. To entice unsuspecting spectators to take part, the game is first played fairly a few times, where the ‘winner’ is usually an accomplice. When the victim actually joins in, however, all kinds of distracting tricks are used to minimise the victim’s chances of winning. The game originated in the Arabian world. In the 19th century it also gained popularity in Europe and was a favourite with travelling bon vivants, who were recognisable by their ‘knapsack, wide-brimmed hat, gaunt face and quick tongue’.11 Travellers offering this kind of game could not, of course, stay in one place for too long, as otherwise their conned victims might seek redress by violent means. There were also groups active in France in the early 20th century: during long train journeys they would try and entice passengers to join in games ‘to kill time’, naturally with no other aim than to fleece anyone who took the bait.12 If the victims protested too strongly, the con men apparently did not think twice about killing them or throwing them off the train.13 In the 1970s ‘Cups and Balls’ was re-introduced into Western European cities by Yugoslavian groups,14 mainly from Sarajevo and the surrounding area, where, it seems, the game was still played.15 In Western Europe, however, people had forgotten about this particular con over the years. The perpetrators were therefore amazed at the naïvety of their victims.16 Bovenkerk (2001) describes a veritable network of groups active throughout Western Europe, apparently sent by a ‘leader’ living in Belgrade. As a result of the press coverage of these practices, it became more difficult to find victims and ‘Cups and Balls’ con artists gradually disappeared off the streets. Petty gambling in the back room of shady bars and eating establishments still goes on, although little is known about its nature or extent. These are closed

10 Other variants use playing cards, nutshells or metal disks, one of which has an identifying mark. See: E. Villiod (1905), pp. 143–145. 11 E. Villiod (1905) p. 144 (our translation). When these travellers became too conspicuous, well-dressed and well-groomed characters started popping up. 12 E. Villiod (1905), pp. 145–153. 13 Ibidem. 14 See: also, for example, U. Sieber and M. Bögel (1993). 15 F. Bovenkerk, Misdaadprofielen (Amsterdam, Meulenhoff. 2001), p. 99. 16 Ibidem. 23

Crime, Addiction and the Regulation of Gambling

circuits, where outsiders are not welcome.17 Moreover, it is usually difficult to draw the line between normal social activities of regular customers and organised gambling. According to police sources, baccarat or chemin de fer is played in some Turkish coffee houses in the Netherlands.18 Also in Chinese circles, mahjong is a popular game that is also played for money. In the United States there are reports of illegal card schools where poker is played. Illegal poker is also played in Europe, especially with the surge in popularity in recent years. In the Netherlands, for example, illegal poker tournaments are organised in bars and eating establishments. Illegal poker clubs have also sprung up in Britain.19 2.2. Illegal Sports Betting and Totes Sports betting is the second type of illegal gambling that can be identified. For a long time this mainly involved bookmaking on horse racing. Nowadays it is possible to place bets on all kinds of sports events. Illegal gambling on horse racing was professionalised in the United States in the late 19th century. As mentioned earlier, gambling on racing in the US really took off with the advent of the telegraph network. In 1904 telegraph companies, such as Western Union, were banned from disseminating information about horse racing. The result, however, was that an illegal information exchange network was set up within six months. Whoever controlled this network also had control over illegal gambling on sports events.20 After the First World War, the focus in the US slowly but surely shifted from horse racing to other sports, particularly American football, baseball and basketball.21 The monopoly on providing information by telegraph also came to an end, as sports events began to be broadcast over the radio, and later on television. As a result, punters no longer needed to physically go to the bookmakers to find out the results. Often bets were also placed by phone. Nowadays, the Internet serves the same purpose. In 1999 betting on sports events was permitted in just two US

17 D. de Bruin, C. Meijerman, F. Leenders and R. Braam Verslingerd aan meer dan een spel, Nulmeting van een meerjarig onderzoek naar de aard en omvang van kansspelproblematiek in Nederland (Utrecht, CVO, 2005), p. 166. 18 Ibidem. 19 Gambling Commission, Illegal Poker Clubs Face Action, 19 January 2007. 20 P. Reuter, Disorganised Crime, Illegal Markets and the Maffia (Cambridge Massachusetts, The MIT Press, 1983), p. 15. 21 P. Reuter (1983), p. 17. 24



Crime Problems Related to Gambling: an Overview

states (Nevada and Oregon).22 Betting on horse racing (pari-mutuel wagering) was, however, legalised in 43 states in that same year.23 A bookmaking operation demands considerable logistical organisation. At the centre of it all is the actual bookmaker, who has to determine the profit margins, ensuring that all the information about bets placed is incorporated into his calculations. The bookmaker uses one or more clerks, who process the bets placed. Under them come the runners, i.e. the people who collect the money and pay out any winnings. Bets are placed either by telephone or with these runners, of which there may be dozens, depending on the scale of the operation. In addition to this primary logistical organisation, there may be all kinds of links between bookmakers, or with ‘reinsurers’, for example to cover unexpected losses. A little known fact is that back in the 1920s and 1930s, one of the main illegal activities of Al Capone was organising bets on horse racing. Although Capone is mainly associated with bootlegging, documents recently released by the US Internal Revenue Service reveal that his famous conviction for tax evasion actually stemmed from his illegal gambling activities. During a 1926 raid of Capone’s gambling den, where punters could not only bet on the horses but also play roulette, craps and cards, a ledger was found detailing his earnings from gambling activities. This gave the IRS its first concrete evidence, enabling investigators to link income – on which no income tax had been paid of course – to Capone. It took the IRS three years, in a special operation conducted by the Intelligence Unit, to collect witness statements from people who had worked in his illegal gaming house and analyse his cash flow. Capone was sentenced to 11 years in prison in 1931.24 According to the Kefauver Committee, which investigated organised crime in the United States in the 1950s, the Italian-American mafia was the prime mover behind illegal sports betting at that time.25 A recent assessment by the FBI’s Cryptanalysis & Racketeering Records Unit revealed that La Cosa Nostra still controls illegal bookmaking activities in the US.26 Sports betting in the form of totes is legal in most European countries, but this does not mean that the illegal circuit has been stamped out. These illegal totes usually use the same odds ratings as their legal counterparts, but the

22 National Gambling Impact Study Commission, Final Report (1999, Washington D.C, ), Chapter 2, p. 14. 23 National Gambling Impact Study Commission (1999), Chapter 2, p. 11. 24 Treasury Department, Internal Revenue Service, Summary Report dated December 21, 1933, <www.irs.gov>. 25 P. Reuter (1983), p. 16. 26 D. Hernandez, Cryptanalysis and Racketeering Records Unit, paper presented at the 13th Annual Risk Taking and Gambling Conference (Reno, Nevada, 2006). 25

Crime, Addiction and the Regulation of Gambling

advantage for the punters is that they can place higher bets. No betting tax on winnings is deducted either. Lastly, illegal operators allow late bets to be placed, which gives punters the opportunity to anticipate any changes that occur at a late stage, but that can affect the winning odds. One example might be a key player sustaining an injury.27 Little is known about the extent of illegal betting on sports events in Europe. Italy is reported to have a significant problem, with people getting involved in betting on horses and dogs, for example, and in the totonero.28 A report by the Italian Senate concluded that activities of clandestine betting and gaming, prohibited as such, are a considerable problem.29 Betting on sports events has also been identified as a problem in France, mainly involving bookmaking on horse racing, greyhound racing and pelota.30 In the Netherlands there is also evidence of illegal betting on horse racing,31 with between five and eight bookmakers reportedly active in this area in 2001. Horse racing is, however, a relatively minor sport in the Netherlands. Gross illegal proceeds have been estimated at just €200,000 per annum.32 Illegal totes also exist in the Netherlands. Several criminal groups in Rotterdam and The Hague were found to be actively involved in these in the early 1990s and attracted the attention of the police because of clashes that resulted in several deaths. One of these criminal alliances was even said to have around 100 to 200 runners.33 The bets were often arranged in cafés, sports canteens, within companies or simply among friends or acquaintances.34 A relatively recent research report concluded that the illegal gambling circuit associated with football matches in the Netherlands was controlled by five organised criminal groups.35 Unfortunately, the authors were vague about the background and composition of these groups and did not explicitly identify

27 Utrechts Nieuwsblad, ‘In Utrecht floreert vooral illegaal gokcircuit’, 5 February 2005. 28 See: <www.narcomafie.it/articoli_2008/dos1_1_2008.htm> (accessed 11 February 2008). 29 Reference is made to this report in the Placanica case. See: Case C-338/04, C-359/04 and C-360/04 Criminal proceedings against Massimiliano Placanica, Christian Palazzese and Angelo Sorricchio [2007] ECR I-01891 30 See: F. Trucy, ‘The Role of Crime and Addiction in the Gambling Policy of France’ (this volume). 31 Regioplan (2001), p. 18. 32 Regioplan (2001), p. 65. 33 A. van ’t Veer, H. Moerland and C. Fijnaut (1993), p. 102. 34 Ibidem. 35 KPMG Integrity & Investigation Services, Preventieve doorlichting bedrijfstak betaald voetbal (Amstelveen, KPMG, 2004), p. 75, p. 82. 26



Crime Problems Related to Gambling: an Overview

the sources on which their conclusion was based. Turnover was reported to be €18 million per annum, similar to that of the legal tote.36 2.3. Illegal Lotteries and Lottos State lotteries have been organised in Europe since the 17th century, primarily with the aim of helping the authorities earn additional income.37 This type of lottery involves selling lottery tickets with a unique number. State lotteries enjoyed enormous popularity. The price of the lottery tickets was so high, however, that they were beyond the pockets of ordinary working folk. Expensive lottery tickets were therefore sold illegally in portions, so that people of more modest means could buy a small share of one. In the United States, the price of a lottery ticket for an official lottery in the 19th century, for example, was in the region of 5 dollars. Instead of a whole lottery ticket, people would buy a share from an intermediary, or they would wager a couple of cents separately on the winning number. In the latter half of the 19th century, lotteries were banned in many – but not all – US states. In states that did not have a lottery, this inevitably led to the emergence of an illegal alternative, conducted in parallel with the official lottery in states where no such ban was in place. Besides lotteries, another game became the vogue in the 18th century: lotto. This does not involve lottery tickets with a fixed number. Instead, people buy a ticket printed with several numbers, from 1 to 45 for example. They can choose several numbers, let’s say six. During the official lotto draw, six numbers would then be drawn out of 45 numbered balls. Anyone who matches all six numbers drawn wins the jackpot. The lotto game was originally developed in Italy, before spreading to the rest of Europe and later to other continents.38 The Italians, who alone had the necessary expertise, were granted licences to organise lotto in various European countries. In 1761, for example, the lotto game was introduced in Brussels, which at that time was part of the Austrian Netherlands.39 Nowadays, any mention of illegal lotteries usually refers to lotto. In the United States this game is known as ‘The Numbers’,40 and has been available illegally since the end of the 19th century. In terms of logistics, organising an

36 KPMG Integrity & Investigation Services (2004), p. 74. 37 M. Zollinger, Entrepreneurs of Chance, The Spreading of Lotto in 18th Century Europe, paper presented at the IV International Economic History Congress, Helsinki, 2006. 38 M. Zollinger (2006). 39 M. Zollinger (2006). King William I put an end to it in 1828. See: A. van ’t Veer (1998), p. 14. 40 P. Reuter (1983), p. 45 ff. 27

Crime, Addiction and the Regulation of Gambling

illegal lotto is very similar to running an illegal tote. Here, too, punters can place their bets with a runner, with everything being administered by a clerk. However, in this case there is no bookmaker involved who has to determine the profit margins, but rather a bank, which must keep track of all the wagers. There is no official draw. Whether people win or lose is determined on the basis of an external source. At present the results mirror those of the official lotto. In the United States, in the days when there were not yet any legal lottos, other numbers were used as reference, for example the daily quotation of stock prices on the New York Stock Exchange.41 The Numbers would become an important money-maker for organised crime in the US. The Pennsylvania Crime Commission, for example, investigated illegal lottos in the state between the 1970s and the early 1990s42 and found that The Numbers game in Philadelphia was largely controlled by an Italian-American mafia ‘family’ in the 1970s. Afro-American operators were also active in the city’s black neighbourhoods, however. When a legal state lottery was set up in Pennsylvania in the 1980s, the illegal lottos did not disappear from the scene and in fact were particularly popular with the black population of Philadelphia. Although there is a lack of systematic research, illegal lottos still exist to this day in the US, according to the FBI. As with illegal totes, they are reportedly still mainly controlled by the Italian-American mafia.43 There is hardly any information about the nature and scale of illegal lotteries in the European Union. What little there is concerns only the Netherlands. We can conclude from the information available to us that illegal lottos exist, particularly in the larger cities.44 During checks made recently in Amsterdam, for example, it was found that almost half of the outlets where lottery tickets for legal lotteries were on sale also had forms for an unofficial lottery. In September 2006 a criminal gang involved in organising an illegal tote and lotto was rounded up. Other illegal activities included cigarette smuggling and money laundering. The illegal lotto was run in parallel with the Dutch Lotto and the German Lotto.45 2.4. Illegal Casinos Casinos originated in the 19th century as gaming houses where various games of chance were available under one roof, e.g. card games, craps, roulette and

41 D. Liddick, The Mob’s Daily Number, Organized Crime and the Numbers Gambling Industry (Lanham, Maryland, University Press of America, 1999), p. 3. 42 D. Liddick (1999), p. 50. 43 D. Hernandez (2006). 44 Regioplan (2001), p. 72. 45 Openbaar Ministerie, Verdachten witwassen en illegale kansspelen aangehouden, 6 September 2006, <www.om.nl>. 28



Crime Problems Related to Gambling: an Overview

later also slot machines or other electronic games.46 These gaming establishments were banned at the beginning of the 20th century in most European countries, or only permitted in the fashionable tourist destinations of the day, such as Monaco, or Knokke in Belgium.47 Unlike other forms of illegal gambling, a brick-and-mortar casino is difficult to hide. The survival of an illegal casino therefore very much depends on whether there are any loopholes in the law that make it more difficult to close down the establishment, or on a government that is not inclined to intervene, for whatever reason. Illegal casinos have never made any headway in the US, or at any rate this is what can be inferred from the literature available. There were reports of casinos on board ships in the 1930s, for example in California, but nothing more. Offering gambling activities only outside US territorial waters was an attempt to circumvent American legislation. In spite of this, these floating gaming houses were quickly stamped out.48 Even in Europe there are only some countries, in so far as information is available, where there is substantial evidence of the past existence of illegal casinos – Germany, Austria and the Netherlands, for instance. The core business of these illegal gaming houses was ‘observation roulette’, or 24 roulette. This game, with its many variations such as Golden Ten, Dromus24, Euro Observation Game, etc., bears some resemblance to French or American roulette. These ‘usual’ forms of roulette are pure games of chance, however. In observation roulette, tracking the trajectory of the ball gives experienced players a reasonable chance of predicting the number on which the ball will land. To ensure that the most skilful player wins, the players play only for their combined stakes. Since observation roulette was considered a game of skill, private entrepreneurs, for example in Germany or Austria, were able to obtain a licence to open a gaming house offering this game.49 With a few modifications, however, observation roulette can easily be transformed from a game of skill into a game of chance. In this case, the players are no longer playing for their combined stakes, but rather against the casino bank. To stop skilful players breaking the bank in no time, however, some measures have to be taken to prevent them using their skill. For example, plastic screens can be erected to obscure the players’ view of the ball. The croupier can also say ‘rien ne va plus’ at an early stage, leaving little time for observing the ball. The bouleur can vary the way in which he introduces the ball, use balls with different weights, and so on. Last but not least, players who are too ‘lucky’ can of course be forcibly removed from the premises and henceforth banned. 46 Regioplan (2001), p. 14. 47 See, for example: B. Polders (1999). 48 See: J. Skolnick (1978). 49 U. Sieber and M. Bögel (1993). 29

Crime, Addiction and the Regulation of Gambling

The German and Austrian casinos offering observation roulette were therefore not illegal as such, but their playing practices certainly were. The situation was different in the Netherlands, where no licences for observation roulette were granted. Nevertheless, from the 1970s right up to the turn of the century there were dozens of illegal gaming houses where this game formed the crux of the business. In most establishments it was also possible to play poker or blackjack. In 1974 there were estimated to be 350 such establishments. For a long time the Dutch government took only very limited action, as long as no trouble was caused. Some of these illegal casinos were very large. In Amsterdam, for instance, the Cabala gambling club was opened in 1976 partly with money put up by the Italian-American mafia (as was later discovered), specifically the Meyer Lansky group.50 The Americans were also planning to invest in the adjoining Club 26 on Oudezijds Achterburgwal in Amsterdam’s red-light district. According to reports, 18 million guilders (€8.2 million) were sunk into this casino, 10 million of which came from the Americans.51 In 1983 these two ‘gambling emporia’ were burned to the ground, however, with thirteen fatalities. In response to this incident, the authorities in Amsterdam took a hard line. The Americans did not return. In any case their experience with the Amsterdam underworld was not particularly positive, and the casinos turned out to be much less lucrative than they had expected.52 Despite the fact that twelve legal casinos had meanwhile opened up all over the Netherlands, by the late 1990s there were still around 100 illegal gambling establishments in business. As a result of complex case law, it took a long time to prove breaches of the Dutch Betting and Gaming Act.53 Moreover, after one of these establishments had been closed down, it was easy for the operators to set up a new legal entity and continue their illegal gambling activities. In many cities the authorities therefore gradually adopted a policy of tolerance. A solution to the enforcement problem was not found until the late 1990s, and illegal casinos in the Netherlands disappeared within a few years.54

50 B. Middelburg De mafia in Amsterdam (Amsterdam, De Arbeiderspers, 1988), C. Fijnaut and F. Bovenkerk, Enquête opsporingsmethoden, Deelonderzoek IV, Georganiseerde criminaliteit in Nederland: een analyse van de situatie in Amsterdam, Tweede Kamer, Vergaderjaar 1995–1996, 24072, no. 20, p. 27. 51 B. Middelburg (1988). 52 Ibidem. 53 For further details, See: Toine Spapens, ‘Regulating Illegal Gambling Markets: The Case of Illegal Casinos in the Netherlands’ (this volume). 54 T. Spapens, Joker, De aanpak van illegale casino’s in Nederland (The Hague, Boom Juridische Uitgevers, 2008). 30



Crime Problems Related to Gambling: an Overview

2.5. Illegal Electronic Gambling Machines The next form of illegal gambling that can be singled out is illegal EGMs, for example machines that are placed in bars or restaurants on which video games can be played. These machines do not pay out any money and, on paper, can be used purely for entertainment. Players can only win free games or credit points, for example. These EGMs are legal in themselves. The illegal element is that the points gained are paid out by the barman or a clerk. Games of skill can, if necessary, also be turned into games of chance by making software modifications. Individual machines can be reset to zero once the accumulated credits have been paid out. These EGMs are leased rather than purchased by the manager of the establishment in question. The lessors link the installation of the machines to a loan, which is paid off over a specific period of time out of the proceeds from illegal gambling. For the managers of bars and eating establishments this is often a welcome addition to their income, as they are allowed to keep half of the profits or even more. Video poker, in particular, is regarded as a serious problem both in the United States and in various European countries. A recent study in the US state of Maryland revealed that there were an estimated 3,500 illegal EGMs in use in the city and county of Baltimore alone.55 According to the FBI, the leasing of ‘Joker Poker Machines’ in the US is controlled by La Cosa Nostra, but also by criminal groups from the Balkans.56 Illegal video poker is also played in Europe, for example in Italy, France and Greece. A systematic overview of the situation in the EU is not available, however, In Italy, organised crime is reputed to have a firm grip on video poker. In Rome, for instance, former members of the Banda Magliana are thought to control this game in parts of the city.57 An unknown number of clandestine EGMs were in operation in France in 2001, with estimates ranging from more than 6,000 to 100,000 installed in bars,58 featuring video poker and other games. As in the US, winnings were paid out on the basis of points accumulated. Installing EGMs, particularly in the south of France, was reputed to be one of the key activities of organised crime. Disputes on the subject also ended in violence. In the south of France, the resulting death toll between 1998 and September 1999 was 48.59

55 J. Jacobson, Underground Video Gambling Industry Costing Maryland More Than $15 Million Annually in Uncollected Taxes (Baltimore, The Abell Foundation, 2006), p. 1. 56 D. Hernandez (2006). 57 See: <www.narcomafie.it> (accessed 11 February 2008). 58 F. Trucy (2002), p. 164. 59 F. Trucy (2006), p. 109. 31

Crime, Addiction and the Regulation of Gambling

2.6. Online Gambling Online gambling is a relatively new way of giving people access to games of chance. The World Wide Web boasts a multitude of sites offering gambling in various forms, such as virtual slot machines or poker. Gambling online really seems to have taken off in the past few years. The number of gambling sites rose from 130 to almost 2,000 between 1999 and 2005. Global turnover was an estimated 24.3 billion US dollars in 2004.60 The British online gambling company PartyGaming, for example, saw its turnover increase from €131 million in 2003 to €516 million a year later.61 More than half was profit. A survey conducted in the Netherlands showed that in 2005 3.5% of Dutch people connected to the Internet had gambled online for money. Turnover was estimated to be €62–120 million.62 This trend is a cause for concern for the government of more than one country for several reasons. Firstly, betting and gaming legislation and the task of overseeing gambling are subject to territorial limits. In many States it is prohibited to offer online gambling. There are, however, States or self-governing territories within the European Union and elsewhere where more liberal rules and regulations prevail. Malta, for example, readily issues licences for various games of chance on the Internet, on condition that they are not aimed at Malta itself. There are also enclaves such as Gibraltar, Alderney, the Isle of Man and the Finnish island of Aland, where the authorities have no objections to servers being installed for the purpose of online gambling.63 Outside the EU, Costa Rica, Antigua and Barbuda, Kahnawake and the Dutch Antilles are important bases.64 In countries with a restrictive policy on online gambling, there is nothing to stop citizens gambling on these foreign websites. The second area of concern is that virtually no control can be exercised on gambling addiction, since the players no longer need to leave the comfort of their own home. Statistics on gambling addiction in relation to the Internet are not yet available, however. Thirdly, players have absolutely no guarantee that the technology behind these websites ensures fair-play. This also applies to games that, on the face of it, cannot be rigged, such as poker. The provider might introduce a ‘virtual player

60 D. Hernandez (2006). 61 Het Parool, Holland Casino kijkt jaloers naar Brits gokbedrijf, 30 June 2005. 62 M. Lampert, B. van der Lelij and R. Gras, Kansspelen via nieuwe media 2005 (Amsterdam, Motivaction, 2005). 63 CERT-LEXSI, Cybercriminalité des Jeux en Ligne, Livre Blanc du CERT-LEXSI, July 2006, p. 15. 64 CERT-LEXSI, Cybercriminalité des Jeux en Ligne, Livre Blanc du CERT-LEXSI, July 2006, p. 4. 32



Crime Problems Related to Gambling: an Overview

of the house’ – a computer program – into the game without the other – real – players noticing. Logically, this virtual player can manipulate the game to its own advantage at will. When the players notice that their results on a particular website are disproportionately poor, and share that information with others via chat sites, the provider can simply pull the plug on the site and start again at another web address with a slightly different format. In a way, this is the modern equivalent of the card cheat who moves from one town to the next. Gambling websites could also be exploited for other purposes, such as the theft of credit card details or the introduction of viruses or spyware.65 Last but not least, often it is not clear who the owners of foreign gambling sites are, certainly not when they are based in exotic locations. The fear is that, sooner or later, criminals – organised or otherwise – will try to take control of this highly lucrative market, if they have not done so already. In 2005 three arrests were made in the US involving people who operated websites on the Isle of Man (Euro Off-Track) and Curacao (Racebook), and who had links with the Gambino family.66 In February 2008 a further 26 people were arrested, including one of the big guns in the Gambino family, in connection with illegal gambling on sports events and the operation of four websites.67 In this case the traditional ‘wire rooms’ and ‘street corner bookies’ were supplemented with the Internet: on the websites, players could place their bets using a password-protected account. The Internet is extremely flexible, so there is little point in the authorities trying to block access to particular websites, given that providers can simply get back in business from a new address. Yet online gambling has an Achilles’ heel: payments, which have to be transferred through normal channels, i.e. via credit card companies or banks. Governments can therefore prohibit these institutions, provided they have branches on their territory, from processing financial transactions on behalf of these websites. This is precisely what happened in the US in 2006, and resulted in the shares of legitimate companies like PartyGaming plummeting.68 Similar measures were announced by the Dutch Minister of Justice early in 2008. Here, too, the problem remains that providers can simply activate new sites and link new accounts to them. It will therefore require considerable effort to keep track of the situation in order to be able to block these accounts.

65 CERT-LEXSI, Cybercriminalité des Jeux en Ligne, Livre Blanc du CERT-LEXSI, July 2006, p. 9. 66 CERT-LEXSI, Cybercriminalité des Jeux en Ligne, Livre Blanc du CERT-LEXSI, July 2006, p. 10. 67 The North Country Gazette, ‘Gambino Captain, Others Busted for Sports Gambling’, 7 February 2008. 68 Brabants Dagblad, ‘Crisis gokbedrijven door wetgeving VS’, 3 October 2006. 33

Crime, Addiction and the Regulation of Gambling

2.7. Loan Sharking The final type of ‘service’ offered in connection with gambling that we shall discuss here is the practice of lending money to gambling addicts at extortionate interest rates. The recipients may use the money either to pay off their gambling debts or as a stake in a bid to make that ‘big win’. The latter option would allow them to pay off the loan with interest, settle their gambling debts and, at the same time, indulge their compulsion to gamble. Clearly, in this case, the risk of gamblers getting themselves deeper into trouble considerably outweighs the likelihood of them solving their problems. Relating to gambling, loan sharking is only mentioned by Peter Reuter.69 Loan sharks can, of course, also provide fellow criminals with investment capital, for example to purchase a consignment of drugs.70 Although very little is known about the phenomenon Reuter claimed that in the US ‘a frequent and important assertion about loan sharks is that they derive a great deal of their business from gambling’.71 This assumption was, however, tempered by the necessary uncertainties. Hardly anything was known about the real extent of the problem, or about the methods of the loan sharks. Even cases brought to court provided few details about what had actually happened. All that could be ascertained was that high interest rates were applied, that violence was threatened or used if the loan was not paid off on time, and that the financiers were either serious criminals or had links with the criminal world, in some cases with organised crime. To the best of our knowledge, absolutely no academic research has been conducted in Europe on the subject of loan sharking in connection with gambling. Only one single mention can be found in media reports. In the Netherlands, following the murder of a Chinese man, it was reported that criminal groups were involved in loan sharking in both casinos and amusement arcades frequented by Chinese punters.72 They were said to focus on Chinese illegal residents in the Netherlands, since these people cannot apply to a commercial bank or other financial institution for a loan.73

69 P. Reuter (1983), p. 85. 70 T. Spapens, Interactie tussen criminaliteit en opsporing. De gevolgen van opsporingsactiviteiten voor de organisatie en afscherming van xtc-productie en -handel in Nederland (Antwerpen/ Oxford, Intersentia, 2006), pp. 182–183. 71 P. Reuter (1983), p. 101. 72 Haagsche Courant, ‘Louche geldschieters zitten overal in gokgelegenheden’, 29 March 2005. The victim was a member of the ‘Fat Kee’ gang from The Hague, which was reputed to have clashed with the ‘Ming’ group from Rotterdam over sharing out the casinos and amusement arcades where loan-sharking practices could be employed. See: Haagsche Courant, ‘Chinese maffia werkt vanuit casino’s’, 26 March 2005. 73 Haagsche Courant, ‘Chinese maffia werkt vanuit casino’s’, 26 March 2005. 34



Crime Problems Related to Gambling: an Overview

3. Penetration of Criminals into the Legal Betting and Gaming Sector Instead of providing gambling services illegally, criminals can also try to penetrate the legitimate betting and gaming sector. Naturally, this is only possible when specific forms of gambling are actually available legally. This section will look in more detail at the risk that members of the underworld are able to obtain a licence to provide gambling services legally. We shall start by examining the involvement of the Italian-American mafia in Las Vegas casinos (Section 3.1). In the absence of any further information, the European examples of penetration by organised and other crime into the legal betting and gaming sector are limited to the Netherlands. We shall take a close look at the allegations, in the mid-1990s, that criminals infiltrated the electronic gambling machine sector (Section 3.2). Lastly, the problem of unknown beneficial owners will be discussed in relation to legal gambling (Section 3.3). 3.1. The Mafia in Las Vegas The Italian-American mafia first became involved in casinos in Las Vegas in the 1940s, and is also reputed to have run gaming houses in Cuba for a short while in the 1950s. In 1978, in his now famous book, House of Cards, the American sociologist Jerome Skolnick described how the links between organised crime and Las Vegas casinos came about. The following potted history is based on his work. All forms of gambling, including bookmaking and sports betting, were legalised in the state of Nevada in 1931.74 The first two casinos were opened in Reno five years later. One of the people involved was William Harrah, a legitimate businessman. In those days Las Vegas was a small, sleepy town. All that changed when the Hoover Dam, also known as the Boulder Dam, was built nearby and construction workers flooded into town looking for entertainment. During World War II, Nevada served as a temporary base for US armed forces en route to the theatre of war in the Pacific. They, too, were good customers for the gaming houses. The underworld arrived on the scene in 1946, when the Flamingo Hotel was opened. The man behind this casino hotel was Bugsy Siegel, a legendary gangster from the East Coast of America. As part of a plan to step up activities, the mafia had decided to move its operations westwards. Siegel was sent to California to develop syndicate gambling rackets. He also managed a few floating casinos that operated outside US territorial waters.75 However the Californian authorities soon put an end to that. In 1945 charges were also brought against Siegel for 74 J. Skolnick (1978), p. 108. 75 J. Skolnick (1978), p. 111. 35

Crime, Addiction and the Regulation of Gambling

his bookmaking activities. As a result of this he started looking for legitimate ways to pursue his gambling interests. With its liberal laws, Nevada offered the perfect opportunity. Although Siegel was known to have a shady reputation, the Las Vegas authorities welcomed him with open arms.76 Siegel realised full well that a couple of tables or slot machines would not be enough to entice large numbers of clients. He therefore decided to tackle the job on a much grander scale. Gamblers would be lured in with a luxuriously appointed hotel, exquisite food and drink, and shows featuring Hollywood’s biggest stars, all at very low prices. Siegel can therefore rightly be regarded as the founding father of the Las Vegas Strip casinos as we know them today. To get the whole operation off the ground, however, he did not shrink from employing the usual ‘mafia methods’. Right after the war there was a serious shortage of building materials and vehicles, but with a little ‘persuasion’ suppliers were willing to give the builders of the Flamingo Hotel priority. In spite of this, the work did not go exactly as planned: there were considerable cost overruns and the grand opening of the casino was delayed. Siegel’s criminal business partners were apparently so angered by all this that they had him killed in 1947. Strangely enough, this did not do the casino any harm. The murder of Bugsy Siegel generated massive publicity for the Flamingo Hotel coast to coast, and the underworld connection perversely seemed to exert a powerful attraction on the public. In the years that followed, a number of similar gambling joints would be opened using outside capital and manpower. One of the reasons for this was that Nevada – at that time still a thinly populated state – did not have any entrepreneurs with the necessary investment capital; nor could it provide personnel with the expertise and experience required to successfully run a casino. Moreover, because of gambling’s negative image, bona fide parties were not prepared to put money into casinos. Inevitably, the city attracted people from elsewhere in the country, who did have money, experience and know-how, albeit largely acquired through illegal gambling activities. Nevertheless, they had little trouble obtaining the necessary licences. The situation gradually changed after 1955, when controls on potential investors were tightened. Henceforth they would be subject to thorough background checks, for example. Yet it was not until the 1960s that the authorities turned their attention to the existing casinos, mainly prompted by the suspicion that they were guilty of systematic and large-scale tax evasion. Criminal investigation of these practices did not come up with much, however. It was 1973 before the first case was successfully prosecuted. On that occasion the State was able to prove that, between 1960 and 1967, an average of 4.5 million US dollars a year did not go through the books in one casino, out of an annual turnover of 36 million. It was the same story in several other casinos. The evil genius behind 76 J. Skolnick (1978), p. 112. 36



Crime Problems Related to Gambling: an Overview

these practices was Meyer Lansky. Lansky – who had ‘emigrated’ to Israel in the meantime – was indicted on the charges, but they were dismissed in 1976 because ill health supposedly prevented him from standing trial.77 Although enforcing criminal law on the mafia casinos was not very successful, something happened in 1966 that would eventually have a huge impact on the development of Las Vegas. The Nevada governorship elections took place that year. The incumbent governor, Grant Sawyer, who until then had categorically denied the existence of any ongoing illegal activities in the casinos – a stance that had slowly but surely put him on a war footing with the federal authorities – was defeated by Paul Laxalt, who proved willing to work with the authorities. Laxalt also somehow managed to get Howard Hughes – an eccentric and mysterious character, but one of the richest men in America – interested in buying casinos that were run by the mafia at the time. The reason for Hughes’ sudden interest in the casino business has always remained a mystery. According to one of his closest advisors, who later wrote a book about the episode, it was pure coincidence.78 Nevertheless, Hughes succeeded in buying up six casino hotels in just a couple of years, which meant he controlled 25% of the Strip’s total turnover. Howard Hughes was regarded as an icon in the United States at that time. His investments in Las Vegas therefore helped boost the city’s image enormously, which led to a substantial increase in casino tourism, and also attracted other bona fide investors. In later years the casinos’ running costs soared and larger and larger investments had to be made in order to keep drawing in the crowds. This was beyond the pocket of private financial backers. Instead, large companies such as the Hilton Hotel chain became the main investors. It was chiefly these developments that eventually led to organised crime being sidelined. As noted, the mafia – in this case Meyer Lansky – did not confine its investments in legal casinos to the United States. In the 1950s the mafia also got involved in casinos in Cuba. Under the dictatorship of Batista, the island of Cuba had become an important tourist destination – in relative terms, of course – for Americans. Cuban law did not outlaw gambling, and American tourists were more than willing to try their luck. There was no question of a professional set-up, however, and tourists were also at considerable risk of being ripped off by local gambling operators. American gangsters were therefore brought in to professionalise operations and – contradictory as it sounds – to clean up the games. The Italian-American mafia first became involved in the Hotel Nacional, which was owned by Pan American Airlines. In 1957 they opened their own

77 Lansky’s health problems were not as bad as all that, it seems: he survived until 1983, dying at the age of 81. 78 R. Maheu and R. Hack, Next to Hughes. Behind the Power and Tragic Downfall of Howard Hughes by his Closest Advisor (New York, Harper Collins, 1992). 37

Crime, Addiction and the Regulation of Gambling

hotel-casino. The party was cut short when Fidel Castro took power two years later, and it was game over for the casinos. 3.2. The Electronic Gambling Machine Sector in the Netherlands In the 1990s the Dutch authorities suspected that organised crime had penetrated the legitimate betting and gaming sector, specifically the electronic gambling machine sector. Private companies in the Netherlands have been able to operate EGMs since 1986. The machines are placed in bars and eating establishments and in amusement arcades. First of all, it was suggested that the lease of EGMs was under the control of criminal groups. Secondly, some amusement arcades were suspected of being in criminal hands. Even before it was possible to legally operate these machines, all kinds of EGMs that paid out money were set up in Dutch bars and eating establishments.79 At the time there were already rumours that these machines sometimes had to be installed under duress.80 In 1986, when EGMs could be operated legally, these allegations did not go away. In 1992, for example, a representative of the Rotterdam police was reported as claiming that one in five operators of EGMs in the city was associated with organisations involved in drug trafficking and other forms of serious crime.81 Klaas Bruinsma’s group, whose main business was importing hashish, also reportedly tried to force businesses in Amsterdam’s red-light district to purchase EGMs from them.82 In 1993 half of all EGMs in Amsterdam – 3,100 in all – were said to be controlled by five criminal organisations.83 In 1996 an academic study examining the problem of organised crime in the Netherlands was carried out as part of a parliamentary inquiry into investigative methods employed in the Netherlands. This study also concluded that there was a possibility of organised crime being entangled in the Dutch EGM sector.84 The alarming nature of these findings prompted further research, which was concluded in 1997 but actually significantly tempered suspicions of close links between organised or other crime and the EGM sector.85 79 D. Pruis, ‘Electronische speelautomaten in opmars’, Algemeen politieblad, no. 10, 1999, pp. 236–239, and S. Kingma, Het Gokcomplex, verzelfstandiging van vermaak (Amsterdam, Rozenberg Publishers, 2002), p. 144. 80 S. Kingma (2002), p. 149. 81 A. van ’t Veer, H. Moerland and C. Fijnaut (1993), p. 103. 82 Tweede Kamer, Vergaderjaar 1995–1996, 24072, no. 17, p. 25. 83 A. van ’t Veer, H. Moerland and C. Fijnaut (1993), p. 103. Later the figure of 70% was even mentioned, but at that point no criminal organisations were involved, just five companies. See: Tweede Kamer, Vergaderjaar 1995–1996, 24072, no. 18, p. 194, p. 197. 84 Tweede Kamer, Vergaderjaar 1995–1996, 24072, no. 10, p. 48. 85 M. Bottenberg, F. Bovenkerk, A. Hartmann and E. Slooff (1997). 38



Crime Problems Related to Gambling: an Overview

The first important conclusion was that the big operators turned out to be bona fide and that, as a result of government-imposed restrictions, fewer and fewer small operators were still in business. The second finding was that, in seven Dutch cities, there were a total of five amusement arcade managers or owners who were also engaged in some kind of organised or other crime. In all cases these people were or had been involved in drug trafficking.86 However, they seemed to regard owning an amusement arcade at that time less as a substantial source of income, and more as a way of enhancing their status. One important question was, of course, whether the EGM sector was being used to launder criminal money. Basically this could be done by making up transactions that had not actually taken place. Tax was then paid on this paper turnover, leaving the rest of the money ‘clean’. The researchers did not estimate this risk to be particularly high, however. As a result of technical improvements to the machines, it was less easy to rig the counter indicating how much a machine had been played, for example. Moreover, at that time the betting tax on EGMs in the Netherlands was so high that using them for money laundering purposes was not an attractive proposition. The conclusion, therefore, was that there was probably no question of substantial money laundering practices. As was the case in Las Vegas, it can be concluded that, if criminals succeeded in penetrating the Dutch EGM sector, this was primarily due to insufficient screening of licence applicants when the sector was legalised in the 1980s. The likelihood of people with a criminal past being able to get in on the EGM sector was later reduced to virtually zero as a result of closer scrutiny of licence applications. 3.3. The Problem of Unknown Beneficial Owners Governments naturally strive for maximum transparency when issuing licences to gambling operators. There are, however, situations where it is not possible to identify the beneficial owners of companies applying for a licence. This does not, of course, imply that criminal organisations are the economic owners. But the fact is that this possibility cannot be ruled out. This problem surfaced in a study on casinos in the Dutch Antilles and Aruba, which was conducted in the mid-1990s. Private casinos are permitted on these islands, but the operating licence is linked to a hotel. A literature survey in the 1990s found that there may be ties between Italian and American organised crime and the Antillean casinos.87 The Dutch parliamentary committee that reviewed the situation in the mid-1990s could not, however, find any concrete

86 M. Bottenberg, F. Bovenkerk, A. Hartmann and E. Slooff (1997), p. 65. 87 A. Baars-Schuyt, Witwassen op de Nederlandse Antillen en Aruba (The Hague, Ministry of Justice, WODC, 1996). 39

Crime, Addiction and the Regulation of Gambling

evidence of such ties.88 The reason was that the hotel, i.e. the actual licence holder, and the casino did not need to be in the hands of the same owner. Moreover, the casino could also be leased out. When the committee started looking for the actual beneficial owners, it often turned out to be a company based in Delaware in the United States. In Delaware it is possible to set up companies or legal entities without the owner being required to identify himself.89 The economic owners of the Aruban casinos could therefore seldom be traced. By June 2003 the situation was still far from ideal: at that time only one in twelve casinos on the island of Curacao complied with the Minimum Internal Control Standards (MICS) drawn up by the international Gaming Control Board. Finally, it is by no means always possible to identify the economic owners of gambling websites. This was the conclusion of a law firm, for example, which – acting on behalf of a legal Dutch gambling operator – tried to issue a summons to the directors of the companies behind certain gambling sites, pointing out to them that their activities were illegal in the Netherlands.90 Either the addresses of the overseas legal entities concerned could not be found, or the summons was simply ignored.

4. Improper Use of Gambling for Illegal Activities The next way in which crime and gambling can be linked involves improper use of gambling for illegal activities. The emphasis in this section will be on the improper use of legal forms of gambling. Illegal operators can also be exploited, however. First of all, improper use might involve fixing matches in organised sports, on which bets are then placed at legal or illegal betting shops.91 Secondly, an attempt may be made to cheat gambling operators. Lastly, legal gambling channels may be used to launder criminal money.

88 Presentation by C. Schaap at the seminar ‘Gokken en georganiseerde criminaliteit’, CIROC, VU Amsterdam, 6 April 2005. See: <www.ciroc.nl>. 89 Ironically, while the Americans in particular were seriously concerned about organised crime in the Dutch Antilles and Aruba, not least because of the large number of American tourists who went there, the US government was giving the actual economic owners the opportunity to remain anonymous thanks to the Delaware arrangements. 90 The sites in question were explicitly aimed at Dutch participants, for example by displaying pages in Dutch. The Netherlands prohibits foreign operators from offering gambling over the Internet to its citizens. 91 Naturally, someone who has fixed a match can also place a bet with an illegal operator. 40



Crime Problems Related to Gambling: an Overview

4.1. Match Fixing Match fixing has been very much in the news recently because of a number of scandals. Generally speaking, however, this type of crime is particularly difficult to prove. In the United States, for example, there is only one documented instance of a gambling scandal in professional sports on which wagers are placed. It happened in 1919 in baseball.92 There have been a few allegations of match fixing in American football (both professional and college), but in the end nothing could be proved. College basketball is the only sport to have been hit by a few gambling scandals: in fact five between 1950 and 1990.93 In each case, point shaving was involved, which works as follows. In the US, a gambling system based on set handicaps is used for competitive sports matches. Suppose that before a basketball game, team A is reckoned to be stronger than team B; this is translated into a points difference with which it is assumed team A will win the game (known as the ‘line’). Only when the difference is greater is there a win in gambling terms. So suppose that the line is set at three points; anyone who bets on team A winning will only collect if the favoured team’s winning margin is more than three points. If team A wins by only one point, then this is a loss in gambling terms. The line can change daily, for example because a star player gets injured. For players who want to fix matches, there is much to gain from this system. They can influence the outcome of the bets by staying within the margin of the line, without needing to put their team at a disadvantage by actually losing the game. In Europe bets are usually based on wins or losses (or also on a draw in the tote), thus ruling out the possibility of point shaving. Several cases of possible match fixing have also been discovered in Europe in the past few years, mainly involving football games in lower divisions, but also tennis matches, for instance. Bribery scandals came to light in Germany and Belgium in 2005 and 2006. There have also been allegations of gambling scams in football in the Netherlands, Finland, Portugal, Italy, Poland, Austria, the Czech Republic, Turkey and Romania in recent years. In the spring of 2005 it emerged that a referee in the German Regionalliga had influenced the outcome of several football matches on the instructions of Berlin bookmakers. Referee Robert Hoyzer admitted having manipulated four games in return for €70,000 and a colour television. The sum of €2.4 million was confiscated from a Croatian bookmaker who ran a betting ring from a café in Berlin.94 Hoyzer’s interventions – such as awarding penalties or sending off

92 Presentation by D. Whelan at the seminar ‘Gokken en georganiseerde criminaliteit’, CIROC, VU Amsterdam, 6 April 2005. See: <www.ciroc.nl>. 93 Ibidem. 94 De Standaard, ‘De maffia als spelmaker’, 5 February 2005. 41

Crime, Addiction and the Regulation of Gambling

players – ensured that low-ranked teams, for example in cup matches, unexpectedly won against much more able opponents. He was sentenced to two years and five months in prison in November 2005. The bookmaker in question, Ante Sapina, was also convicted and given a prison term of two years and eleven months. Another referee implicated was given a suspended sentence. Several players, who were also named, got off scot-free. A major bribery scandal was also uncovered in Belgium in November 2005. A Chinese businessman by the name of Zheyun Ye played a pivotal role in the affair, although he strenuously denied all accusations. According to reports, Ye paid footballers in low-ranked teams in the Belgian second division, including Lierse and La Louvière, to deliberately lose matches by a specific scoreline. He then placed bets on these rigged results with bookmakers in the Far East. The Lierse goalkeeper is alleged to have received €61,250 for influencing four games. Another player was allegedly paid €57,000. Five others were accused of receiving lower handouts, ranging from €5,000 to €20,000.95 As it turned out, however, it was not so easy to produce the results that the ‘client’ had ordered. For example, one particular match had to be lost 5–0, but the losing team managed to net a goal ‘by accident’ just before the final whistle went, making the score 5–1, which meant that the bet was lost. There were also growing complaints from club players about what was going on, and some of them refused to play. Moreover, bookmakers in China also began to smell a rat and stopped accepting large wagers on specific results. When the affair came to light, Ye fled to China and is still at large at the time of writing. A total of ten players have been indicted. Criminal proceedings are currently under way. In 2007 European soccer’s governing body, UEFA, asked police in Europe to investigate 26 football matches played in various countries, where the results were suspected of having been manipulated by overseas betting syndicates, principally in Asia. Operation Soga, coordinated by Interpol, was subsequently carried out in China, Hong Kong, Macau, Malaysia, Singapore, Thailand and Vietnam. As a result of this operation, 430 individuals were arrested and 272 underground gambling dens, which had an estimated turnover of 680 million US dollars, were shut down by the police. Allegations of bribery involving football matches were also made in the Netherlands in May 2006 by the jilted girlfriend of a player with the ADO club in The Hague. The football magazine Voetbal International gave her plenty of opportunity to air her detailed accusations.96 According to her statement, three players from ADO and RBC Roosendaal – at that time low-ranked teams in the Dutch top league – had taken bribes. She claimed that Turkish bookmakers

95 Humo, Zheyun Ye: ‘Jullie hebben mij doodgemaakt: nu maak ik jullie dood’, 21 April 2006. 96 Voetbal International, ‘Omkoping in Nederland: het ware verhaal’, 24 May 2006. 42



Crime Problems Related to Gambling: an Overview

were behind the bribery and that the go-between for this organisation was a Turkish footballer who was a friend of the Dutch players, but who had since been transferred to an Austrian club. The magazine confronted the fingered players with the allegations, which they vehemently denied. The Public Prosecutions Service nevertheless decided to conduct further inquiries, focusing on the conduct of a number of players during the 2004–2005 season. Four people were questioned on suspicion of fraud, and their financial records investigated. Nine witnesses, most of whom were involved in professional football, were also interviewed. The telephones of both the suspects and several of the witnesses were tapped for a period of time. The inquiry team also confronted the suspects and witnesses with footage of football matches mentioned in witness statements. It was announced in August 2006 that the inquiry had found no evidence whatsoever that fraud had been committed. Voetbal International was censured for its ‘premature’ reporting.97 4.2. Predatory Crime Cheating is not the sole preserve of gambling operators: gamblers themselves can also try to improve their chances of winning, or resort to other forms of fraud. As far back as the early 20th century, casinos in European cities and in fashionable seaside resorts were frequented by bohemians who would travel around from one place to another trying to boost their winnings by means of trickery.98 Illegal gambling establishments also risk being targeted by sharps, of course.99 Over the past few years there have been fairly regular reports in the Dutch press of attempts – successful or otherwise – to swindle legal gambling operators. For example, a few individuals tried to cash in counterfeit chips at a branch of Holland Casino. In the Dutch electronic gambling machine sector there have also been attempts to rig machines to make them pay out money. One such report in November 2006 concerned a form of manipulation that apparently caused a malfunction, causing the machine to pay out all the cash it contained. This is said to have yielded €500 to €1,000 per machine.100 Very recently three people,

97 Openbaar Ministerie, Geen aanwijzingen voor fraude in betaald voetbal, 9 August 2006. 98 E. Villiod (1905), pp. 161–162. 99 One example in the 1980s concerns an illegal casino in the Netherlands that came up against a man who marked playing cards with invisible ink. He was able to see the marks because he was wearing special contact lenses. After he had made a few big wins, the operators of the illegal casino saw through the trick, forced him to pay back his winnings and then shot him. 100 De Telegraaf, ‘Raadsels rond nieuwe vorm gokkastfraude’, 6 November 2006. 43

Crime, Addiction and the Regulation of Gambling

who operated throughout the Netherlands, were arrested for manipulating EGMs.101 Evidence of another type of crime has also come to light in Dutch amusement arcades. The EGMs in these places have a specific pay-out pattern. The arcades therefore attract people who hang around watching other gamblers playing these machines. If someone has been playing for a while without winning and decides to stop, the observer then carries on playing on the same machine because the chance of a pay-out is significantly greater. Chinese criminal organisations are thought to have cornered this particular ‘market’. The situation came to light when two Chinese men were murdered, apparently for using this method in an amusement arcade that was part of the ‘territory’ of another group. Instead of gamblers cheating gambling operators, or taking advantage of them in other ways, the reverse can also happen: operators can also try to scam gamblers. One concrete example of this is insiders winning lotteries. This very situation arose in Canada in 2001.102 In this particular case the scam artist sold lottery tickets for an official lottery. When a ticket was handed in to see whether any money had been won, the sales clerk first checked whether the ticket had drawn a big prize. If it had, he told the lottery ticket holder that nothing had been won. The clerk later claimed the prize as his own, under the pretext that he also liked to buy a ticket himself. Naturally, the lottery organisers only notice this when certain lottery ticket sales clerks start winning big prizes once too often. 4.3. Using Gambling for Money laundering Purposes Unlike betting on matches that have been fixed and cheating gambling operators or gamblers, using gambling to launder money is only possible when legal gambling channels are used.103 Money won through illegal gambling is of course still ‘black’. Since, theoretically, a big prize can be won with a small stake, at first sight gambling would seem to be a good way of explaining why someone is suddenly in possession of a large sum of money. This does not necessarily mean that the

101 De Telegraaf, ‘Bendes trekken gokkasten leeg met kunstgreep’, 6 February 2008. 102 See: CBC News, ‘Bob Edmonds’ Story’, <www.cbc.ca/fifth/luckofthedraw/timeline. html>. 103 Here, the term ‘money laundering’ is merely interpreted as the process of concealing the origin of money obtained through illegal activities so that it appears to come from a legitimate source and can then be used for other purposes. Under Dutch criminal law, spending black money is also formally regarded as money laundering. This therefore also applies when a criminal takes part in legal gambling using money he has obtained through other forms of crime. The latter example will not be dealt with here, however. 44



Crime Problems Related to Gambling: an Overview

tax authorities will accept such an explanation, however.104 But the fact remains that money laundering through legal gambling channels is not impossible. In theory, several options can be identified. First, sports betting can be used to launder ill-gotten gains. Individuals with a substantial amount of black money at their disposal can use it to place various bets. The best result is achieved when large wagers can be placed on contests where the outcome is relatively predictable. The fact that the proceeds are low is not important, as the aim is not so much to win money by gambling but to ensure that the black money wagered has a legitimate source. The success of this method depends mainly on the checks made by betting shops, since the way in which the bets are placed does not follow the usual pattern. Certainly when someone gambles in this way over a period of time, the odds are that it will attract attention. Second, lotteries can be used for money laundering purposes. In Belgium, for instance, a man was sentenced to 12 months in prison in January 2007 for attempting to launder money through the German lotto.105 In April 2002 he had spent almost €390,000 on lottery tickets, one of which won a prize of €468,700. This method is risky and labour-intensive, however. To remain inconspicuous, the purchase of lottery tickets must be spread over many addresses, and there is also the risk – even though a certain amount of loss is factored into the equation – that the amount won will be much lower than the money invested. Another variant mentioned a few times in media reports involves criminals buying lottery tickets, or shares in lottery tickets, from real winners.106 The advantage for the seller is that the winning ticket is bought for a higher price. The disadvantage for him, of course, is that the money received is black, and hence cannot automatically be spent. For no other reason than that the lottery winner has to be an acquaintance of the person buying the ticket, it goes without saying that this sort of thing only happens occasionally. The third option is to try and launder money through casinos and, in this case, there are several methods available. For a start, criminal money can be wagered in a way that minimises the risk of losing. At the roulette table, for instance, money can be put on red or black, with nearly a 50% chance of winning.107 If

104 One example concerns a Dutch ecstasy producer/dealer who put part of his wealth down to casino winnings. The police asked him for detailed explanations about the games he had played, his wagers, his style of play and how often he played. The information was then submitted to an expert, who worked out that the chances of the individual in question winning the specified amounts as he had claimed were practically nil. 105 Het Belang van Limburg, Cel voor witwassen met lotto, 15 January 2007. 106 See, for example: WLA Magazine, ‘Boston Mob Leader Cashes Lottery Ticket Worth $ 14 Million’, Issue no. 17, June 2005. 107 The house wins on zero. 45

Crime, Addiction and the Regulation of Gambling

someone has a cache of black money, €10,000 for example, he or she can visit the casino with a friend. Both buy chips to the value of €5,000, then one puts the whole lot on black while the other bets on red. One player loses €5,000, while the other wins the same amount. The total therefore remains €10,000, but half of it is now ‘honest’ gambling winnings, i.e. it has been laundered. Although it is theoretically possible to operate in this way, this method is not, of course, appropriate for large sums. Anyone who regularly adopted such an approach would quickly attract attention. A few years ago there was a great deal of fuss made in the Dutch media about another method used to launder money through legal casinos. This involved taking advantage of a particular service offered by the casinos, intended to protect clients who had made a big win from potential attackers. To prevent them having to walk the streets carrying a large amount of cash, they were given the opportunity of having their winnings transferred to their bank account. The Dutch tax authorities would also accept a copy of a transfer made by Holland Casino as proof that the money was gambling winnings. However, the media expressed doubts as to whether Holland Casino was carrying out adequate checks to ensure that the money did in fact come from gambling winnings, and was not cash that the client had simply brought into the casino earlier. There were also rumours of staff being bribed by clients to make cash transfers.108 In response to the press coverage, the Amsterdam-Amstelland police launched an investigation under the code name Togo, which revealed that the casinos’ checks were not in fact up to scratch.109 However, the investigation yielded insufficient evidence to prosecute. Based on figures concerning these cash transfers, Holland Casino was also able to satisfactorily prove that there was no question of large-scale money laundering practices. The size of the transfers could not be described as spectacular and, moreover, most of this cash flow could be verified. In 2005, for instance, €17.7 million was transferred from Holland Casino’s account to the accounts of a total of 466 clients. Of this, €12.9 million could definitely be identified as gambling winnings, because it was paid out by slot machines, or because it was tournament prize money. Only €4.8 million was transferred after manual checks, which is where the aforementioned shortcomings were noted.110 Lastly, back in the late 1990s the Financial Action Task Force (FATF) reported a risk of underground banking through casinos that had branches in several countries. The same problem was noted by the aforementioned Dutch parliamentary committee that investigated casinos in the Dutch Antilles and Aruba. 108 Het Parool, ‘Holland Casino drijft op zwart geld’, 2 September 2003. 109 Het Parool, ‘Casino spreekt sterke verhalen heftig tegen’, 31 March 2004. 110 Holland Casino, Spannende verhalen over witwassen sterk overdreven, published at: <www. hollandcasino.com>. 46



Crime Problems Related to Gambling: an Overview

For example, cash could be converted into all sorts of currency at the casinos, and gambling winnings could easily be transferred to offshore banks or paid out in the form of cheques. The gaming houses also had an internal banking system, together with other casinos in South America and the Caribbean. A client could, for example, deposit a specific sum in country A and then use it to gamble in other countries at affiliated casinos, or have the full or remaining amount paid out. This system could therefore theoretically be used to channel money from one country to another without recourse to official banks or other financial institutions.

5. Crime in Relation to Gamblers Finally, crime problems associated with gambling can also ensue from gamblers turning to some form of crime, primarily acquisition crime in order to fund their gambling addiction or pay off gambling debts. General research has also been conducted, mainly in the US, into the effect of opening large casinos on crime rates in the city or region in question. 5.1. Crime Committed by Gambling Addicts Before we can consider whether there is evidence of crime committed by gambling addicts, it must of course first be established whether someone is a pathological gambler. The most commonly used measuring instrument is the South Oaks Gambling Screen (SOGS), which was developed in 1987. Although the SOGS is certainly not immune from scientific criticism, this method is now used in several countries, which has created some basis for comparison. The SOGS consists of twenty questions to which respondents can answer either ‘yes’ or ‘no’. On the basis of this, the scale score is worked out. A score of 0–2 is classified as ‘recreational gambler’. Someone with a score of 3 or 4 is designated a ‘risk gambler’. Respondents with a score of 5 or more are generally defined as ‘pathological gamblers’.111 The first method of assessing criminal behaviour among pathological gamblers uses a form of self-report research. This involves conducting a population survey, in which gambling problems are systematically documented and the respondents are asked whether they have committed an offence during a given period, related to gambling or otherwise. Studies of this kind have been carried

111 The exact classifications allocated to the scale scores are not clear-cut, however. In some studies, the limit of 5 or more is used to denote problems. Elsewhere, this category requires a score of 10 or more. 47

Crime, Addiction and the Regulation of Gambling

out in Australia a few times, but the results were inconsistent.112 In two studies, the researchers found that 11–16% of the respondents with an SOGS score of 10+ had committed a gambling-related or other offence in the previous twelve months. For the respondents with an SOGS score of 5+, the figure was 3–15%.113 However, another two Australian studies found scarcely any relationship between acquisition or other crime and gambling.114 A German study of some 300 compulsive gamblers showed that 89% of them had committed an offence (lifetime prevalence), compared with 52% of occasional and regular (non-pathological) gamblers, and only 22% of the control group.115 Research was recently conducted in the Netherlands involving a group of 400 ‘experienced gamblers’, who were selected either on the basis of a population survey or by approaching them directly through gambling operators and welfare services.116 Of the group with an SOGS score of 5+, 25% had committed theft or fraud by their own admission. In the group with an SOGS score of 3 or 4, however, the figure was even higher (35%).117 A variation of the self-report method has been used in Australia. A population survey was conducted among 2,744 respondents, 22 of whom were identified as pathological gamblers on the basis of their SOGS score. A check of the criminal records of this group revealed that one-third had had dealings with the police in connection with gambling.118

112 J. Marshall and A. Marshall, ‘Gambling Crime in South Australia’, in: Independent Gambling Authority, Study into the Relationship between Crime and Problem Gambling, Report to the Minister, (Adelaide, Office of Crime Statistics and Research, 2003), <www. iga.sa.gov.au>, pp. 22–23. 113 Productivity Commission, Australia’s Gambling Industries (Canberra, 1999) and Australian Institute of Gambling Research, K. Tremayne, H. Masterman-Smith and J. McMillen, Study into the Nature and Extent of Gambling and Problem Gambling in ACT (Sydney, Australian Institute for Gambling Research, University of Western Sydney, 2001), cited in J. Marshall and A. Marshall (2003), pp. 22–23. 114 A. Taylor, E. Dal Grande, T. Gill, P. Delfabbro, V. Glenn, S. Goulding, H. Weston, S. Barton, N. Rogers, A. Stanley, R. Blandy, B. Tolchard and. R. Kingston, Gambling Patterns of South Australians and Associated Health Indicators (Report prepared for the Strategic Planning and Policy Division Department of Human Services, South Australia, 2001) and Queensland Treasury, The Queensland Household Survey, 2001), cited in J. Marshall and A. Marshall (2003), pp. 22–23. 115 G. Meyer and M. Stadler, ‘Criminal Behavior Associated with Pathological Gambling’, Journal of Gambling Studies, Vol. 15 (1), 1999, pp. 29–43, p. 34. 116 D. de Bruin, C. Meijerman, F. Leenders and R. Braam (2006). 117 D. de Bruin, C. Meijerman, F. Leenders and R. Braam (2006), p. 56. 118 M. Dickerson, E. Baron, S. Hong and D. Cottrell, Estimating the Extent and Degree of Gambling Related Problems in the Australian Population: a National Survey, Journal of 48



Crime Problems Related to Gambling: an Overview

It is not easy to interpret the results of this type of research. The studies vary widely in design and scope; other screening instruments are used in addition to the SOGS; the number of people with a score of 5 or more is often very small; with self-report studies there is a significant chance of receiving socially desirable answers, certainly when they are conducted by phone; it is not always clear which prevalence rate (annual prevalence, lifetime prevalence, or behaviour when someone was still addicted to gambling) has been measured; and so on. Another way of checking the extent to which gambling addicts display criminal behaviour is to use a group of people who are receiving – or have received – some form of addiction support as a starting point. These studies tend to find much higher percentages in terms of criminal behaviour in connection with gambling. On average, the annual prevalence rates are about 30%.119 Here, too, the results vary significantly, however, depending on the study design. The proportion of the study population that claim to have committed an offence ranges from 20% to more than 60%.120 The third research method used is to check whether people who are under arrest or have been convicted show signs of gambling addiction. In 1995 a study of gambling behaviour was conducted in the Netherlands among 185 people arrested by the police for property offences.121 It was found that 30% of this group gambled on occasion. The population consisted mainly of relatively young people who played on EGMs. Only 4% explicitly stated that gambling was what prompted them to commit a crime, however.122 Smith, Wynne and Hartnagel (2003) examined police records in an attempt to determine the extent of gambling-related crime in the Canadian city of Edmonton. The authors concluded that gambling was implicated in 2.7% of the 11,198 files examined.123 The police records proved to be a highly unreliable source, however. The possible existence of gambling addiction is often not raised during police interviews, and in any case there is always a chance that the interviewees keep quiet or lie about it. One important finding, however, was that gambling

Gambling Studies, 12 (2), 1996, pp. 161–177. 119 G. Meyer and M. Stadler (1999), J. Marshall and A. Marshall (2003) and C. Orme, The Social Consequences of Gambling Problems, paper prepared for the 2006 International Conference on Problem Gambling, Auckland, New Zealand. 120 J. Marshall and A. Marshall (2003), pp. 23–24. 121 M. van den Heuvel and J. van Kalmthout, Gokverslaving en criminaliteit in Nederland, Een verkennende studie naar de aard en omvang van aan gokken gerelateerde criminaliteit (Tilburg, Tilburg University Press, 1995). Gambling addiction was not assessed in this study. 122 M. van den Heuvel and J. van Kalmthout (1995), p. 38. 123 G. Smith, H. Wynne and T. Hartnagel, Examining Police Records to Assess Gambling Impacts: A Study of Gambling-Related Crime in the City of Edmonton (The Alberta Gaming Research Institute, 2003), p. 81. 49

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addicts committed mainly fraud offences. Furthermore, one-third of the incidents involved domestic disputes, robbery or attempted suicide.124 In Australia, Penny Crofts analysed nearly 3,000 local and district court files of various offences to determine what percentage was primarily committed to fund a gambling addiction, or to pay off debts.125 Here, too, it was found that gambling addicts committed mainly fraud offences, significantly often at work.126 In particular, addicted accountants and employees of financial institutions sometimes embezzled large sums of money over a period of many years. For example, a bank clerk stole 450,000 Australian dollars from her employer over ten years. Others managed to misappropriate sums ranging from 10,000 to more than 100,000 dollars.127 A similar case was uncovered recently in the Netherlands, where an accountant was suspected of stealing €18 million or more from his employer.128 However, Crofts’ study also found that problem gamblers committed relatively few property offences. Evidence of a gambling addiction was found in only 3.1% of armed robberies, 2.5% of burglaries, and less than 1.5% of other types of theft. In general, it can be concluded that studies in which information about people who have been arrested or convicted is collected through police sources suffer from the fact that the question of gambling addiction is not systematically examined during police interviews. Moreover, police officers who conduct these interviews are of course not qualified to make a diagnosis. They could, however, get the interviewee to complete a SOGS questionnaire or bring in scientific researchers to do this. As far as we know, this method has not yet been used. Instead, there is extensive literature on gambling addiction among prisoners. This type of research was done in the US as far back as the 1960s. The outcome was that 38% of a group of more than 400 prisoners could be termed inveterate gamblers.129 Other studies conducted in the US, Australia and New 124 G. Smith, H. Wynne and T. Hartnagel (2003), p. 82. 125 P. Crofts, Researching the Link Between Gambling and Crime, paper presented at the Evaluation in Crime and Justice: Trends and Methods Conference convened by the Australian Institute of Criminology in conjunction with the Australian Bureau of Statistics and held in Canberra, 24–25 March 2003. 126 P. Crofts (2003), p. 4. The offences included ‘cheque not paid on presentation’ (19.4%), ‘obtain[ing] financial advantage by deception’ (13.6%) and ‘making false/misleading statement with intent to obtain money/financial advantage’ (5.6%). 127 P. Crofts, Gambling and Criminal Behaviour, an Analysis of Local and District Court Files (Sydney, University of Technology 2002), p. 5. 128 Brabants Dagblad, ‘Miljoenenfraudeur in casino als vip ontvangen’, 23 January 2004. 129 J. Roebuck, Criminal Typology, the Legalistic, Physical-Constitutional Heredity, Psychological, Psychiatric and Sociological Approaches (Springfield, C.C. Thomas, 1967), cited in R. McCorkle, Pathological Gambling in Arrestee Populations, (Las Vegas University of Nevada, Department of Criminal Justice, 2002), p. 21. 50



Crime Problems Related to Gambling: an Overview

Zealand yielded figures ranging from 26% to 38% gambling addicts among prison inmates.130 Although these scores can of course be described as high, there is also a related methodological problem. The difficulty is that, in the absence of any other form of entertainment, gambling is one of the main ways of passing the time for many inmates of American prisons.131 Consequently, it is not easy to say whether the inmates only became pathological gamblers in jail, or whether they had a pre-existing problem. In this context, the results of a study, where the prison inmates completed the SOGS questionnaire during intake, speaks volumes. At that moment in time only 5% of the people interviewed could be described as problem gamblers – a relatively low figure, yet well above the average figures to come out of population surveys.132 The second methodological problem is that, except in individual cases, it is difficult to ascertain whether gambling addicts turned to crime because of their problem gambling behaviour, or whether these were people with parallel behavioural problems. In other words, people who display criminal behaviour for other reasons, but also happen to be addicted to gambling. Research among gambling addicts also points to a high degree of co-morbidity. Pathological gamblers often have other addictions as well, such as alcohol or drugs.133 Even if a gambling-related offence is committed, the question remains whether the perpetrator’s only goal was to obtain money with which to gamble or pay off gambling debts. In 2003, for example, there was an attempt in the Netherlands to blackmail a retail chain.

130 See, for example: D. Templer, G. Kaiser and K. Sicsoe, ‘Correlates of pathological gambling propensity in prison inmates’, Comprehensive Psychiatry, 35, 1993, pp. 347–351; H. Shaffer, M. Hall, and J. Vander Bilt, ‘Estimating the prevalence of disordered gambling behavior in the United States and Canada: a research synthesis’, American Journal of Public Health, 89(9), 1999, pp. 1369–1376; D. Anderson, ‘Problem gambling among incarcerated male felons’, in: Journal of Offender Rehabilitation 29, 1999, pp. 113–127; M. Abbott, B. McKenna and L. Giles, Gambling and problem gambling among recently sentenced males in four New Zealand prisons (New Zealand, Department of Internal Affairs, 2000); M. Abbott and B. McKenna, ‘Gambling and problem gambling among recently sentenced women in New Zealand prisons’, Journal of Gambling Studies, 21 (4), 2005, pp. 559–581; J. Lahn, ‘Gambling among Offenders: Results from an Australian Survey’, Journal of Offender Therapy and Comparative Criminology, Vol. 49, no. 3, 2005, pp. 343–355; J. Marrotta, Gambling Treatment in Prisons, paper presented at the Alberta Gaming Research Institute’s 6th Annual Conference, Banff, Alberta, 30 March 2007. 131 Alberta Gaming Research Institute, ‘Gambling in Prison: a Benign Leisure Time Activity’, in: Research Reveals, Volume 4, Issue 5, June/July 2005. 132 Moreover, in this case a score of just 4 on the SOGS questionnaire was used as the limit value. G. Walters, ‘Problem Gambling in a Federal Prison Population: Results from the South Oaks Gambling Screen’, in: Journal of Gambling Studies, Vol. 13 (1), 1997, pp. 7–24. 133 National Gambling Impact Study Commission, 1999, Chapter 7, p. 3. 51

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One of the culprits wanted to pay off a €30,000 gambling debt, but the sum of €5 million was actually demanded.134 It does not seem reasonable to assume that the intention was to gamble with the entire sum. 5.2. Casino-related Crime Besides the strands of academic research outlined above, which explore the relationship between pathological gambling and crime, another line of research can be discerned in the literature. Here, the emphasis is on establishing to what extent expanding the legitimate supply of gambling services leads to an increase in the level of crime. This type of research has mainly been carried out in the US to examine the effects of opening large casinos. On the face of it, the theoretical assumption underlying these studies is simple. A sudden and substantial increase in the gambling activities available should be reflected in the crime rates, assuming that such an expansion results in more gambling addiction. In the US, the opening of casinos in Atlantic City, New Jersey, in 1978 provided the perfect opportunity to study the effects on the crime rates. The ‘usual’ police statistics in Atlantic City did in fact almost triple in 1980, compared with the situation in 1977.135 However, no allowance was made for the fact that this city of 38,000 inhabitants had attracted large numbers of visitors from elsewhere in the US since the gambling establishments had opened. In 1983 the tourist influx was no fewer than 27 million. When this was taken into account, the rise in the crime rate was of no more than marginal significance.136 Once due weight was given to the tourist population, and trends in crime in neighbouring counties were taken into consideration, the casinos were not found to have any effect on the crime rates. These findings were confirmed by a separate study.137 The opening of the casinos had hardly any consequences for the inhabitants of Atlantic City itself. These findings were called into question by other researchers, however. Grinols, Mustard and Dilley, for example, compared 170 counties that had one or more casinos with 3,165 places without any casinos.138 It was found that

134 De Volkskrant, ‘Eis: 12 en 9 jaar voor afpersen AH’, 26 September 2003. 135 B. Grant Stitt, M. Nichols and D. Giacopassi, ‘Does the Presence of Casinos Increase Crime? An Examination of Casino and Control Communities’, Crime & Delinquency, Vol. 49, no. 2 (2003), 253–284, p. 257. 136 J. Albanese, ‘The Effect of Casino Gambling on Crime’, Federal Probation, 48, 1985, pp. 39–44. 137 D. Curran and F. Scarpitti, ‘Crime in Atlantic City: Do casinos make a difference?’, Deviant Behavior 12, 1991, pp. 431–449. 138 E. Grinols, D. Mustard and C. Dilley, Casinos and Crime, paper presented at the annual meeting of the American Law and Economics Association (Yale Law School, New Haven, CT, 1999). 52



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counties with casinos had a higher crime rate, but that this only began emerging after three or four years. The explanation put forward was that it takes time for pathological gamblers to become desperate enough to turn to crime. First they gamble away everything they own, try to borrow money from friends or legitimate financial institutions, etc. This delayed effect was confirmed in a later study.139 The effect was observed not only in the casino’s host city, but also for the county as a whole. Curiously enough, there was evidence of an increase in all sorts of different offences, such as rape, for instance, which was difficult to attribute to gambling addiction, in theory. As noted, gambling addicts commit mainly fraud offences. In a study by Albanese, a link was therefore sought between white-collar crime and the opening of a casino, in seven different locations.140 This research showed that the effects were by no means clear-cut. In Las Vegas, Kansas City and St Louis, the crime rate for fraud, forgery and embezzlement remained virtually unchanged between 1988 and 1996. Only in Biloxi-Gulfport and Vicksburg was there evidence of an increase. In two other places with large casinos, the number of reported cases of fraud actually fell. Finally, Grant Stitt, Nichols and Giacopassi studied six places that hosted a casino and six comparable cities without gaming houses, but also failed to come up with a clear-cut picture.141 Constant, falling and increasing crime rates were once again found in cities with a casino. However, the same was true for places that had no casino. The authors therefore concluded that, in the absence of a good theoretical understanding of the possible relevant variables, the effect on the host city’s crime rate of opening a casino cannot be determined. Add to this the fact that crime rates as such are not, of course, an absolute variable. In part they are influenced by the choices made by the police or the local authorities. For example, is the local police presence being stepped up? The opening of a mega-casino will also affect the way the local police act. On the one hand it can have the effect of a self-denying prophecy: greater alertness prevents an increase in crime. On the other hand the opposite is possible, a self-fulfilling prophecy: greater alertness, and possibly increased police presence, can also result in a higher crime detection rate.142

139 E. Grinols and D. Mustard, Casinos, Crime and Community Costs, (University of Illinois, Department of Economics, 2004). 140 J. Albanese, Casino Gambling and White-Collar Crime: an Examination of the Empirical Evidence, Paper prepared for the American Gaming Association (Virginia Commonwealth University, 1999). 141 B. Grant Stitt, M. Nichols and D. Giacopassi (2003). 142 Population surveys could be used to check for these sorts of effects; as far as we know, however, these are not yet carried out in the US. 53

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6. Concluding Remarks This overview shows that gambling can be linked with various types of crime. At the same time it must be said that hardly any systematic academic research has been conducted, particularly in the European Union Member States, on the nature and extent of the various forms in which gambling-related crime actually manifests itself. This is true for illegal gambling, the risk of penetration of organised or other crime into the legal betting and gaming sector, improper use of legal forms of gambling for criminal purposes, and the extent to which gambling addicts commit crime. The scant literature available on the subject is seriously hampered by the lack of international orientation and a clear conceptual framework. Apparently identical terms such as lottery, illegal casino, illegal sports betting, etc. seem to be interpreted differently in different countries, depending on the specific characteristics of the legal and illegal gambling markets. Consequently, there is a huge need for a conceptual framework. The link between gambling and crime figures prominently in discussions about the regulation of gambling in the EU, as the recent Placanica case shows. The incidence of illegal gambling seems to vary a great deal within the EU, however, depending on the nature and extent of legal gambling services available. Whether a difference in perception of the problem is the underlying reason for the widely varying degree of academic interest in crime in relation to gambling addiction is a moot point. To address this issue, and as a follow-up to the comparative study of gambling legislation in the EU Member States, a survey of the illegal gambling market is required.143 A similar conclusion can be drawn with regard to the research into crime problems linked with gambling addiction. Although a measuring instrument exists in this case, the SOGS, which is more or less accepted, the scores obtained in practice appear to be measured and interpreted in very different ways. For example, there seem to be huge – possibly culturally determined – differences in gambling behaviour between the EU and a country like Australia, but also within the EU itself. A reliable population survey, similar to the International Crime Victims Survey, for instance, may help shed more light on the matter.

143 Swiss Institute of Comparative Law, Study of Gambling Services in the Internal Market of the European Union, 1st part, Legal Study (Lausanne, 2006). 54

The Proper Functioning of the Internal Market: Observations from Brussels Erik Bertil Vagnhammar

1. Introduction As the European Commission seeks to ensure the proper functioning of the internal market, it must for each market segment decide how to address problems and restrictions to the fundamental freedoms. To the extent that the Commission has identified unjustified restrictions it must also decide how these should be resolved and the extent to which the restrictions are justified – if these restrictions should be imposed on all Member States in order to develop the internal market. After looking at definitions of gambling activities within the context of the EU (section 2), the following sections will describe how the European legislator (the European Parliament and the Council) has dealt with gambling services in secondary legislation (harmonisation of justified restrictions – section 3.1) and how the Commission seeks to assess in view of valid public interest objectives if a restriction is justified or not in the context of the infringement procedure out lined in Article 226 of the EC Treaty (section 3.2). The description on how restrictions are assessed is simplified and serves to illustrate the need for further research relating to problem gambling and the spread of clandestine activities in the Member States.

2. Definition of Gambling in Community Law 2.1. Secondary Legislation The first definition to be set down in secondary legislation can be found in the e-commerce directive, which excludes gambling activities from its scope:1 1 The Commission had not identified any restrictions to online gambling services when preparing this proposal in 1997–1998, but later in its first report on the application of the Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 55–67 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

‘gambling activities which involve wagering a stake with monetary value in games of chance, including lotteries and betting transactions.’ The term ‘gambling activities’ is later used in secondary legislation in the Unfair Commercial Practices Directive (2005/29/EC),2 the Services Directive (2006/123/EC)3 and most recently in the Audiovisual Media Services Directive (2007/65/EC)4 where the slightly different wording is used ‘games of chance involving a stake representing a sum of money, including lotteries, betting and other forms of gambling services’. All of these texts exclude such services from their respective scopes of application 2.2. The European Commission’s 2006 Study on Gambling Services in the Internal Market 5 As the jurisprudence of the European Court of Justice has clarified that gambling activities are services falling under Article 49 (previously Article 59) of the EC Treaty, the Commission’s study refers to ‘gambling services’ and not ‘gambling activities’. While a previous Commission study from 1991 covering 12 Member States referred to five6 gambling services – the 2006 study covered eight: bingo,

Directive, the Commission makes reference to complaints against a number of Member States (point 7.4 of the report). European Commission, First Report on the application of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market (Directive on electronic commerce), COM(2003)702 final. 2 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market OJ L 149, 11 June 2005, pp. 22–39. The deadline for transposition was 12 June 2007. Several Member States had failed to transpose the directive into their national laws by this deadline. 3 Directive 2006/123/EC of the European Parliament and of the Council of 12€December€2006 on services in the internal market, OJ L 376, 27 December 2006, pp. 36–68. Member States shall transpose it into national law by 28 December 2009. 4 Directive 2007/65/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, OJ L 332 of 18 December 2007, pp. 27–45. The directive entered into force on 19 December 2007. Member States are required to transpose the requirements into national law by 19 December 2009 at the latest. 5 The tender was published on 27 July 2004 and the final result was a study by the Swiss Institute of Comparative Law that can be found on the Commission’s website: <ec.europa.eu/internal_market/services/gambling_en.htm>. 6 The 1991 study, Gambling in the single market: a study of the current legal and market situation, covered 12 Member States and the following services: bingo, casinos, gaming machines, horse racing and sports betting, and lotteries. 56



The Proper Functioning of the Internal Market: Observations from Brussels

casino games, gaming machines (outside casinos), horse racing and sports betting, lotteries, media games, promotional games and games organised by charities.

3. Why is the Commission Taking Action? One of the Commission’s key roles is to ensure the proper functioning and development of the internal market. In doing so it shall ensure that the provisions of EC Treaty and the measures taken by the institutions pursuant thereto are applied. If the Commission considers that a Member State has failed to fulfil an obligation under the EC Treaty, it shall open an infringement procedure against that Member State. The Commission may also use its power of decision and participate in shaping secondary legislation (e.g. directives). The Commission is normally made aware of internal market problems and cross-border restrictions through complaints from citizens, operators or other stakeholders.7 This descriptive paper will present the two main approaches that the Commission may use to resolve regulatory barriers for cross-border gambling services and to ensure the proper functioning and development of the Internal Market for such services. The paper sets out to describe possible advantages and disadvantages of the respective approaches but does not seek to favour one or the other. It should also be noted that the Commission’s work to ensure a proper functioning internal market does not suggest that deregulation or privatisation of the sector is required. 3.1. Approach 1 – Harmonisation and Something about the Relevant Secondary Legislation An overview of the Community’s work with secondary legislation can be found in the opinion of Advocate General Colomer in the Placanica case,8 in which he highlights that the lack of secondary legislation applicable to gambling means that the questions referred for a preliminary ruling must be given a reply based on primary legislation. The Advocate General stresses that there has been no shortage of opportunities to achieve such harmonisation and refers to when the Commission, on the basis of the 1991 study suggested that the regulation of gambling should be subject to the common market regime; but it did not proceed owing to the reluctance of some Member States. He also makes reference to Directive 2000/31/EC

7 The European Parliament also plays a key role in identifying internal market problems and issues are communicated to the Commission through written or oral questions to the Commission or through ‘own initiative reports’. 8 Opinion of Advocate General Colomer, delivered on 16 May 2006 in Joined Cases C-338/04, C-359/04 and C-360/04, Criminal Proceedings against Placanica and others, [2007] ECR I-1891. See in particular: paras 144–149. 57

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on electronic commerce that expressly excluded ‘gambling activities’ and the considerations given to gambling services in the proposed services directive (now adopted as 2006/123/EC), which also ended up excluding gambling services on the demand from both the European Parliament and the Council. The E-commerce Directive (2000/31/EC).9 The main reason for not covering gambling services in this directive was that the Commission had not identified any restrictions to online gambling services when preparing this proposal in 1997–1998. Nevertheless, the directive defined gambling activities and excluded such activities from the coordinated field. However, the supply of gambling services has increased enormously since the adoption of this directive and in its first report on the application of the directive,10 the Commission made reference to complaints against a number of Member States (point 7.4 of the report). The Services Directive (2006/123/EC). A decade after the internal market was supposed to be completed; European businesses and consumers feel that they are still losing out because of the huge gap between the vision of an integrated European economy and the day-to-day reality they experience. This was the conclusion of a European Commission report on the state of the internal market in services.11 The 2004 report presented an inventory of barriers, which businesses and consumers consider to still prevent the proper functioning of the internal market and hold back the European economy. This inventory, which did not assess whether or not the barriers were justified, included regulatory barriers to the access of cross-border gambling services. It was therefore not a surprise that gambling services were included in the first proposal for a services directive. However, as mentioned in its original strategy for services12 – where such a horizontal instrument could not address regulatory barriers, the issue would need to be tackled by additional harmonisation.

9 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market (‘Directive on electronic commerce’), OJ L 178, 17 July 2000, pp. 1–16. 10 COM(2003)702 final. 11 Report from the Commission to the Council and the European Parliament on the state of the internal market for services presented under the first stage of the internal market for services, COM(2002)441 final, 30 July 2002. 12 Communication from the Commission to the Council and the European Parliament – ‘An Internal Market for Services’ – COM(2000)888 final of 29 December 2000. 58



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Additional harmonisation was therefore proposed in the 2004 proposal for a (horizontal) directive on services. Article 40 of the original proposal set out a three-step process where the Commission should: 1. draft a report on gambling in the internal market (for this purpose it launched a study to collect legal and economic data); 2. on the basis of the report, consult stakeholders; and, 3. in the light of the report and the consultation, assess the possibility of presenting a proposal for a harmonisation instrument on gambling activities which involve wagering a stake with pecuniary value in games of chance. However, the European Parliament13 rejected this approach and as a consequence the Commission presented a modified proposal14 that excluded the reference to the possibility of additional harmonisation of gambling services and launched a number of infringement procedures addressing barriers that businesses, media operators and consumers had identified as restricting their possibility to provide, promote and receive gambling services. In addition to Advocate General Colomer’s remarks, the following four directives are also relevant when describing the Communities work with secondary legislation relating to providing, promoting and facilitating gambling services: 1. A directive that sought to seek to ensure a well functioning internal market and protect consumers was Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising that established minimum criteria for national rules on misleading advertising, but does not prevent the Member States from retaining or adopting measures which provide more extensive protection for consumers. As a result, Member States’ provisions on misleading advertising diverge significantly. Aiming at full harmonization the Commission legislation in the Unfair Commercial Practices Directive (2005/29/EC), sought to redress this problem but excluded the promotion of gambling services from its scope.

13 The European Parliament’s vote on the services directive of 16 February 2006 (first reading). See: P6_TC1-COD(2004)0001 Position of the European Parliament adopted at first reading on 16 February 2006 with a view to the adoption of Directive 2006/…/ EC of the European Parliament and of the Council on services in the internal market. 14 Amended proposal for a Directive of the European Parliament and of the Council on services in the internal market, COM(2006)160 final. 59

Crime, Addiction and the Regulation of Gambling

2. Audiovisual Media Services Directive (2007/65/EC)15 – The Television Without Frontiers Directive (TVWF)16 was adopted in 1989, revised in 1997 and again in 2007 to become the Audiovisual Media Services Directive to provide an up to date regulatory framework for the European audiovisual sector. While the original directive makes no reference to (or exclusion of) gambling services, the Audiovisual Media Services Directive seeks to exclude audiovisual media gambling services from the scope of the directive. However, the derogation relates to audiovisual media service (nevertheless covered by Article 49 of the EC Treaty) but not to the advertising, teleshopping or the sponsoring of such services (Chapter IV) of the Directive). 3. Money Laundering Directive 2005/60/EC.17 The directive covers one specific gambling service – gambling in casinos – for which it establishes rules on identification (Article 10) in particular that all casino customers must be identified and their identity verified if they purchase or exchange gambling chips with a value of €2000 or more. In contrast, Article 12 is of relevance for all other gambling services as it obliges Member States to apply provisions of this directive to all professions and categories of undertakings that engage in activities that are particularly likely to be used for money laundering purposes. It follows that gambling service operators in many Member States are obliged to report suspicious activities to their national authorities competent for combating money laundering on the basis of national legislations implementing Directive 91/308 as amended and replaced by Directive 2005/60/EC. 4. The Notification Directive (Directive 98/34/EC as amended by Directive 98/48/ EC). Since 1984 Directive 83/189/EEC, codified by Directive 98/34/EC, 18 has imposed on the Member States the obligation to communicate to the Commission all new draft technical regulations. After the adoption of

15 Supra note 4. 16 Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by Law, Regulation or Administrative Action in Member States concerning the pursuit of television broadcasting activities OJ L 298, 17 October 1989, pp. 23–30. 17 Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, OJ L 309, 25 November 2005, pp. 15–36. Directive 2005/60/EC replaced Directive 91/308/EEC, as amended by Directive 2001/79/EC, and all Member States should have transposed its provisions by 15 December 2007. 18 Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations, OJ L 204, 21 July 1998, pp. 37–48. All notified legislation is made publicly available on the TRIS database; <ec.europa.eu/enterprise/tris/index_en.htm>. 60



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Directive 98/48/EC,19 the scope of the notification obligation was extended to all new draft regulations relating to information society services. This has allowed the implementation of the prior inspection of Member States’ regulations in this field which is undergoing rapid growth, in order to prevent the creation of new barriers to the freedom to provide these intra-Community services or to the freedom of establishment of service providers. The examination of the legislation of Member States is also an important instrument used by the Commission to identify those sectors in which (a) the harmonisation of regulations at a Community level is desirable or (b) further investigations and infringement procedures might be required. As is clear from above, the EC legislator in the field of gambling services has opted for a light touch regulatory approach giving the Member States a key role in ensuring a well functioning internal market. In this context three issues linked to harmonisation are worth mentioning: the need for clear definitions, the need for a clear scope of application and necessary homogeneous transposition of directives. 3.1.1. The Need for Clear Definitions The key definition, first used in the E-commerce Directive, is based on three elements, namely: stake (of monetary value), chance used as selection criteria and winnings (prizes). All three raise different questions; must the stake represent a substantial value or is the cost of a phone call or a sms enough to be considered as a stake? Many games of chance also include an element of skill and it might be justified to ask if there exist any games that are exclusively based on skill. For example, is there a pre-selection round based on any element of chance before a final round that is truly based on skill? (I.e. the capacity of a switchboard that in fact lead to a random selection of participants). As the jurisprudence of the European Court of Justice has clarified that gambling activities are services falling under Article 49 (previously Article 59) of the EC Treaty, the Commission’s study refers to ‘gambling services’ and not ‘gambling activities’. While a previous Commission study from 1991 covering 12 Member States referred to five20 gambling services – the 2006 study covered eight: bingo, casino games, gaming machines (outside casinos), horse racing and

19 Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998 amending Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations, OJ L 217 of 5 August 1998, pp. 18–26. 20 Supra note 6. 61

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sports betting, lotteries, media games, promotional games and games organised by charities. Already when the terms of reference were published some stakeholders (in particular media operators and suppliers of promotional games) argued that the scope of the study was too wide and that the services they offered should not be considered as gambling services. Media operators argued that their services merely were entertainment services and that any participation fee only covered the costs for organising the game and that the real added value was an increased audience.21 Stakeholders offering promotional games claimed that these were a form of sales promotions (like discounts or premiums), that revenues from the games were marginal and that the real purpose of the game was to increase the sales of the promoted good or service. These points may be valid but it should also be noted that Member States are not always effectively applying or enforcing their regulatory framework to such services which are expanding in prominence even if these activities are covered by the legal definition of a gambling service. Moreover, there is no definition of ‘casino’ in the Money Laundering Directive and therefore it is not clear to what extent this definition covers various games offered in private clubs, restaurants or aboard ships or planes in international zones. 3.1.2. The Need for a Clear Scope Even where the legislators’ (the European Parliament and the Council) intentions are clear there may be different interpretations on what is covered and not. Two examples can be found in the Unfair Commercial Practices Directive and the Audiovisual Media Services Directive where the exclusion of gambling services can be found in these directives’ recitals without any corresponding exclusionary provision in the body of the text. The fact that a recital shall not contain normative provisions may raise doubts about the scope of application of these texts. Without a clear reference of the exclusion in the enacting terms (the articles) these exclusions are legally unclear and this could also lead to divergent transposition of the Community measure at national level.22 Moreover, the Audiovisual Media Services Directive makes a distinction between (1) games

21 Case C-195/06 Kommunikationsbehörde Austria (KommAustria) v. Österreichischer Rundfunk (ORF), [2007] ECR I, paras 30–34. 22 Recital 9 of Directive 2005/29/EC and recital 18 of Directive 2007/65/EC without any corresponding article in the Directives. This contravenes guidance regarding the drafting of legislation. See: Joint Practical Guide of the European Parliament, of the Council and the Commission for persons involved in the drafting of legal texts within the Community institutions (European Communities, 2003), in particular section 7 and section 10, which clarifies that a recital shall not contain normative provisions. Available at: <eur-lex. europa.eu/en/techleg/pdf/en.pdf>. 62



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of chance as an entertainment service in itself (excluded from the scope of the directive) and (2) a broadcast devoted to games of chance, for example a poker game/tournament or a lottery draw, which in contrast would be covered by the directive. 3.1.3. Transposition of Directives It follows that the existence of unclear definitions and an unclear scope may lead to divergent national transposition of directives, e.g. Article 12 of the Money Laundering Directive that obliges Member States to apply the directive to all professions and categories of undertakings that engage in activities that are particularly likely to be used for money laundering purposes. There is little doubt that Member States with different legal frameworks and systems are likely to transpose a directive into divergent legal frameworks. 3.2. Approach 2 – Infringement Proceedings and National Restrictions To date the Commission has initiated investigations against 10 Member States in relation to national measures that restrict the freedom to provide services (Article 49 of the EC Treaty). If the Commission considers that a Member State has failed to fulfil an obligation under the EC Treaty, it shall give the Member State concerned the opportunity to submit its observations before it delivers a reasoned opinion on the matter. If the Member State concerned does not comply with the reasoned opinion within the period laid down by the Commission (normally two months), the latter may bring the matter before the European Court of Justice.23 It is important to note that restrictions to the free movement of services (for example the provision and promotion of gambling services) may be justified to protect valid public interest objectives (Articles 55 and 46 of the EC Treaty), in particular public security or public health. This section sets out to describe in general terms the framework for assessing restrictive national measures and to present two examples, which both illustrate the need for research and further information/documentation collection relating to certain public interest objectives. According to the jurisprudence of the European Court of Justice, the only, non-discriminatory, national measures admissible as restrictions to Article 49 of the Treaty are those which:

23 The procedure is laid down in Article 226 of the EC Treaty and is the most common procedure. There is also a possibility that a Member State initiates a procedure against another Member State (Article 227 of the EC Treaty). To the extent the Member State concerned does not take the necessary measures to comply with the judgment of the European Court of Justice there is a possibility to re-launch the procedure which may result in a penalty payment (Article 228 of the EC Treaty). 63

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– are justified by imperative reasons relating to the public interest in so far that the relevant interest is not protected in the Member State in which the provider is established; and



– are not disproportionate, i.e. are liable to carry out the objective pursued and are not excessive and cannot be replaced by less restrictive measures.24

As regards the objectives capable of justifying such restrictions, a distinction must be drawn in this context between, on the one hand, the objective of reducing gambling opportunities and, on the other hand – in so far as games of chance are permitted – the objective of combating criminality by making the operators active in the sector subject to control and channelling the activities of betting and gaming into the systems thus controlled.25 After identifying the relevant public interest objectives, the following question arises: are the relevant restrictions justified in so far that the relevant interest is not protected in the Member State in which the provider is established? It appears obvious that a Member State cannot justify a restriction by referring to protection of minors if the same age limit applies to players in both the restricting Member State and the Member State where the non-domestic supplier is licensed and established, unless there is unambiguous evidence that the age limit is not effectively enforced in the latter. 3.3. Justification and Evidence – Which Problem – What Evidence? First of all, it is for the national authorities, which invoke a derogation from the fundamental principle of freedom of movement, to show in each individual case that their rules are necessary and proportionate to attain the aim pursued. The reasons that may be invoked by a Member State by way of justification must be accompanied by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that State and specific evidence substantiating its arguments.26 Example 1: Prevention of problem gambling and the need of reducing gambling opportunities The frequently cited paragraph 69 of the Gambelli ruling can be the starting point for a first example relating to consumer protection/prevention of problem

24 See: Case C-76/90, Manfred Säger v. Dennemeyer & Co. Ltd., [1991] ECR I-4221. 25 Joined Cases C-338/04, C-359/04 and C-360/04, Criminal Proceedings against Placanica and others, [2007] ECR I-1891 para. 52. 26 Case C-147/03, Commission v. Austria, [2005] ECR I-5969 para. 63 (Article 226 EC procedure), and for gambling services; Case C-42/02, Lindman, [2003] ECR I-13519, paras 25–26. 64



The Proper Functioning of the Internal Market: Observations from Brussels

gambling objective as it illustrates how a Member State may justify its restrictions and what evidence it may present in support its claim. ‘In so far as the authorities of a Member State incite and encourage consumers to participate in lotteries, games of chance and betting to the financial benefit of the public purse, the authorities of that State cannot invoke public order concerns relating to the need to reduce opportunities for betting in order to justify measures such as those at issue in the main proceedings.’ First of all, it is essential that the restricting Member State presents proof of the existence of a problem and need for the restriction. A Member State that invokes this public interest objective may show that there is a need to reduce gambling opportunities for all, or a limited number of, gambling services by presenting prevalence studies, governmental, academic or other research reports or information/statistics from help lines, support organisations or institutions working in the fields of prevention or treatment of problem gamblers. As regards the need for the restriction – the Member State shall present evidence that the existing problem is linked to the restricted service (in each individual case). If and when such a causal link has been established the assessment turns to consistency and suitability – to what extent are licensed operators in the restricting Member State permitted to incite and encourage consumers to participate in games of chance? Are there content or media restrictions for advertising of gambling services or merely a ban preventing non-domestic license holders from promoting their services? All gambling operators incite and encourage consumers to participate in their gambling activities through a mix of commercial communications. Marketing restricted to the point of sale (within premises where games of chance are offered) may be allowed even if certain gambling services are subject to a total advertising ban. Some Member States require that licence holders present an annual report explaining in detail their use of commercial communications but few – if any – of these reports present enough evidence or a complete picture of the operator’s use of commercial communications. Nearly all attention has been given to gambling operators’ media expenditures (in particular television advertising) and yet there are many other forms of marketing that should be taken into account. Of particular interest are commercial communications relating to both wholesale and retail operations, which include use of sales promotions (in particular free gifts, discounts and promotional games), point of sales promotions (posters, signs, display material and reservation of the most attractive areas of the point of sale) and public relations. It is difficult to assess the monetary value of the use of certain commercial communications as there may simply be (a) an obligation in the operator’s retail agreement to reserve the best areas of the point of sale for gambling services or (b) an obligation for a beneficiary of funds to

65

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participate without any additional compensation in advertising or promotional activities (which would be a form of sponsorship agreement). Example 2: Prevention of criminal activities The Italian government has referred to the existence of the problem relating to prevention of criminal activities and the need to prevent the development of clandestine activities in two recent cases. In the first case, the Placanica case, the European Court of Justice found that the Italian government had successfully presented proof of the existence of this problem and the need for a restriction (sports betting services):27 ‘The Italian government also referred to a number of factual elements, including, notably, an investigation into the betting and gaming sector, carried out by the Sixth Permanent Committee (Finance and the Treasury) of the Italian Senate. That investigation led to the conclusion that the activities of clandestine betting and gaming, prohibited as such, are a considerable problem in Italy, which it may be possible to solve through the expansion of authorised and regulated activities. Thus, according to that investigation, half the total turnover figure for the betting and gaming sector in Italy is generated by illegal activities. It was also thought that, by extending the betting and gaming activities permitted by law, it might be possible to recover from those illegal activities a proportion of that turnover figure at least equivalent in value to the amount generated by the activities permitted by law.’ In contrast, in the second case28 for which the Commission had launched an infringement procedure in accordance with Article 226 of the EC Treaty, the European Court of Justice found that the Italian government had failed to explain and prove that its selected restriction to tackle this problem was necessary: ‘However, the Italian government has not explained in its defence the basis on which it was necessary not to invite competing bids and has not submitted arguments to dispute the infringement alleged by the Commission. In particular, the Italian government has not explained how the renewal of the existing licences without inviting any competing bids could prevent the development of clandestine activities in the horse-race betting sector, and has simply submitted that Law No. 200/2003 and Decision No. 107/2003 are in conformity with the requirements of Community law concerning public service concessions.’

27 Placanica and others, supra note 23, para. 56. 28 Case C-260/04, Commission v. Italy, [2007] ECR I-7083 para. 32. 66



The Proper Functioning of the Internal Market: Observations from Brussels

It is important to note that the Italian government, when referring to ‘criminal activities’ in the sector of the games of chance, refers to all clandestine activities. It is clear that a distinction must be drawn in this context between different service providers, on the one hand, criminal organisations operating without any license and, on the other hand service providers that are licensed, controlled and established in another Member State. It also follows that evidence relating to the existence of criminal organisations offering gambling services does not suffice to justify restrictions on licensed and controlled operators.

4. Final Observations Many Member States spend today more money and resources on prevention, treatment and research of problem gambling. To the Commission, the justification for this appears to be a combination of an increased awareness of these problems and the opening of a number of infringement proceedings. Detailed information of players’ behaviour and regular prevalence studies forms the basis for the Member States’ own evidence based approach to assessing the efficiency of their license systems and legal frameworks. New gambling services and their effects on players’ gambling behaviour are now to a large extent scrutinised before such services are launched in both single and multi license jurisdictions and there are also indications that the launch of new gambling services or modifications of license systems increasingly are followed by ex-post evaluations (e.g. the Swedish launch of online gambling (poker services)). Most of the research available to the Commission focuses on the risks associated with different gambling services but research addressing questions relating to the effects of various forms of commercial communications (e.g. direct marketing through registered memberships or loyalty cards), evaluations of preventative work carried out by voluntary organisations, trade unions, employer organisations or financial institutions are scarce. The Commission would also welcome comparative studies on the use of gambling services offered by, on one hand, private operators and, on the other hand, state owned operators and to what extent problem gambling and gambling addiction depend on how gambling services are organised. As regards research and documentation relating to gambling services and their link to criminal activities the Commission would in particular be interested in work relating to issues such as ‘does competition prevent crime?’; ‘tax rates as incentives for criminal organisations to enter a national market’; and comparative work on how differing gambling services may give rise to varying risks of money laundering.

67

Placanica: Combating Criminality vs. Reducing Gambling Opportunities as Grounds for Justification in the ECJ’s Jurisprudence Nele Hoekx*

1. Introduction Gambling has been familiar territory for the European Court of Justice for several years now. Since it ruled that gambling is a service within the meaning of the EC Treaty,1 the Court of Justice has had to make several pronouncements on the relationship between freedoms guaranteed under the Treaty and provisions of national law that limit the availability of some games of chance. Initially reticent, the case law became increasingly explicit and subtle, culminating in the Placanica judgment.2 Nevertheless, the case law of the Court of Justice continues to raise questions and, particularly, expectations. The question of possible restrictions is of importance both to the public authorities and to service providers. The first group is concerned about effectively maintaining state monopolies in many cases, whereas the second group wants to offer gambling throughout the EU without any problem. A great deal was also expected of the judgment in the Placanica case, given by the Grand Chamber of the European Court of Justice. It should not be forgotten, however, that Placanica relates to the betting and gaming

*

1 2

With thanks to Professor Alain Verbeke (K.U. Leuven) and Alan Littler (Tilburg Law and Economics Center – Tilburg University) for their valued comments. This article is a revised version of a note that was published previously in Droit de la Consommation (D.C.C.R.), 2007, no. 76, 227 and Tijdschrift voor Consumentenrecht, 2007, no. 5, 148. Case C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jörg Schindler [1994] ECR I-01039, paras 25 and 34. Case C-338/04, C-359/04 and C-360/04 Criminal proceedings against Massimiliano Placanica, Christian Palazzese and Angelo Sorricchio [2007] ECR I-01891.

Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 69–92 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

policy of just one Member State, Italy, and to just one sector, betting on sporting events. The interpretation that the Court of Justice gives to Articles 43 EC and 49 EC does not always provide an answer for other national gambling laws,3 despite the erga omnes character4 of its judgments. As far as gambling-related questions referred for a preliminary ruling are concerned, therefore, the end is not yet in sight.5 The possible justification of restriction of the freedoms guaranteed under the EC Treaty has taken a more and more prominent place in the gambling case law of the Court of Justice, as has the proportionality of the restrictive measures. The reasons put forward by Member States by way of justification have included the need to prevent addiction and combat crime. Although the Court of Justice does not go further than necessary in Placanica, it does clarify matters substantially as regards the aforementioned reasons. In this article we shall first briefly outline the case law of the Court of Justice prior to the Placanica judgment, devoting particular attention to the grounds for justification invoked. Placanica will then be examined at length. This recent judgment will be discussed and interpreted in the light of existing case law, with the emphasis on analysing the grounds for justification invoked. One of these grounds, curtailing the availability of gambling, is found to be problematic in the given situation. The other, combating crime, can bear initial, albeit summary, scrutiny. Finally, we look at the implications of the case law of the Court of Justice for the Member States. Following a brief explanation of the different place occupied by gambling in the logic of the Court of Justice and in the public order of the Member States, we discuss the impact

3

In its gambling cases, the Court does not really seem to acknowledge that different types of gambling and different types of restrictions (total prohibition, monopoly, licences) are involved. A. Littler, ‘Has the ECJ’s Jurisprudence in the Field of Gambling Become More Restrictive when Applying the Proportionality Principle?’, in: A. Littler and C. Fijnaut (eds), The Regulation of Gambling: European and National Perspectives (Leiden, Martinus Nijhoff, 2006), pp. 32–33.

4

K. Lenaerts, D. Arts and I. Maselis, Procedural Law of the European Union (London, Sweet & Maxwell, 2006), pp. 194–195.

5

Reference for a preliminary ruling from the Verwaltungsgericht Köln (Germany), 9 October 2006, Winner Wetten GmbH/Mayor of Bergheim, C-409/06, OJ C 326, 30 December 2006, 25; Reference for a preliminary ruling from the Rechtbank van Koophandel in Hasselt (Belgium), 22 December 2006, NV de Nationale Loterij v. BVBA Customer Service Agency, C-525/06, OJ C 42, 24 February 2007, 17, see infra, text paragraph 23; Reference for a preliminary ruling from the Tribunal de Pequena Instância Criminal do Porto (Portugal), 2 February 2007, Liga Portuguesa de Futebol Profissional (CA/LPFP) and Baw International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, C-42/07, OJ C 69, 24 March 2007, 9; Reference for a preliminary ruling from the Verwaltungsgericht Giessen (Germany), 3 September 2007, Avalon Service-Online-Dienste GmbH v. Wetteraukreis, C-409/07 and Olaf Amadeus Wilhelm Happel v. Wetteraukreis, C-410/07, OJ C 283, 24 November 2007, 14.

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of the case law on betting and gaming legislation in Belgium, the Netherlands and France.

2. Existing EU Case Law 2.1. From Schindler to Zenatti 6 Schindler heralded the start of a raft of judgments in which the Court of Justice was confronted with restrictions that Member States impose on some gambling operators. The importance of this matter cannot be underestimated. National legislation comes up against not only primary Community law, but also other national regimes. Thanks to modern methods of communication, gamblers are no longer restricted to gambling activities available in their own Member State, but readily have access to foreign operators, based either within or outside the EU. The problem of cross-border gambling is at issue, and operators who offer their services over the Internet from one Member State to another are unsure as to whether the recipient Member State can prohibit their activities. The problem is not, in fact, confined to online gambling. A state monopoly on certain games of chance or the impossibility of operators authorised in one Member State obtaining a licence in another Member State also touches on the freedom of establishment (Art. 43 EC)7 and the freedom to provide services (Art. 49 EC). For the Court of Justice, therefore, the problem constantly comes back to the possible justification for and the form of restrictive regimes. Up until Gambelli 8 the Court of Justice formulated the possibility of restricting the freedom to provide services in a positive way and concentrated on the purely formal existence of grounds for justification for such a restriction. National legislation that prohibits lotteries, as in Schindler, or that grants exclusive rights to operate slot machines to a single public body, as in Läärä 9 and Anomar,10 obviously restricts the freedom to provide services, even if the legislation applies

6

Case C-67/98, Questore di Verona v. Diego Zenatti [1999] ECR I-07289.

7

Gambelli also discussed the restriction of the freedom of establishment for the first time: paras 46 and 48.

8

Case C-243/01, Criminal Proceedings against Piergiorio Gambelli and Others [2003] ECR I-13031.

9

Case C-124/97, Markku Juhani Läärä, Cotswold Microsystems Ltd and Oy Transatlantic Software Ltd v. Kihlakunnansyyttäyä (Jyväskylä) and Suomen valtio (Finnish State) [1999] ECR I-06067.

10 Case C-6/01, Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others v. Estado português [2003] ECR I-08621. 71

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without distinction.11 The provisions of the EC Treaty do not, however, preclude such a restriction if it is justified for overriding reasons relating to the public interest, such as protecting consumers, combating fraud, preventing incitement to squander on gambling and preventing social problems in general.12 A reduction in tax revenue or financing for social activities through a levy on the proceeds of authorised games of chance are not acceptable reasons.13 Right from the start, therefore, two grounds for justification play a key part: combating crime and protecting consumers from fraud on the one hand,14 and preventing morally and financially harmful consequences for the individual and society on the other. Preventing crime and addiction (as part of efforts to maintain order in society) therefore occupies an important place in EU case law on gambling. In the judgments in question, the possible grounds for justification have always been explicitly considered as a whole.15 According to the Court of Justice, they all concern the protection of the recipients of the service and, more generally, of consumers, as well as the maintenance of order in society. The Court holds that Member States must have a sufficient degree of latitude to determine what is required to protect consumers and maintain order in society.16 By virtue of this case law, they have the necessary power to assess whether to restrict certain gambling activities or prohibit them altogether,17 provided, of course, that those restrictions are not discriminatory.18 The judgment in the Zenatti case, in which the Italian legislation relating to bets on sporting events19 was examined for the first time, did not represent a break from the case law. Here, too, the Court of Justice ruled that a system of limited authorisation of gambling, just as much as total prohibition, falls within the ambit of overriding public-interest objectives.20 However, Zenatti introduces a subtle distinction: national betting legislation that is justified by social-policy objectives must in actual fact be intended to limit the harmful effects of such

11 Cf. Case C-131/01, Commission of the European Communities v. Italian Republic [2003] ECR I-1659, para. 26. 12 Läärä, paras 32–33; Zenatti, paras 30–31; Gambelli, para. 67. 13 Schindler, para. 60; Zenatti, para. 36; Gambelli, paras 61–62; D. Buschle, Der Spieler – Schreckgespenst des Gemeinschaftsrechts, European Law Reporter, no. 12, 2003, p. 471. 14 Schindler, para. 60; Läärä, para. 13; Zenatti, para. 18. 15 Schindler, para. 58; Läärä, para. 33; Zenatti, para. 31. 16 Schindler, para. 61; Läärä, para. 35; Zenatti, para. 33; Anomar, para. 87. 17 Läärä, para. 35; Zenatti, para. 33; Anomar, para. 79. 18 Schindler, para. 61. 19 See paragraph 8 of this contribution. 20 Läärä, para. 37; Zenatti, para. 35; Anomar, para. 74. 72



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activities.21 Formal justification on the grounds of public interest is no longer sufficient. It is for the national court to verify whether, having regard to the specific rules governing its application, the national legislation is genuinely directed to realising the objectives that are capable of justifying it and whether the restrictions do not appear disproportionate in the light of those objectives.22 For the first time the national court is invited to verify the reality of the grounds for justification. 2.2. Gambelli and Lindman 23 Gambelli took a different tack by offering guidelines. It makes explicit what Zenatti suggests. Once again the subject under discussion was Italian legislation on the collection of bets on sporting events. The grounds for justification invoked are standard and consistent with previous cases. Aside from the existence of justification, however, strong emphasis is now placed on the proportionality principle. The Member States enjoy less discretion.24 The Court of Justice explicitly examines the ‘rule of reason’ mentioned in Gebhard.25 National measures that impose restrictions on the betting and gaming sector must satisfy four conditions: 1) they must be applied in a non-discriminatory manner; 2) they must be justified by imperative requirements in the general interest; 3) they must be suitable for securing the attainment of the objective which they pursue; and 4) they must not go beyond what is necessary in order to attain it.26 According to the Court of Justice, it is for the national court to verify this, but it suggests a number of parameters to facilitate the task and explains suitability and proportionality (in the narrow sense of the 4th condition) in more detail. 2.2.1. Suitability The Court of Justice understands the suitability of restrictive measures to mean that the restrictions serve to limit betting activities in a consistent and systematic

21 Zenatti, paras 36 and 38; Gambelli, para. 62; Opinion Advocate General Fennelly, Zenatti, 32. 22 Zenatti, para. 37. 23 Case C-42/02, Diana Elisabeth Lindman v. Skatterättelsenämnde [2003] ECR I-13519. 24 A. Littler (2006), p. 38. 25 Case C-55/94, Reinhard Gebhard v. Consiglio dell’Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-04165, para. 37. This rule was mentioned previously, but without really examining it in depth: Läärä, paras 31, 33 and 39; Zenatti, para. 31. 26 Gambelli, para. 65; Lindman, para. 25; J. Steiner et al. (2006), p. 457. 73

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manner.27 This requirement has given rise to a discussion in the literature.28 How should a national court assess the consistency of gambling legislation? The Court of Justice also reiterates the need for the ‘actual’ link between a restrictive measure and a justifying objective in Zenatti.29 Determining suitability normally revolves around the causal relationship between a national restrictive measure and the interests to be protected.30 In actual fact, Gambelli does not consider the restrictive measures as such, but rather policy as a whole, as well as other legislation within the same Member State that does not fulfil the objective on which a restrictive measure claims to be based. Punishing unlicensed operators serves an aim such as consumer protection and is compatible with consistent and systematic restrictions. The real question is whether consumer protection is a genuine aim. In fact, the Court of Justice proposes assessing the aim, not the measure. Specifically, the Court points out that a policy of expansion in the gambling sector (including, for example, advertising gambling and introducing an extensive range of new games of chance for licensed operators) is inconsistent with the protection of society as justification for the restriction of the freedoms guaranteed under the EC Treaty.31 The Court of Justice considers this justification to be unrealistic under those circumstances. The social reasons invoked, such as consumer protection, are served by restricting the opportunities for gambling, not by a policy of expansion. In Lindman, which was rendered shortly after Gambelli, the Court also seemed to indicate that the Member State must substantiate the reasons that may be invoked by way of justification.32 2.2.2. Proportionality In addition, the national court must verify that the measures do not go beyond what is necessary in order to achieve the intended aim. Gambelli explicitly mentions

27 Gambelli, para. 67. 28 See discussion in S. Geeroms, ‘Cross-Border Gambling on the Internet under the WTO/ GATS and EC Rules Compared: A justified Restriction on the Freedom to Provide Services?’, in: Schweizerischen Institut für Rechtsvergleichung, Cross-Border Gambling on the Internet: Challenging National and International Law (Zurich, Schültess, 2004), p. 171, and M. de Koning en J.C.M. van der Beek, ‘De Goksaga wederom vervolgd: De Lotto/Ladbrokes’, Nederlands Tijdschrift voor Europees Recht, 2005, no. 7/8, p. 158. 29 Gambelli, para. 75. 30 P. Kapteyn and P. Verloren van Themaat, Het recht van de Europese Unie en van de Europese Gemeenschappen (Deventer, Kluwer, 2003), p. 547. 31 Gambelli, para. 69. 32 Lindman, para. 26. Note that the rule under discussion in Lindman was not applicable without distinction, in contrast with the rules in earlier cases. Prizes won in foreign games of chance were subject to income tax in Finland, but not prizes won in Finnish games of chance. 74



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that the proportionality of any criminal penalties imposed on players must be considered,33 a point that is not taken up in Placanica, because criminal penalties for players were not raised in the questions put forward by the national court. To assess the proportionality of the criminal penalties imposed on intermediaries, the Court of Justice points out that the service provider, for whom the intermediaries act, is subject to regulation entailing controls and penalties in the Member State in which he is established.34 In the end, the assessment of the proportionality of the exclusion of capital companies quoted on regulated markets from the tender procedure for the award of licences is not conducted by the Court of Justice itself in Gambelli, unlike Placanica. Where Gambelli implies (the disproportionality of these measures), Placanica articulates decisively.

3. An Analysis of the Placanica Judgment 3.1. The Facts For the third time Italian legislation on the collection of bets on sporting events35 gives rise to a reference for a preliminary ruling. Section 4(4a) of Italian Act no. 401 of 13 December 1989 on gaming, clandestine betting and ensuring the proper conduct of sporting contests applies a penalty to any person who, without the required concession, authorisation or licence, carries out activities in Italy for the purpose of accepting or collecting – including by telephone or by data transfer – bets of any kind placed by any person in Italy or abroad. A call for tenders for the award of licences was launched in 1999. One of the criteria for granting a licence to a capital company was transparency of share ownership, by means of shares carrying voting rights issued in the name of natural persons, general partnerships or limited partnerships. Listed companies were thus automatically excluded from the tender procedure, since precise identification of all the individual shareholders is impossible.36 All companies, including listed ones, have been able to take part in tendering since 2002, however. Police authorisation may be granted only to those who hold a licence or authorisation granted by a ministry or other body to which the law reserves the right to organise or manage betting.

33 Gambelli, para. 72. 34 Gambelli, para. 16. 35 See: Placanica, paras 3–14. 36 Although shareholders with a substantial participation in a listed company are identifiable, apparently this did not meet the Italian transparancy requirement. 75

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Stanley International Betting, a company incorporated under English law and quoted on the stock exchange, is licensed37 to operate in the betting and gaming sector in the UK. In view of its stock exchange quotation, prior to 2002 it was excluded from the tender procedure for the direct award of licences in Italy. Stanley therefore operated in Italy through intermediaries, such as Messrs Placanica, Palazzesse and Sorricchio, who ran data transmission centres, premises equipped with computers providing access to the server of Stanley’s host computer in the UK.38 Italian players could thus make use of the services offered by Stanley. The intermediaries were not eligible for police authorisation on the basis of a licence, given that they were bound by contract to Stanley, which could not be licensed. Mr Palazzesse and Mr Sorricchio applied for police authorisation from their local prefecture, but their applications met with no response. The three managers therefore contravened Section 4(4a) of Act no. 401/89. The Public Prosecutor brought criminal proceedings against Mr Placanica before the Tribunale di Larino (Italy).39 The premises and equipment of Mr Palazzesse and Mr Sorricchio were placed under preventive seizure, whereupon they brought an action challenging the seizure before the Tribunale di Teramo.40 3.2. Disagreement Within the Italian Case Law Both courts had doubts about the compatibility of Italian legislation with the freedom of establishment and the freedom to provide services. This is perhaps surprising, because after Gambelli the highest Italian court, the Corte Suprema di Cassazione, had ruled that Italian legislation did not conflict with those freedoms.41 On the basis of the parameters set out in Gambelli, the Corte Suprema noted that any attempt to curtail gambling opportunities cannot be genuine if the government is conducting a policy of expansion at the same time. Rather, the true purpose of the Italian legislation is to channel betting and gaming activities into systems that are controllable, with the objective of preventing their exploitation for criminal purposes.42 In the view of the Corte Suprema, this is sufficient justification in itself. It does not say much about the proportionality test to which the legislation should normally be subject. As regards the condition

37 Issued by the City of Liverpool under the Betting, Gaming and Lotteries Act of 1963. 38 Placanica, para. 23. 39 Placanica, para. 26. 40 Placanica, para. 29. 41 Judgment no. 111/04 of 26 April 2004, Gesualdi. See: <www.ictlex.net/index.php /2004/04/26/cass-su-sent-11104/>. 42 Placanica, para. 16. 76



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of transparency of share ownership, it says only that there is no discrimination, because the legislation applies to both Italian and foreign companies.43 The courts of Larino and Teramo find insufficient support in this judgment to solve their problem, i.e. they have doubts about the interpretation of the Corte Suprema.44 The Tribunale di Larino asks whether Section 4(4a) is compatible with Articles 43 EC and 49 EC, partly in view of the different interpretations found in the judgments of the Court of Justice (Gambelli) and in the judgment of the Corte Suprema di Cassazione.45 The court hearing the cases of Palazzesse and Sorricchio mainly has objections to the restrictions imposed on listed companies, emphasising that such companies have been able to obtain licences since 2002, but that no new calls for tenders have been launched. By all these questions, the national courts are actually asking whether Articles 43 EC and 49 EC preclude national legislation on betting and gaming (enforced by criminal penalties) that obliges operators to obtain a licence and police authorisation, with certain types of operators not being able to obtain a licence.46 Clarification of the Gambelli judgment was essential. 3.3. The Court’s Reply The Court of Justice pursues a clear logic.47 The aforementioned freedoms are restricted, a fact that had already been established in Gambelli.48 Is one of the exceptions in Articles 45 EC and 46 EC present to justify this restriction? This is not the case.49 Consequently, it is necessary to consider whether the restriction can be justified for reasons of overriding general interest.50 Such reasons do not suffice in themselves. The restrictions must also comply with the proportionality

43 Placanica, para. 17. 44 Opinion Advocate General Colomer, point 76. 45 The phrasing of this question is not entirely correct, of course, because the Court of Justice interprets Community law, not national law. Nevertheless, the Court of Justice deals with the question, because it can provide the national court with the guidance as to the interpretation of Community law necessary to enable that court to rule on the compatibility of national rules with Community law (Placanica, para. 37; Opinion Advocate General Colomer, point 70). K. Lenaerts et al. (2006), p. 190. 46 Placanica, paras 40–41. 47 Cf. for free movement of goods: Case 120/78, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon), [1979] ECR 00649. 48 Placanica, paras 42–44; Gambelli, paras 46, 58 and 59. 49 The Court of Justice skips over this quickly, even though public order and public security (Art. 46 EC) bear close resemblance to the ‘crime prevention’ reason of overriding general interest that is eventually retained. Cf. Opinion Advocate General Alber, Gambelli, point 108. 50 Placanica, para. 45; Gambelli, para. 60. 77

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principle in Gebhard.51 The Court of Justice examines this further in relation to the licensing requirement, the tender procedure, the police authorisation requirement and the criminal penalties. It thus provides the national courts with a more or less ready-made answer, without going further than necessary. 3.3.1. Licences A system with a limited number of licences constitutes an obstacle to the aforementioned freedoms, because not everyone can establish as a betting operator and offer betting services. One of the objectives cited earlier to justify this restriction is brushed aside by the Court of Justice. According to the Court of Justice, it is evident from the case law of the Corte Suprema di Cassazione that no justification is to be found in the objective of limiting the availability of gambling, in view of the policy of expansion that the Italian government is pursuing in the betting and gaming sector, for example using advertising to incite people to gamble.52 Only the objective of combating crime by making operators subject to control and channelling the activities of betting and gaming into controlled systems is acceptable as a reason of overriding general interest. This objective is compatible with a policy of expansion, with players being drawn away from clandestine betting and gaming into a controlled system.53 The Court of Justice stops there and throws the ball back to the national court, which has to rule whether the licensing requirement actually achieves that objective and also complies with the conditions of proportionality and non-discrimination. There is a clear hint, however, that fixing the number of licences (1,000) might cause problems. The argument that this number was considered on the basis of a specific assessment to be ‘sufficient’ for the whole of the national territory is not convincing.54 3.3.2. Tender Procedure: Listed Companies Articles 43 EC and 49 EC preclude a tender procedure for the award of licences that excludes listed companies limited by shares. This constitutes a disproportionate restriction on the freedom of establishment.55 The same objective can be achieved with less drastic measures, such as gathering information on a company’s representatives or main shareholders.56 The fact that the exclusion 51 See: paragraph 4 of this contribution; Placanica, para. 48; Gambelli, paras 64–65. 52 Placanica, para. 54; Opinion Advocate General Colomer, point 111. 53 Placanica, para. 55; Opinion Advocate General Colomer, point 38. 54 Placanica, para. 51. 55 Gambelli, para. 48. 56 Placanica, para. 62; Opinion Advocate General Colomer, point 125; Gambelli, para. 74; Opinion Advocate General Alber, Gambelli, point 99. 78



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was abolished in 2002 (without imposing new requirements!57) does not make the question referred for a preliminary ruling redundant, since the licences awarded in the first tender procedure (1999) were valid for six years and renewable for an additional period of six years. Since the Italian government has not planned any new tender procedure in response to the legislative amendment, the old legislation is liable to produce effects until the year 2011.58 The Court of Justice therefore suggests mitigating the consequences of the unlawful exclusion of certain types of companies, for example by launching a new tender procedure for the award of an adequate number of new licences.59 3.3.3. Police Authorisation and Criminal Penalties The restriction that the police authorisation requirement entails can be justified by the objective of combating crime and fraud, since authorised operators are subject to ex ante controls and ongoing supervision.60 However, since the intermediaries were unable to obtain police authorisation because they were not eligible for a licence on the basis of a provision that is contrary to Community law, they cannot be blamed for the lack of a police authorisation.61 Linked with this is the fact that no criminal penalties can be applied to them due to this lack.62 A Member State cannot impose a penalty because the formalities have not been complied with, if compliance with such formalities is refused or rendered impossible, contrary to Community law.63

4. Relationship Between Placanica and Existing Case Law: Is There Anything New Under the Sun? 4.1. Problematic Justification: Reducing Gambling Opportunities What does Placanica add to the gambling case law of the European Court of Justice? First of all, it is significant that the Court of Justice separates the various grounds for justification. The objectives are no longer considered together, as in

57 Which confirms that the original requirement went much further than necessary, and evidently was not even necessary. 58 Placanica, para. 60. 59 Placanica, para. 63. 60 Placanica, para. 65. 61 Placanica, para. 67; Opinion Advocate General Colomer, point 123. 62 Placanica, paras 70–71. 63 Case 5/83, Criminal proceedings against H.G. Rienks [1983] ECR 4233, paras 10 and 11. 79

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the past.64 They are explicitly examined separately to enable a balanced analysis. With regard to the objective of reducing gambling opportunities, the Court of Justice again refers to the need for a consistent and systematic policy and a genuine diminution of gambling opportunities.65 The grounds for justification as such are not wrong, but the ‘suitability’ of a restrictive measure must be determined. It is striking that the Court of Justice now speaks of ‘the objective of reducing gambling opportunities’, whereas Gambelli still talked about objectives such as ‘consumer protection and the prevention of both fraud and incitement to squander on gaming’.66 Several reasons mentioned in Gambelli are now lumped together as the ‘objective of reducing gambling opportunities’. The Court of Justice emphasises a purely quantitative objective (reducing gambling opportunities) that may serve objectives such as consumer protection and fraud prevention. Even if there is a genuine reduction, which may be the case if certain operators are excluded from the market, it must be consistent and systematic. The Italian government conspicuously fails in this respect. For Member States there is no separate obligation, apart from all the objectives, to pursue a genuinely restrictive policy. If this kind of objective is invoked, however, it must be realistic. The Italian Corte Suprema di Cassazione has verified this and ascertained that the objective of restriction does not stand up to scrutiny, given the Italian government’s policy of expansion. The Court of Justice records this conclusion of the Corte Suprema for Italy, but in doing so does not postulate a general rule. Courts in other Member States will still have to verify this for themselves if their legislature invokes a similar reason. 4.2. Possible Justification: Combating Crime The second objective that is considered has more chance of success in the light of the policy of expanding activity in the Italian betting and gaming sector. The emphasis here is on preventing the exploitation of betting and gaming activities for criminal purposes by channelling them into controllable systems. The prevention of criminal and fraudulent practices is thus the objective, channelling the solution. An authorisation procedure including rigorous checks provides the necessary guarantees against the potential dangers posed by operators.67 The Court of Justice explicitly refers to evidence introduced by the Italian government.68

64 See paragraph 3 of this contribution. Cf. Advocate General Alber, Gambelli, point 113. 65 Placanica, para. 53. 66 Gambelli, para. 67. 67 Cf. Opinion Advocate General Alber, point 118. 68 Whereas Advocate General Colomer (point 112) notes that ‘no further evidence is adduced to show the effect of criminal activities on gambling, for example fraud or 80

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A parliamentary investigation concludes that channelling may have a positive effect.69 The request for evidence is in keeping with a similar requirement in Lindman. Nevertheless, the requirement does not seem particularly insurmountable if a State investigation, citing only hypotheses, suffices. As mentioned earlier, the requirement of consistent and systematic restriction of betting and gaming activities disappears. Expanding legal activities and restricting the market are not mutually exclusive. Such a policy is not necessarily inconsistent, which is in fact the case when the government’s objective is to combat gambling addiction. Restricting the fundamental freedoms guaranteed under the EC Treaty should make it possible to control the legal market more effectively. A policy of controlled expansion may be consistent with the objective of keeping players away from the illegal system. The idea is that legal operators will draw players away from clandestine betting and gaming. To make them attractive, these legal operators would have to offer a wide range of games and use a variety of distribution techniques. The Member States also represent advertising as essential for the legal system.70 Legal games must be made more attractive in order to make players switch from illegal to legal. The Internet represents a difficulty in this respect. All kinds of operators compete there, while existing, legal operators often lag behind. Pursuing the logic of channelling, national lotteries and licence holders should also take to the Net in order to curtail illegal activities. In concluding that a policy of expansion can be consistent with channelling, the Court of Justice is not, of course, saying that expansion is an obligation. The Court posits the hypothesis that the two can go together, but it will be for the national court to rule whether the grounds of combating crime are realistic. Besides the existence of an imperative requirement in the general interest, the national court should never forget the proportionality of the restrictive measures. It is strange that nothing more is said about ‘a policy of expanding activity … with the aim of increasing tax revenue’, which the Corte Suprema expressly identified.71 If this is the true purpose of the policy of expansion, the objective of combating crime also fails, since tax revenues should only be a side-effect and not the only, real purpose.72 However, it is for the national court and not the Court of Justice to determine the true purpose of the Italian government. Ultimately, the question is whether the objectives of protection and genuine channelling do not go together. Channelling implies the idea that a proportion

money laundering.’ 69 Placanica, para. 56. 70 Placanica, para. 55. 71 Placanica, para. 54, Gambelli, para. 68. 72 See paragraph 3 of this contribution. 81

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of the population has an inherent urge to gamble. This urge must be fulfilled with a safe, legal system that offers a level of protection that the illegal system fails to provide: guaranteed payment, incentives to prevent gambling addiction and fair games. In that sense the two objectives are not necessarily contradictory. In the Italian case, however, the original channelling idea seems to have failed. Expanding gambling opportunities is necessary in order to cope with illegal games that offer a much higher chance of winning and use modern methods of communication. The limited number of operators have to offer increasingly addictive games. This certainly does little to serve the aim of limiting the propensity to gamble. To what extent is public order in a State served by aggressive legal games? And to what extent are no new players enticed, who were never even in the illegal system? It is for the national court to determine whether the licensing requirement actually serves the stated objective. The Court of Justice rules on Community law, not national law. The Court of Justice will not verify this itself, unless sufficient, manifest facts are brought before it. Anyone expecting this to happen will have a long wait. In this specific case the Court of Justice does intimate that the number of licences must be clearly justified.73 This is logical when combating crime remains the only objective. The defendants in this case (along with many foreign operators) wish to obtain a licence. They are not necessarily involved in organised crime, which seeks to launder money through gambling or make huge profits through fraudulent activities. Foreign operators cannot therefore simply be excluded because they are illegal in the Member State concerned. And they are illegal, of course, because they are not awarded a licence. The government of the Member State in question will have to indicate why it has not granted a licence. It must be demonstrated to the national court why some special risk is attached to operators from other Member States, with the result that there is a greater danger of fraud or other crime than in the purely domestic context.74 Not to mention why, for example, a maximum of nine licences better serves channelling than a maximum of ten. Providing such proof may be hampered somewhat by a policy of expansion. Proving the proportionality of the restrictions introduced seems to be more difficult for the justification of combating crime than for the justification of protecting consumers and society.75 In the first case it is more difficult to justify why operators who wish to comply with the licensing

73 Placanica, paras 51 and 57. 74 Opinion Advocate General Fennelly, point 29. 75 If these grounds were actually present, which is not the case for Italy. 82



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rules are excluded.76 The Court of Justice does not automatically open the door to all possible private operators, however.77 Placanica makes it clear that a policy of expansion is not in itself an indication that national betting and gaming legislation is contrary to the EC Treaty. Some reasons of overriding general interest can be in tandem with such a policy, even consumer protection if there are measures in place to achieve this other than curtailing the availability of gambling. The Member States are not required to restrict availability consistently and systematically; they can invoke other objectives to justify restricting the freedoms guaranteed under the EC Treaty. The reality of the cited reason must always be examined, however. 4.3. Proportionality: Licences from Other Member States The Court of Justice also gives its opinion in very specific terms about the exclusion of listed companies from tender procedures. It links this with the issues of licensing and criminal penalties. Its statements contribute little to the issue of restrictive betting and gaming legislation in general, however. It is significant that, in its conclusions, the Court of Justice does not go as far as the Advocate General, who explicitly asked for a ruling that Articles 43 EC and 49 EC preclude national legislation, such as Italian legislation for intermediaries who act for a company that is not allowed to obtain a licence or authorisation in the Member State concerned, but holds a permit to exercise the same activities that has been issued by another Member State, the one in which it is established.78 The Advocate General speaks out against the double check provided for in Italian legislation.79 If an operator from another Member State meets the requirements applicable in that State, the national authorities of the Member State in which the service is provided should accept that as a sufficient guarantee of the integrity of the operator.80 Excluding Stanley, which has a British licence, from the tender procedure goes further than necessary to prevent fraud and crime. The Advocate General does not argue that a tender procedure is prohibited. The procedure must, however, take into account the checks that have already been carried out in another Member State. The Court of Justice does not pursue this,

76 J. van der Beek and M. de Koning, ‘Volgende aflevering Goksaga: Rien ne va plus?’, Nederlands Tijdschrift voor Europees Recht, 2007, nt. 7/8, p. 120. 77 T. Stein, ‘Bemerkungen zu der Urteilsanmerkung von R. Reichert und M. Winkelmüller in EuZW’, 2007, 214, EuZW 2007, no. 8, p. 230. 78 Opinion Advocate General Colomer, point 150. 79 Opinion Advocate General Colomer, point 132. 80 Opinion Advocate General Colomer, point 130; Opinion Advocate General Alber, point 118. 83

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for one reason because it can establish the unlawfulness of the tender procedure on other grounds. It seems, however, that the Court of Justice simply prefers not to examine this in any great depth. In earlier case law, it advocated a very national approach. In those circumstances, the mere fact that a Member State has opted for a system of protection different from that adopted by another Member State cannot affect the assessment of the need for, and proportionality of, the provisions enacted to that end. Those provisions must be assessed solely by reference to the objectives pursued by the national authorities of the Member State concerned and the level of protection that they are intended to provide.81 In Gambelli the Court of Justice does advise the national court that when assessing the principle of proportionality, it should take into account the fact that the supplier of the service is already subject in his Member State of establishment to a regulation entailing controls and penalties.82 In Placanica the Court of Justice no longer makes any reference to this case law. If combating fraud and crime is the real reason for limiting the number of sports betting operators, why not allow licensed operators from other Member States83 to offer betting over the Internet? This would also lead players into a controlled system, albeit one controlled by another Member State. One condition is, however, that the Member State of origin has similar licensing rules that serve the same goal.84 And that is far from certain in the context of betting and gaming.85 The licensing requirements in Malta for example are not similar to those in the UK.

5. EU Case Law and the Implications for National Legislation 5.1. The Objectives of National Legislation and the Goal of the European Court of Justice Before examining further the possible impact of the recent case law of the Court of Justice on the betting and gaming policy in some Member States, one point needs to be specified. The European Court of Justice does not regulate. It

81 Läärä, para. 36; Zenatti, para. 34; Anomar, para. 80. 82 Gambelli, para. 73. Cf. Case 279/80, Criminal Proceedings against Alfred John Webb [1981] ECR 03305, para. 17; T. Verbiest and E. Keuleers, ‘Gambelli Case Makes it Harder for Nations to Restrict Gaming’, Gaming Law Review, 2004, vol. 8, no. 1, 12. 83 Licences from countries such as Antigua and Barbuda and Curacao are therefore irrelevant in this context. 84 P. Craig and G. de Burca, EU Law (Oxford, Oxford University Press, 2007), p. 828. 85 S. Korte, ‘Das Gambelli-Urteil des EuGH – Meilenstein oder Rückschritt in der Glücksspielrechtsprechung?’, NVwZ 2004, no. 12, p. 1452. 84



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does not state that Member States must provide system X or system Y, or that combating addiction is a better motive than banning crime. The assessment of crime and addiction is only raised if Member States introduce it as justification. What must be justified in this context? Restriction of the freedom to provide services and the freedom of establishment. The difference between the objectives of a national gambling law and those of the Court of Justice is crucial. To put it rather jokily: in any given case the Court of Justice is not interested whether Member States are combating addiction by legislative means or not. The Court of Justice is primarily interested in seeing that free movement is not unnecessarily obstructed. The fundamentals of betting and gaming legislation only come into play for the Court when assessing the obstruction. A Member State’s legislation can be aimed at protecting consumers, combating addiction and preventing crime. To achieve these objectives, it is possible that the Member State concerned will opt for a complete ban on some types of games or a licensing system with a limited number of operators. This, in itself, can lead to problems at EU level, because the freedom to provide services is restricted. In establishing the existence of such a restriction, the Court of Justice disregards the possibly inherent immoral nature of gambling. Even if the morality of gambling is at least questionable, it is not for the Court to substitute its assessment for that of the legislature in the Member State where that activity is practised legally.86 This does not mean that EU law ignores consumer protection or public health.87 Nor does it mean that the Court of Justice is blind to the public interest and the need to combat the harmful effects of gambling. On the contrary, the Court thinks that a limited number of betting and gaming operators is feasible, with a view to combating crime and fraud. It also finds consumer protection and combating addiction acceptable justification for a limited market under certain conditions. Indirectly, the Court is holding a mirror up to the Member States’ face. The national court is instructed to check whether the Member State is behaving consistently as regards the justification it has invoked. If not, the reason invoked is worthless as a justification at Community level. What is more, the Member State lacks its own internal ratio legis in relation to its betting and gaming legislation. Thus, if Member States invoke the need to combat addiction as the principle underlying their licensing system, and hence as a justification for the restriction, this interests 86 Schindler, para. 32, with a reference to Case C-159/90, The Society for the Protection of Unborn Children Ireland Ltd v. Stephen Grogan and others [1991] ECR I-4685, para. 20. 87 It does, in fact, seek a fragile balance between ‘… Community legislation aimed at protecting individuals from the risks which a passion for gambling poses to their property and health, while also guarding the commercial interests of the undertakings and centres where that type of entertainment is conducted, thereby guaranteeing, in short, freedom of establishment and freedom to provide services’. Opinion Advocate General Colomer, Case C-195/06, Kommunikationsbehörde Austria (KommAustria) v. Österreichischer Rundfunk (ORF), point 50. 85

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the European Court of Justice. If they invoke something else instead, however, the Court will remain silent about addiction. In a specific dispute, the Court of Justice thus leaves a difficult task to the national court which made the reference for a preliminary ruling.88 The national court must render inoperative any rule in the betting and gaming legislation that is in conflict with the EC Treaty. To assess the conflict, it must determine not only the proportionality of the rule, but also the reality of the grounds for justification invoked. The national court is asked, as it were, to carry out a policy check, a hypocrisy test.89 A difficult task, and one that will probably only involve a limited review. Although the Court of Justice has already made a number of preliminary rulings on gambling, it remains a difficult exercise for the national court. Anyone who thought, for example, that Gambelli implied that limiting the number of gambling operators is only possible if it is aimed at effectively reducing gambling opportunities is sadly mistaken. Expanding gambling activities can be consistent with certain reasons of overriding general interest. Placanica provides new insight, albeit limited and cautious. It makes no comment about the national court that found the Italian policy incompatible with the objective of effective restriction of gambling opportunities for reasons of consumer protection. Yet it does not exclude the objective of preventing fraud and crime and asks the national court to investigate its true character. After the questions that were raised in response to the consistent and systematic restriction, we will have to wait and see what the Italian court does with the actual character of the objective to prevent fraud. For other national courts, however, the exact meaning of the first criterion also remains unclear, in the event that a Member State were to invoke the objective of restricting gambling opportunities for reasons of consumer protection. 5.2. Belgium The different types of betting and gaming are regulated differently in Belgium. The National Lottery has a monopoly and can even advertise.90 Bets on sporting events are permitted under licence.91 Other betting and gaming activities

88 Although, where the Court has sufficient facts at its disposal, it is not prevented from making an assessment itself. Opinion Advocate General Alber, point 120. 89 J. van der Beek and M. de Koning, ‘De Goksaga: nieuwe grenzen aan de beperkingen van gokken over de grenzen’, Nederlands Tijdschrift voor Europees Recht, no. 6, 2004, p. 140. 90 Act of 19 April 2002 rationalising the operation and management of the National Lottery, Belgian government Gazette, 4 May 2002. 91 Act of 26 June 1963 on the promotion of physical education, sports and outdoor life, as well as the monitoring of enterprises that organise sports betting contests, Belgian government Gazette, 25 December 1963. 86



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are prohibited or strictly licensed under the Act of 7 May 1999 on games of chance, gaming establishments and the protection of players.92 The principle of a consistent and systematic policy can raise questions in such a situation: should all betting and gaming activities be considered as a whole, or should each regulation be examined in turn? The Court of Justice only gives its opinion on specific cases and refers to the specific legislation on betting activities and not to the policy as a whole.93 The questions referred to the Court of Justice for a preliminary ruling will always result from specific legislation and it is unlikely that the Court will ever make reference to the entire betting and gaming policy of a Member State. One of the objectives justifying the state monopoly of the National Lottery is comparable with the protection objective that did not prove to be realistic in Italy. Such being the case, the Rechtbank van Koophandel (Commercial Court) in Hasselt made a reference for a preliminary ruling in a dispute between the National Lottery and a company that sells participation forms in Euro Millions.94 Can the number of distributors of participation forms be limited, given the policy of expansion of the National Lottery, which includes advertising and sales methods that have a foreclosure effect? The organisational monopoly of the National Lottery is not disputed, but rather the distribution monopoly. The question referred for a preliminary ruling is interesting in itself, but it seems to be an entirely internal dispute involving a Belgian company that sells forms in Belgium.95 It is therefore not certain that the Court of Justice will rule on this question.96 The restrictions that ensue from the Act of 7 May 1999 genuinely seem to pursue the objectives of consumer protection and the prevention of crime, and also seem to be consistent and systematic for the gambling activities in question, even though assessing the principle of proportionality remains a difficult task. Can, as suggested in Placanica, the precise number of licences97 be sufficiently 92 Belgian government Gazette, 30 December 1999. 93 Gambelli, para. 67. 94 See: Case C-67/98, Questore di Verona v. Diego Zenatti [1999] ECR I-07289. 95 In principle, there must be an inter-State element (P. Craig and G. De Burca (2007), p. 817). It is possible that the services are also offered in other Member States, but this cannot be inferred from the question. 96 Though there is a good chance, as Anomar also concerned a wholly internal Portuguese dispute. In this case, the Court of Justice examined the questions referred by the national court, because it was not obvious that the interpretation of Community law requested was not necessary for the referring court. Such a reply might be useful to it if its national law were to require that a Portuguese national must be allowed to enjoy the same rights as those which a national of another Member State would derive from Community law in the same situation (Anomar, para. 41). 97 Nine for casinos (Section 29) and 180 for slot machine arcades (Section 34). 87

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justified? Recent bills98 proposed bringing betting on sports events under the Act of 7 May 1999 and certifying Internet sites, including those licensed in another Member State. No changes in the law were made in the last legislative term, however. If there is a desire to re-regulate sports betting in the future, due attention must be given to specific, consistent justification of the whys and wherefores of the limited number of licence holders. 5.3. The Netherlands Like Belgium, the Netherlands adopts a ‘no, unless’ kind of approach: betting and gaming are prohibited, unless they are licensed. For casinos there is only one licence holder. For lotteries the law provides for one licence holder and three ‘semi-permanent’ licence holders that have to have their licence renewed periodically. The Gambelli case law has been applied in recent judgments. With one single exception,99 the argument put forward by foreign operators, i.e. that Dutch policy on betting and gaming is not consistently and systematically aimed at restricting gambling, has always been dismissed.100 The reasoning of the Netherlands’ Supreme Court tends predominantly towards the grounds for justification that were upheld by Placanica. The Supreme Court apparently realised very quickly after Gambelli that reasons other than limiting the propensity to gamble might be more powerful when a policy of expansion is in place. It therefore highlights the objective of channelling, drawing players away from the illegal system into the legal one, which can be compatible with, for example, extensive advertising of legal gambling. This channelling idea has been around for a while and is emphasised once again in the new betting and gaming legislation that is making its way through parliament.101 In the meantime, the Council of State has delivered two judgments referring to Placanica, the first one in an appeal decision against a judgment of the District 98 Originally intended to be included in the Programme Act of December 2006, but eventually dealt with separately in the Games of Chance Bill, Parl. St. Kamer 2006–07, 2807/001 and 2807/002. 99 Interlocutory judgment, District Court Arnhem, 2 June 2004, Lotto/Ladbrokes, cited in M. de Koning, De Goksaga duurt voort!, Nederlands Tijdschrift voor Europees Recht, 2006, no. 4, p. 71; District Court Breda, 2 December 2005, Compagnie Financière Régionale/ Ministers van Justitie en Economische Zaken, LJN (National Case Law no.): AU7389. 100 Supreme Court, 18 February 2005 De Lotto/Ladbrokes, LJN:AR4841; Court of Appeal Arnhem, 23 November 2004, De Lotto/Betfair, LJN:AR7476; District Court Arnhem, 31 August 2005, De Lotto/Ladbrokes, LJN:AU1924. For a good discussion of the cases, See: A. van ’t Veer, J. Franssen and R. Budik, ‘The Netherlands’, in: M. Balesta and A. Cabot (eds), Internet Gambling Report: An Evolving Conflict between Technology and Law (Saint Charles, River City Group, 2005, 8th edition), pp. 435–456. 101 Bill of 2 August 2007, Rules on betting and gaming, Explanatory memorandum, 2, <www.justitie.nl>. 88



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Court of Breda concerning a licence for a casino.102 In this case the court ruled that the refusal to authorise a foreign company to operate in the casino market, in which Holland Casino has a monopoly, does not comply with the Gambelli judgment, and more specifically with the special requirement to be consistent and systematic.103 It does not indicate a consistent policy of refusing several operators access to the market, but at the same time increasing the number of Holland Casino establishments and permitting intensive marketing campaigns. The District Court therefore reversed the decision to refuse a licence.104 The Council of State did not share this view. The existing one-licence system is, in principle, an appropriate and proportionate means of achieving the objectives set (protecting consumers, combating illegality and crime and preventing gambling addiction). The Council of State deems it insufficiently likely that the various measures exceed the limits of a consistent and systematic policy.105 It does not separate the various grounds for justification and subjects them to only a limited review. In its view, a system with just one licence holder is certainly appropriate for curtailing gambling opportunities. This may well be so, but the European Court of Justice insists on a reality check in Gambelli and Placanica. Is reducing gambling opportunities the true purpose of the government? The Council of State admits that an increase in the number of establishments and Holland Casino’s generous advertising budget are not really consistent with a cautious gambling policy. It finds this justified, however, in the light of the Dutch channelling policy.106 These ‘canvassing’ measures would actually entice players to the legal gambling offer, ensuring that gambling can be controlled. This argument fits in with the grounds for justification that the European Court of Justice did not dismiss out of hand in the Italian case, i.e. preventing crime and fraud through channelling. It does not, however, answer the question of whether the Dutch policy is consistent and systematic in relation to limiting gambling opportunities.107 The second application of the criteria in Placanica followed quickly on the heels of the first, in a case about lotteries.108 Here, the Council of State reached a different conclusion: ‘… the Minister has failed to show that the betting and gaming policy he is pursuing is an appropriate and proportionate means of 102 Council of State (Neth.), 14 March 2007, 200600283/1, <www.raadvanstate.nl/>. 103 J. Franssen, ‘What’s next for the Netherlands? Court decision might nix Dutch monopoly on casino gambling’, Gaming Law Review, 2006, 34. 104 M. de Koning (2006), p. 71. 105 Council of State (Neth.) 14 March 2007, 2.6.2.4 and 2.6.2.5. 106 Council of State (Neth.) 14 March 2007, 2.6.2.5 107 The hypocrisy test is poorly executed by the Council of State. J. van der Beek and M. de Koning (2007), p. 122. 108 Council of State (Neth.), 18 July 2007, 200607881/1, <www.raadvanstate.nl/>. 89

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justifying the restriction of free movement of services, where this restriction ensues from the refusal of an application for a licence’.109 Unlike the previous case, a one-licence system is not involved here. No temporary licences for large lotteries have been awarded since 1992. At that time three national lotteries held a temporary licence, which has been periodically renewed ever since. There is also one national lottery that derives its licence directly from the law and thus does not need any renewals. The following are put forward as justification for limiting the market to these four operators: protecting consumers, combating illegality and crime and preventing gambling addiction.110 A policy of expansion can also be discerned in the lottery sector: the lotteries are allowed to organise more and more draws, increase their turnover and undertake marketing activities. In this instance the Council of State does not adopt the government’s channelling reasoning (prevent illegality by making more legal games of chance available). This argument does not sufficiently justify the refusal of one extra licence holder. Furthermore, according to the Council of State, it is disproportionate to automatically award the existing licences (which are not derived directly from the law) to the same holder without a call for tenders. The objectives put forward would also be served with an objective tender procedure, which is less restrictive of the freedom to provide services.111 It is clear from this judgment that realistic grounds for justification are not sufficient to bear European scrutiny. The Council of State scrupulously applies the Gebhart test here. Essentially the two judgments, with their differing conclusions, demonstrate how difficult it is for the Dutch betting and gaming policy to find some sort of balance, and it even loses credibility in the process. 5.4. France Of the three countries discussed here, the French courts go furthest in their assessment of the national gambling policy. Whereas the highest courts of justice originally advocated a superficial review,112 the French Cour de Cassation (Supreme Court) tried another approach in the Zeturf case.113 It even goes further than what the European Court of Justice proposes in Placanica. The French betting and gaming scene is similar to that in Belgium and the Netherlands, with a number of monopolists and licence holders for specific games. In Zeturf the Cour de Cassation tackled the monopoly that the French state-controlled betting

109 Council of State (Neth.), 18 July 2007, 2.7 (own translation). 110 Council of State (Neth.), 18 July 2007, 2.5.2. 111 Council of State (Neth.), 18 July 2007, 2.5.7 – 2.5.9. 112 Conseil d’Etat 15 May 2000, no. 202666, <www.legifrance.gouv.fr/>. 113 Cour de Cassation, Chambre commerciale, 10 July 2007, no. 06–13.986, 2359, note J. Clergerie D, 2007. 90



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system, Pari Mutuel Urbain (PMU), has on off-track horse-race betting. The PMU asked a Maltese company, Zeturf, to stop offering its online sports betting services on French territory, claiming that its activities infringed the PMU’s monopoly on horse-race betting. One important difference compared with the facts in Placanica is that a kind of private enforcement of the betting legislation is involved here, with a legal operator trying to protect its monopoly. The Maltese company in this case was therefore not threatened with criminal penalties, as Messrs Placanica and Palazzesse were. The Cour d’appel (Court of Appeal) in Paris confirmed that the company should desist from its activities as the first court ordered, on the grounds that it was infringing the exclusive rights of the PMU. The Cour de Cassation subsequently revoked the judgment of the Cour d’appel on two grounds. First, the Cour d’appel ruled on the grounds of elements from which it could not deduce whether the legislation relating to the PMU was actually based on the objectives of preventing crime and reducing gambling opportunities. With regard to the latter objective, it was not explicitly determined whether the government is pursuing a policy of expansion contrary to the objective put forward.114 The Cour de Cassation thus explicitly cites the two different grounds in Placanica.115 Second, the Cour d’appel should have determined whether the foreign operator was already subject to sufficient controls in its own country of origin. This assessment imposed by the Cour de Cassation is not mentioned in Placanica.116 The Cour de Cassation therefore leaves the way open for mutual recognition of licences. The actual assessment will be a task for the Cour d’appel, however. The Cour de Cassation does not therefore conclude that Community law has been infringed, but invites the lower court to examine French betting legislation (more) thoroughly. As in European case law, foreign operators have yet to win the argument.

6. Conclusion The curtain did not come down with Placanica. Neither licence holders nor new operators have emerged as indisputable winners. It has not opened up the gambling market to operators from other Member States and state monopolies do not need to disappear immediately. A policy of expansion is not a problem per se, but must be examined in relation to the objectives invoked for restrictive measures. Member

114 It is not certain whether this objective holds up, in view of the policy of expansion in the sector. D. Simon, ‘Faites vos jeux, rien ne va plus …’, Europe, no. 5, comm. 141, 2007. 115 The judgment of the Cour d’appel (4 January 2006) actually predates the Placanica judgment. 116 E. Heffermehl and T. Verbiest, ‘Jeux d’argent en ligne: l’impact de l’arrêt Zeturf ’, Revue Lamy Droit des Affaires, no. 20, 2007, p. 73. 91

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States still have the right to introduce restrictions on the freedoms guaranteed under the EC Treaty in the betting and gaming sector, but must observe the rules of play of the European Court of Justice. These rules have been clarified to some extent, certainly for the referring courts in Placanica. However, these criteria will not always be as simple for the national courts to use. Determining the reality of an objective and assessing the principle of proportionality are not self-evident and in no way guarantee minimum consistency within the internal market. The European Court of Justice has done its duty in Placanica, however, and the question is whether it will go much further in future. There is no evidence whatsoever of liberalisation or mutual recognition. The limits of primary legislation in this matter would seem to be in sight. Continual interpretation of the freedoms guaranteed under the EC Treaty does not seem to be the right way to go to achieve harmonisation in the gambling sector.117 The infringement proceedings on the grounds of non-compliance initiated by the European Commission against Member States in relation to their gambling legislation are ad hoc and focus chiefly on sports betting.118 The most recent letters of formal notice nearly all proceeded on the basis of the absence of a consistent and systematic restriction of the supply of gambling services, given the policy of expansion of the Member States concerned.119 However, the Member States can put forward other objectives to justify the restriction of the freedoms, such as, in this case, combating fraud and crime. It may be anticipated that Member States will modify their objectives rather than their gambling policy. No immediate answer may be expected from secondary legislation. That would require political will from various actors, at both European institution and national levels. There is no sign of this at the moment. Gambling was recently excluded from the draft services directive.120 Deregulation is not so self-evident, and harmonisation even more unlikely. For the time being it is a case of making do with primary legislation and the way it is interpreted by the European Court of Justice. Placanica has done little to simplify the task of the national courts, but the Court does not seem to be in a position to do much more. 117 Cf. Opinion Advocate General Colomer, Placanica, points 144–148. 118 Case C-260/04, Commission of the European Communities v. Italian Republic [2007] ECR. 119 Sent to seven Member States in April 2006, and three in October 2006 (IP/06/436 and IP/06/1362, <ec.europa.eu/internal_market/services/infringements/index_en.htm>). Six of these ten Member States have since been formally requested to amend their laws (‘reasoned opinion’) (IP/07/360 and IP/07/909). If they fail to do so, the matter can ultimately be referred to the European Court of Justice. 120 See, for example, the Draft European Parliament legislative resolution on the Council common position for adopting a directive of the European Parliament and of the Council on services in the internal market (10003/4/2006 – C6-0270/2006 – 2004/0001(COD))€(P6 TA(2006)0490). 92

Regulating Illegal Gambling Markets: The Case of Illegal Casinos in the Netherlands Toine Spapens

1. Introduction By the end of the nineteenth century gambling was, in most European countries, prohibited by law.1 Games of chance imply a certain risk of addiction, which may result in severe financial and social problems, or may even lead to criminal activities for the purpose to gain money to settle gambling debts, or to be able to keep on playing. For the authorities, the prevention of addiction and crime has always been, apart from ideological motives, a strong incentive for the restriction of gambling activities. Of course, prohibition of games of chance did not mean that the citizens lost their interest in playing, and this created a market for illegal gambling operators. Although the authorities were taking repressive action against illegal gambling, they were unable to stop these activities completely. During the twentieth century, from the end of the Second World War onwards, games of chance were gradually more accepted by the public, so it became politically feasible to lift the hitherto strict bans on gambling. In most European countries, the authorities introduced forms of regulation of gambling, or they adapted the existing gambling laws to expand the legal market. However, the gambling market remained under strict government control. In some countries, only the state itself, or state operated companies, could provide gambling services. In other countries private companies were allowed to operate games of chance but only under strict conditions. For the authorities, the reduction of illegal gambling by creating a legal alternative has always been an important policy goal. However, the introduction

1 B. Polders, ‘Gambling in Europe: Unity in Diversity’, in: W. Eadington and J. Cornelius, Gambling: Public Policies and the Social Sciences (Reno, Nevada, Institute for the Study of Gambling and Commercial Gaming, 1997), pp. 65–100. Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 93–107 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

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of legal gambling services did not necessarily deprive the illegal operators of their entire market. A good example has been casino gambling in the Netherlands. The first official casino opened in the seventies and, over the years, thirteen other gaming houses followed. Yet a substantial number of illegal casinos remained operative. It was not until the turn of the century, and only by taking effective repressive action, that the authorities were able to close these casinos, and keep them closed. The last of the illegal gambling houses disappeared in 2005. Why a substantial number of illegal casinos in the Netherlands were able to survive and attract customers for such a long time is an interesting question. This contribution discusses the regulation of the Dutch casino market and its effects on the illegal gaming houses. To begin with, the theoretical assumptions with regard to the interaction between legal and illegal gambling markets will be outlined (section 2). Next, we briefly describe the gambling policies of the Dutch government (section 3). Section 4 follows with an examination of the policies the authorities pursued with regard to casino gambling. Section 5 describes the developments with regard to the illegal gaming houses. Next, the effects of regulation and repression with regard to gambling markets will be discussed (section 6). Section 7 offers some concluding remarks, based on the outcomes of this case study.

2. The Theory With Regard to Regulation A simple rule of economics declares that if there is a substantial demand for goods or services by customers who possess the necessary purchasing power, adequate supply will always follow. The rule also applies when the goods or services in question happen to be illegal. Of course, the authorities can try to track down illegal providers and bring them to justice. However, a higher risk of getting caught also implies higher profits to be made, so there will always be crime entrepreneurs available who are willing to take their chances. Hence, criminologists generally agree on the fact that if there is a substantial demand for certain illegal goods or services, repression, however severe it may be, will only have marginal or temporary effects on the availability of these goods or services. Of course, legalisation would put an immediate end to the activities of the illegal suppliers. However, this cause of action would also give way to negative effects – for example addiction problems – which were an important reason why these goods and services were restricted in the first place. Instead, regulation can be an alternative. The idea of regulation is to draw customers away from the illegal market by introducing a controlled supply of formerly prohibited goods or services, and thus reduce crime problems. By doing this, the government can also monitor undesirable effects, and take action when needed.

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When the gambling market is considered, we can theoretically divide it into legal and illegal segments.2 In a situation wherein the authorities have prohibited all games of chance, customers have no choice but to turn to illegal operators. If the authorities decide to regulate gambling, a new situation will occur. Customers will then turn to operators whose businesses the authorities have approved. However, this is not the only effect. The market will also expand because a certain number of new customers, who did not want or dare to play as long as gambling was illegal, will now start to participate in games of chance as well. This in turn might increase the number of problem gamblers. Thus, the authorities need to balance these two effects carefully. One the one hand, official games of chance should be attractive enough to ensure that illegal operators will lose a substantial share of the market. In turn, the crime entrepreneurs will try to prevent this by starting to compete with the legal providers. They might for instance introduce new products or try to increase the attractiveness of existing services. On the other hand, the official gambling operators also need to be restricted in their competition with illegal providers. If they would be allowed to expand their businesses without restraint, and maximize the number of customers, for example by advertising on a large scale, this would not only increase the number of players, but also the number of people experiencing gambling related problems. From this, we can conclude that legal gambling providers cannot compete with illegal operators on strictly equal terms. Therefore, the authorities need to level the playing field by taking repressive action against illegal gambling operators as well. This theoretical model is pictured below. On the left side of the picture is the illegal gambling market, whereas the right side depicts the legal gambling market. The entrepreneurs on both markets are competing for customers who are willing to participate in both legal and illegal games of chance. The ‘new’ customers will only gamble with official providers. The key question in this model will be to what extent the group of customers, who have turned to the legal gambling market is comparable with the group of ‘remaining customers’ that still prefer to play illegal games of chance. As long as these groups, and their preferences, are similar, one would conclude that there is room left for convincing ‘remaining customers’ to switch from illegal to legal gambling operators. However, if both groups have become largely dissimilar, the conclusion would be that exchange has reached its limits.

2 Of course, this is a simplification. In reality, we should also take into account the interaction between markets for different types of games of chance, as well as the fact that the customer population also comprises different segments. 95

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Figure 1 Illegal gambling market

Legal gambling market

‘New’ customers

Remaining customers

Comparable? Limit?

Former customers of illegal gambling services

In the remainder of this contribution, we will use this model to analyse developments on the Dutch casino market focusing on the period from 1976, when the first official casino was opened, to 2005, when the authorities closed the last illegal casino. First, we will present a general picture of the Dutch gambling policies in the past decades.

3. Gambling Policy in the Netherlands In the Netherlands, prohibition of games of chance, on a national level, started at the beginning of the nineteenth century. In 1810, France annexed the Netherlands and, as a result, the Code Pénal came into effect for the Low Countries as well. The Code Pénal specifically outlawed jeux d’hasard, for example games of dice or cards. However, the French criminal law did not consider lotteries. When the Netherlands regained its independence in 1813, the authorities left the restrictions that the French had imposed on gambling activities untouched. In addition, King William I also ruled that lotteries operated by private or foreign parties were subject to his approval.3

3 A. van ’t Veer, Spelregels (Deventer, Gouda Quint, 1998), p. 14. In the Southern parts of the Netherlands (Belgium), lotto was legal until 1828. 96



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At the end of the nineteenth century groups of citizens who wanted to reinforce traditional values, and who were, from an ideological point of view, strongly opposed to games of chance, gained influence. In their view, the authorities should even prohibit lotteries. The government agreed that immoral behaviour, including gambling, was to be restricted as much as possible. In 1905, this led to the Loterijwet (Lottery Act), which declared all lotteries, with the exception of the state lottery, illegal. Following the Lottery Act, in 1911, the government took a number of measures to increase public morality. These for instance concerned pornography, abortion, seduction of minors, and games of chance. From then on, law prohibited all public organization of games of chance. The operation of gambling services was declared a criminal offence, whereas participation in games of chance was punishable as a misdemeanour.4 However, after a stiff debate in the Dutch parliament, the government once again excluded the state lottery from prohibition.5 It was not until the end of the Second World War that this situation was gradually changed. Firstly, after the end of the war, private companies introduced new types of games, for instance prize competitions or crossword puzzles, which involved money prizes. Formally, these were games of chance and therefore illegal. Despite this, practically all newspapers and magazines organized these games. In addition, many local football clubs organized pari-mutuel wagering on matches in the national football competition. However, none of this caused public concern, and neither did the authorities take serious repressive action against the operators of these games. Secondly, the Dutch were also able to gamble in Belgium and Germany, for example in casinos. Especially in border regions, people also played the German lotto. Due to these developments, public acceptation of gambling increased and this, in time, lead to a growing political will to loosen the severe restrictions imposed on the operation of games of chance. Over a period of four decades, the authorities lifted the prohibition of different types of gambling. Already in 1948, the Dutch government legalized betting on horseracing. In 1964, after a debate of several years, the parliament passed the Wet op de Kansspelen (Gambling Act). This Act also regulated pari-mutuel wagering on football matches and prize competitions. The government expanded the Gambling Act in 1974 to allow for casino gambling, although the first official gaming house was not to open until 1976. In 1975, the Lotto was added to the Gambling Act. In 1986, operation of EGMs became possible. Finally, in the

4 A. van ’t Veer (1989), p. 14. 5 S. Kingma, Het Gokcomplex, verzelfstandiging van vermaak (Amsterdam, Rozenberg Publishers, 2002), p. 96. 97

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nineties, the organization of lotteries for good causes, instant lottery games and SMS-games, was also approved. As a result of all additions to the original Gambling Act of 1964, it developed into a patchwork of very different and sometimes complex and highly technical paragraphs, the latter for example with regard to EGMs. Hence, in 2007, the Dutch government drafted a proposal for a thorough revision of the Gambling Act. Generally speaking, the main policy goal of the subsequent governments has been to ‘canalise’ the urge of the public to play games of chance. The authorities introduced the term canalisation in the discussion with regard to the Gambling Act of 1964. On the one hand, the fact that people want to gamble is recognized and acknowledged. On the other hand, gaming also calls for regulative measures to minimize the risks.6 Therefore, as a basic principle, games of chance cannot be offered publicly unless the conditions set in the Gambling Act are met. The Dutch authorities never defined the term ‘canalisation’ exactly. Hence, subsequent governments were able to adjust gambling policies without coming into conflict with the basic principle. In fact, until the second half of the nineties, new games were continuously incorporated in the Gambling Act and existing operators were also allowed to expand their offers. This policy was justified by the fact that legal operators were to be enabled to compete with illegal operators. Although it was unclear if this goal was actually achieved – scientific studies or policy research were lacking – parliament did not seriously question this policy for a long time. However, at the end of the eighties, things began to change, because of the number of problem gamblers was rising sharply. The problem was first observed by institutions involved in the treatment of addiction problems. Based on several small-scale studies of gambling addiction, the number of problem gamblers in the Netherlands was estimated at 21,000 to 75,000.7 Especially EGMs and casino gambling led to addiction problems. Because of these findings, the authorities turned to a more restrictive gambling policy. In November 1995, the government explicated its changed views in the note Kansspelen herijkt (Recalibrating Games of Chance).8 Canalization remained the principle policy goal, but – illustrating the flexibility of this notion – the existing legal gambling market was now virtually frozen. Moreover, gambling providers were to substantially reduce

6 H. van de Bunt, ‘Onderzoek naar de uitgangspunten van het kansspelbeleid’, in: B. Polders, H. Moerland and A. van ’t Veer (eds), Kansspelen onderzocht (Arnhem, Gouda Quint, 1994), pp. 37–43, p. 40. 7 Tweede Kamer, Vergaderjaar 1995–1996, 24557, no. 2, p. 6. A nationwide study of gambling addiction in the Netherlands was not conducted until 2006. 8 Tweede Kamer, Vergaderjaar 1995–1996, 24557, nos 1–2. 98



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advertisements. Finally, the prosecution services were to take action against illegal gambling operators.9 At the turn of the century, the government once again proposed a serious change of gambling policies. This time, the authorities put the principle of canalization aside, to favor a liberalization of the gambling market. A working group drafted a first proposal. However, this note instantly met with wide and heavy criticism, urging the government to omitting the more radical parts. Parliament received the policy note entitled Nieuwe ronden, nieuwe kansen (New Rounds New Opportunities) at the end of the year 2000. Yet again, it was severely criticized, and further adjustments had to be made. Execution of the new policy was, albeit hesitatingly, started in 2002. However, a new government, which came into office in the same year, quickly turned the tables once again. This time the Christian Democrats were leading the coalition, and they had been vigorously opposed to the changes pursued by the former government. The new Minister of Justice immediately reinstated a restrictive gambling policy and the situation has not changed since.

4. Illegal Casinos in the Netherlands Casinos, in other words houses that offer different types of games at the same location, for example roulette and card games, first appeared at the end of the nineteenth century. In the Netherlands, the first casino opened in 1884, at the Kurhaus in the town of Scheveningen.10 The casino presented itself as a members only club, but the operators were openly advertising, and new ‘members’ were able to join without a ballot.11 Although it could be questioned whether the gaming house was legal, the local authorities took no action. Their decision might have been influenced by the fact that the upper class, according to some accounts even members of the royal family, frequented the casino. However, when the Lottery Act of 1905 came into effect, all gambling activities were shut down by the operators themselves, for fear of prosecution.12 Several decades later, new types of roulette, for example Straperlo, were developed. Although the game went into oblivion later on, it was highly popular in the nineteen thirties. Once again, people could play the game at the Kurhaus, but also in gaming houses in several other seaside resorts in the Netherlands. Although it was unclear whether Straperlo was a game of skill or a game of

9 Tweede Kamer, Vergaderjaar 1995–1996, 24557, no. 2, pp. 8–13. 10 A. van ’t Veer (1998): p. 131. 11 Ibidem. 12 Adama Zijlstra (1976), cited in A. van ’t Veer (1998), p. 131. 99

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chance, the court ruled that operators needed a permit from the local authorities. After this the casinos had to close, because no permits were issued.13 It is uncertain if this truly put an end to illegal casinos in the Netherlands. There has been no research conducted with regard to gaming houses in the interbellum and the first decades after the Second World War. However, in the early seventies an estimated number of 350 illegal casinos were operational. As a rule, these were small gaming houses, comparable to the size of an average restaurant. Most of the time, the main gambling activity was a type of observation roulette, for example Golden Ten or derivates of this game. The customers could also play card games, for example poker or blackjack. Sometimes, a small number of EGMs were available as well. Large illegal casinos were relatively rare, because the operators always ran the risk of losing their investment if the authorities chose to close the gaming house. One of the biggest illegal casinos that have existed in the Netherlands was the Cabala Club, situated in the Red Light District of Amsterdam.14 For many years, the local authorities of Amsterdam also tolerated another large illegal casino in the centre of the city, at the Rembrandt Square. It was eventually closed in 2001. In the eighties a type of observation roulette called Golden Ten became hugely popular. As a result, the number of illegal casinos rose again. In one of these casinos, the daily number of players was estimated at 500.15 This development urged the prosecution services to take action against these casinos, and subsequently the number was reduced. The largest and most visible illegal gaming houses were consequently targeted. However, a substantial number of smaller illegal casinos remained. At the turn of the century, the estimated number of daily customers was at 30 to 90 persons.16 However, there were about 50 illegal casinos in the Netherlands, and the estimated number of visits was 1.5 million in the year 2001.17 This number was certainly substantial as in the same year the official casinos recorded about 5 million visits. As the location of the illegal casinos was known to every local taxi-driver, and of course also to the police, it is an interesting question how these gaming houses could operate, even though it was clear that the betting and gaming law as well as tax laws were consequently violated. Why did the authorities not act to put an end to all this? Grosso modo, three explanations can be put forward.

13 A. van ’t Veer (1998), p. 132. 14 See: T. Spapens, ‘Crime Problems Related to Gambling: An Overview’ (this volume). 15 S. Kingma (2002), p. 339. 16 Regioplan (2001). 17 Regioplan (2001), p. 44. 100



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Firstly, the Gambling Act only considers games of chance. Therefore, operators of illegal casinos stated that they only offered games of skill. The distinction between games of chance and games of skill is not always clear-cut. However, in 1965 the Dutch High Court ruled that if the majority of the players lost on the game, it was to be considered a game of chance in the light of the Gambling Act. Subsequent case law implied that a violation of the Gambling Act in this sense, could not be proved by theoretical calculations of the chances of winning the game, but had to be underpinned by observations. Also, more than one observation was required, but judgements differed with regard to the exact number. Observations had to be carried out by gambling experts of the police or the tax office. All of this meant that successful prosecution of an illegal casino required a lot of effort. As the operators of the illegal gaming houses continuously made small adjustments to the games, it was also difficult to build a solid base of case law, so the public prosecutor always ran the risk of losing the case. Secondly, the Gambling Act stated that only publicly offered games of chance were illegal. Therefore, gambling in private clubs, for instance, was not punishable by law. Understandably, illegal casinos presented themselves as members only clubs whereas they actually accepted any person who wanted to play. Once again, it took the authorities a lot of effort to prove this without a doubt. Thirdly and most importantly, even if the authorities closed an illegal casino, it was easily restarted by the operators, often even at the same location. Of course, if a violation of the Gambling Act or the Gambling Taxation Act (Wet op de Kansspelbelasting) had been established, the club and its board were answerable. But the club was immediately liquidated after being closed down, and the board only consisted of figureheads who were themselves penniless. All of this rendered criminal prosecution ineffective. Moreover, financial debts, mainly to the tax office, could neither be collected. The actual operators of the illegal casino stayed behind the scenes and quickly established a new club. If a new illegal casino opened it usually took several months before the police were able to collect the necessary evidence to prove a violation of the Gambling Act. Shutting down illegal casinos was not given top priority, and several observations had to be carried out by gambling experts. A second option was to close the casino because of the fact that gambling taxes were left unpaid. However, the tax-office also needed to allow the operators several months for paying their debts, before they could be declared malevolent. Of course this allowed the illegal operators to make good on their investments and to gain substantial profits as well. Given these circumstances, it will be no surprise that the public prosecution service, the police and the tax-office became less and less eager to take action against illegal gaming houses. As a rule the local authorities did not regard illegal casinos as a serious problem provided that public order was not put at risk and

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no serious crime problems occurred. Hence, illegal casinos were in many cases tolerated. However, in 1996, the Ministry of Finance decided that the massive tax evasion by illegal casinos needed to stop, and the department started a special project to normalize the situation. This project, codenamed ‘Joker’ started at the end of 1999, after several years of preparation. In the cause of operation Joker an effective approach was developed to prevent illegal casinos from restarting. This was done by applying administrative law. Local regulations, namely the Algemene Plaatselijke Verordening (APV), were modified to this end. Among other things, the APV specifies the conditions under which local authorities will issue permits for the hotel and catering industry. Members only clubs also need a permit if they supply the members with food and drink. The APV also states the conditions under which these permits can be revoked. If a club is in violation of these conditions the Mayor can decide to close it down, and this decision is effected immediately. Its admissibility is weighed by the court afterwards. Thus, the local authorities were asked to add an extra paragraph to the APV, which explicitly stated that violations of the Gambling Act were also reason for revocation of permits. All of this had a profound effect on operators of illegal casinos. From then on it was no longer necessary to prove an offence of the betting and gaming law, or to establish the fact that the operators were unwilling to pay taxes. Instead it sufficed to prove that local regulations were violated. In these cases, the burden of proof was far less severe and only a single observation to determine whether games of chance were played had to be carried out. In addition, players were interviewed to underpin observations that they made no effort to play skilfully, but were solely counting on good luck. On the basis of a report of these findings, the Mayor decided to close the premises. All of this meant that the time period during which the illegal gaming house was able to operate was shortened to a few weeks – which were usually needed to organise a combined visit by the police, the Tax Office and the local authorities – or sometimes even less. Therefore, the operators were no longer able to make good on their investments, or to gain any profit. Of course the new approach was contested in court, but basically to no avail. The last illegal casino was closed in 2005, and no new gaming houses have occurred since.

5. Legal Casinos in the Netherlands In the Netherlands, discussion started as early as the nineteen fifties on the question whether casino gaming was to be legalized.18 To begin with, local authorities from several towns were lobbying for a lift of the prohibition of casino

18 A. van ’t Veer (1998), pp. 132–133. 102



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gaming because they saw casinos as important means for furthering tourism. In fact, establishment of a number of casino hotels had already been allowed in a part of the Kingdom of the Netherlands, namely the Dutch West Indies, to service the growing number of American tourists. Secondly, the Dutch were also able to play in casinos abroad, and there were even bus tours organized to gaming houses in Belgium. The Dutch authorities could do little to prevent this, as playing abroad was not punishable by law. However, no provisions for casino gaming in the Netherlands itself were incorporated in the Gambling Act of 1964. Only in 1974 a title was added to the Gambling Act that enabled operation of official gaming houses, albeit under strict conditions. All revenues earned were to fall to the state and all gambling activities were rigorously controlled. Moreover, the number of permits to operate casinos was limited to just one. There were 43 applicants for this sole permit. From these the ‘Nationale Stichting tot Exploitatie van Casinospelen in Nederland’ (National Foundation for the Operation of Casino Gaming in the Netherlands) was chosen in 1976. In 1989, the company changed its name to Holland Casino. The first official casino opened in 1976, in the seaside resort of Zandvoort. From the start, the casino was a commercial success. On average, a daily number of 1,000 visitors were welcomed, adding up to 665,000 persons in the first fifteen months after opening.19 In the following years, the number of official casinos was steadily increased. Soon after the first casino, two more gaming houses were opened. The government further allowed for five extra casinos in 1983. Included were Amsterdam and Rotterdam, explicitly because of the substantial number of illegal gambling dens in these towns. In the first half of the nineties, the government set the total number of official casinos at twelve. As has been discussed in section three of this contribution, restrictions were imposed upon the gambling sector from 1995 onwards, because of the perception that the number of gambling addicts was rising. As casino gaming especially implied a risk of gambling addiction, it was decided that the number of official casinos was not to be increased.20 When the government proposed to liberalize the gambling market in the year 2000, the issue of the number of official casinos immediately returned to the agenda. Holland Casino had initiated market research, which lead to the conclusion that (potential) customers did not want to travel more than thirty minutes by car in order to visit a gaming house. At that point in time, Holland Casino could not meet this demand in the whole of the Netherlands. In order to fill in the gaps, a further six casinos would be necessary. Although liberalization of the gambling market was favoured by the government, it was not prepared 19 A. van ’t Veer (1998), pp. 141–143. 20 Tweede Kamer, Vergaderjaar 1995–1996, 24557, no. 2, p. 18. 103

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to allow this expansion without further thought. Therefore, research was commissioned to forecast the effects of six more casinos on gambling addiction and the illegal casino market. The report was published in 2002.21 As it turned out, about eight percent of the Dutch population had visited an official casino in 2001. The number of customers had been 1.2 million, and the total number of visits added up to 5.9 million. If a further six gaming houses were to be opened, be no more than 76,000 extra players were expected. However, the researchers also predicted an increase of the number of visits per customer, which might imply a rise of the number of gambling addicts. As has been outlined before, a new government came into office in 2002, and this coalition was strongly opposed to liberalization of the gambling market. Hence, it concluded that the possibility of increasing gambling addiction was sufficient reason to postpone any changes with regard to the casino market.22 Instead, the Minister of Justice argued that he wanted to study the problem of gambling addiction first. This research though, was not given much priority. It took several years before a study was even commissioned, and the results were only published at the end of 2006.23 In the meantime, Holland Casino had formally requested the government to allow for six new gaming houses to be opened. However, there were several reasons why the Minister of Justice was reluctant to approve to this request. Firstly, new official gaming houses were no longer needed to combat the illegal line of business, as practically all illegal casinos had already been closed down in the cause of operation Joker. Secondly, the ECJ had ruled, in the case of Gambelli, that the policies of the Member States with regard to gambling had to be consistent in order to justify a limitation of the freedom of movement of services within the European Union. In other words, restriction of gambling services was not compatible with allowing a selected number of gambling providers to extend their market. The ruling of the ECJ in the Gambelli-case also necessitated Holland Casino to reduce its advertisements. For example, the company had to give up sponsoring the Dutch premier football league. However, in 2004 the Minister of Justice agreed, albeit reluctantly, upon the opening of two more official casinos.24

21 A. Pemberton, A. Oostdijk, J. Wils and C. van der Werf, Een spel met grenzen: de Nederlandse casinomarkt (Leiden, Research voor Beleid, 2002). 22 Tweede Kamer, Vergaderjaar 2002–2003, 24036, no. 280, p. 8. 23 D. de Bruin, C. Meijerman, F. Leenders en R. Braam, Verslingerd aan meer dan een spel, een onderzoek naar de aard en omvang van kansspelproblematiek in Nederland (The Hague, Wetenschappelijk Onderzoek- en Documentatiecentrum, 2006). 24 Tweede Kamer, Vergaderjaar 2003–2004, 24557, no. 46. 104



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6. Repression and Regulation As described above, taking repressive action against illegal casinos proved to be very difficult for a long time. This was an important reason for regulating casino gaming in 1974. The number of official casinos was gradually expanded, to allow Holland Casino to compete with the illegal operators as best as possible. Although the effects of this policy were never properly evaluated, the number of illegal gaming houses seems to have dropped from an estimated 350 in 1974, to approximately 100 in the nineties. However, illegal gaming houses did not disappear completely. For this, there are three explanations. Firstly, as outlined before, it was very difficult to prevent restarts after an illegal casino had been closed down. Secondly, the background of the customers of legal and illegal gaming houses had started to diverge. In the nineties, illegal casinos were mostly visited by people who were unable, or unwilling, to play at official gaming houses. An estimated 40 percent of the visitors were unable to travel to an official casino in another town, for instance because they did not possess a car or because in their view the trip took too much time. Another group of customers, which was also estimated at 40 percent, consisted of gambling addicts, who were no longer welcome in official casinos. The last 20 percent of the players were criminals who avoided the official casinos, because of the fact that customers had to register and also because suspicious transactions, involving a certain amount of cash money, were reported to the Ministry of Justice.25 Thirdly, because of the government decision to freeze the gambling market in the mid-nineties, Holland casino was unable to expand its offers. For instance, a plan to open a range of small casinos offering a reduced number of games could not be realised.26 These small casinos might of course have attracted the customer group consisting of people who were unable to travel to a larger official casino further away. Turning back to the theoretical model with regard to substitution between the legal and illegal parts of the gambling market, the following conclusions can be drawn. Firstly, the opening of official casinos indeed reduced the number of illegal gaming houses. However, to keep substitution going, the government had to allow further expansion of legal gaming. After it became clear that the number of gambling addicts was rising, this policy was changed. The only option left to reduce the illegal market further was to step up repressive action. The government clearly expressed this intention in the policy notes ‘Kansspelen

25 Based on reported transactions government bodies, for instance the Tax Office, might inquire where the money had come from, especially if the person in question had little or no official earnings or was living on welfare. 26 Tweede Kamer, Vergaderjaar 1988–1989, 21277, no. 2. 105

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Figure 2 Illegal casinos

Legal casinos

‘New’ customers Substitution

Members of criminal groups Gambling addicts

Little or no substitution

Former customers of illegal casinos

Local players

herijkt’ and ‘Nieuwe ronden, nieuwe kansen.’ With regard to illegal casinos, this goal was achieved by operation Joker. This leaves us with the question where the customers of the illegal casinos have gone since these gaming houses were closed. Regrettably, this has never been researched, so we have to make do with a number of educated guesses. To begin with, local players, often elderly people, might have turned to gambling arcades which offer gaming by means of EGMs. These arcades can be found in many towns, and they generally attract a local public. In recent years, operators have also upgraded the arcades which now resemble official casinos. Apart from slot machines, operators of gambling arcades were also allowed to offer electronic games that can be played by several people simultaneously, for example electronic roulette. Last but not least, marketing was also explicitly aimed at elderly players, who were invited to visit the arcade during the daytime. For criminals, gambling is an important activity. On the one hand high-stakes gambling is a useful tool for showing-off. On the other hand, gambling is one of the social activities which enable criminals to keep in contact, and to exchange information about potential illegal activities. Thus, after the illegal casinos had disappeared, members of the criminal network may have turned to closed circuits of illegal gambling, usually in the backrooms of pubs of dubious reputation. They also may have started to play at casinos abroad. Apart from that, some notorious criminals regularly visit official gaming houses. 106



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To conclude with, a recent study showed that gambling addicts usually play more than one game. Therefore, when the illegal casinos were closed, they may have started to play other games more often. It is also possible that gambling addicts have turned to remote gambling on the internet, or to casinos abroad. Finally, they might have started to play poker in illegal tournaments.

7. Concluding Remarks In the judgement in the Placanica case,27 the European Court of Justice made two remarks that are of importance in the light of the findings that I have described earlier. Firstly, the judges stated that ‘It is possible that a policy of controlled expansion in the betting and gaming sector may be entirely consistent with the objective of drawing players away from clandestine betting and gaming – and, as such, activities which are prohibited – to activities which are authorised and regulated.’ Secondly, the judgement stated that ‘… in order to achieve that objective, authorised operators must represent a reliable, but at the same time attractive, alternative to a prohibited activity. This may as such necessitate the offer of an extensive range of games, advertising on a certain scale and the use of new distribution techniques.’ From the case of the illegal casinos in the Netherlands, we can draw the conclusion that the extent to which the players can be convinced to stop playing illegal games of chance by expanding the legal gambling market, depends on the characteristics of the persons that are playing illegal games of chance. If all games of chance are prohibited by law, creating a legal alternative will probably draw a substantial number of players away from illegal gambling. However, if legal gambling is already possible, the situation is more complex. Specific circumstances then determine if the effect of a further expansion of the legal gambling market is positive, in terms of extra reduction of the illegal gambling market, or negative, in terms of a substantial rise of the number of gambling addicts. In other words, there are two sides to the coin as far as the regulation of gambling markets is concerned. Therefore, governments should not try to counter illegal gambling solely by regulation, but always combine this policy with effective repression of the illegal market.

27 Case C-338/04, C-359/04 and C-360/04 Criminal proceedings against Massimiliano Placanica, Christian Palazzese and Angelo Sorricchio [2007] ECR I-01891. 107

Gambling and Addiction Problems in the Netherlands Dick de Bruin

1. Introduction We have long known that gambling can be addictive. Some people seem to be incapable of controlling their gaming behaviour and devote more time and money to gambling than they actually can afford. Gambling addicts are constantly occupied with gambling, not only with the actual playing but also with thinking about it and devising methods to acquire the money needed. As a result of gambling addiction, not only do financial difficulties arise but also problems with the partner or with parents. Gambling addicts are often masters in concealing their problem from those around them. In the Netherlands, the supply of gambling is regulated. In principle, gambling cannot be offered unless the government has granted a license to do so. Thus, the suppliers of gambling are also restricted. As regards casinos, only one license holder is permitted: Holland Casino. The same applies for the State Lottery and the Lotto and Toto games. With respect to other lotteries for good causes, there are now three operators, and no new licenses are being issued. On the number of companies that operate EGMs in the Netherlands, however, there are no restrictions.1 Of course, they have to have a license and for this must meet the imposed conditions. By means of controlling the legal supply of gambling, the government is trying to ‘canalise’ the passion for gambling of the citizens. On the one hand, this policy serves to take the wind out of the sails of the illegal suppliers. On the other hand, by means of controlling the supply of legal gambling, the honest functioning of the games can be better assured and the weaker in society can be better protected.

1 In addition, all kinds of other forms of smaller, local gambling are regulated, such as bingo or prize contests. Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 109–126 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

In the conduct of a gambling policy, there is always a moral dilemma. While the authorities want to leave the citizens as much space for freedom as possible, they are still concerned that they can get into trouble. In the Netherlands, in the past few decades, therefore, policy measures have been taken both to increase the freedom of choice of the citizens by expanding the supply of gambling and to protect the citizen by means of restricting the freedom of movement of the suppliers of gambling and measures to prevent gambling addiction. This chapter focuses on gambling addiction and the measures the Dutch authorities have taken to rein it. First, the scientific understanding of gambling addiction is dealt with in Section 2. Then, in Section 3, the results of a recent study on the scope and nature of gambling addiction in the Netherlands are sketched. In Section 4, the various gambling-addiction prevention measures that have been taken since the middle of the 1990s in the Netherlands are discussed. Section 5 concludes with a number of general conclusions.

2. Gambling Addiction: Diagnosis, Taxonomy, and Risk Factors Addiction is described in the diagnostic manuals in terms of physical and psychological dependence. To begin with, physical dependence implies that the body has become accustomed to the substance and has adapted itself to it. Tolerance is also characteristic: to obtain the same high, ever greater amounts of the substance are needed. Psychological dependence means that one thinks that a particular substance is needed or so enjoys its use that he or she can no longer get along without it. In contrast to physical addiction, psychological dependence is individual, as people prefer different things. This is, first and foremost, applicable to addiction to substances, such as drugs, medicines, or alcohol. Still, the points of agreement with gambling addiction are very obvious: pathological gamblers may also experience physical withdrawal phenomena when they stop playing. Tolerance is also observable in the sense that gambling addicts often play at ever higher stakes in order to continue to be able to achieve the level of tension desired. Gambling addicts are also psychologically dependant on the game. They are not able to leave gambling alone and are constantly occupied with it both actually and in their thoughts. Pathological gambling was included for the first time in the Diagnostic and Statistical Manual (DSM-III), the psychiatric classification system of the American Psychiatric Association (APA), in 1980 in the third edition. 2 Gambling

2 The DSM and the International Classification of Diseases (ICD) of the World Health Organisation (WHO) are the two dominant psychiatric classification systems. In the ICD, pathological gambling was included already in 1977 and placed under ‘habit and impulse disorders’. 110



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addiction was classified in the DSM-III under impulse-control disorders and thus not conceived as a dependence disorder. In 1987, the DSM-III-R(evised) was published in which the criteria were modified more in the latter sense. The DSM-IV appeared in 1994, and the criteria for gambling addiction were again modified. In the DSM-IV, an attempt is made to find a better balance between the criteria applied in the previous editions. The central characteristics of pathological gambling were now described as a constant or ever recurring loss of control over gambling, an increase in the frequency with which one gambles and/or the amount of money with which one plays, preoccupation with gambling and the obtaining of money to be able to gamble, and continuing to gamble in spite of negative consequences. Moreover, escapism, conceived as gambling in order to forget problems, was added. In addiction research, it is customary to classify substances taxonomically. Narcotics, for example, can be distinguished in function of the effect on the user.3 Thus, there are drugs that stimulate, anesthetize, or alter consciousness. Finally, the harmfulness of a drug can be used as a criterion for classification. In a recent study of the United Kingdom’s Science and Technology Committee of the House of Commons, the risks associated with the use of tobacco and alcohol were deemed greater than the risks involved in using LSD and ecstasy.4 Gambling can also be divided into various kinds: lotteries, the Lotto, EGMs, card games like poker or blackjack, bets on sports, instant lotteries, and so on. Thus, it is a challenge to develop a taxonomy of the ‘effect’ of the various kinds of gambling. Gambling can, for example, be subdivided on the basis of the function that it can serve for the player and also on the basis of the addiction risk. The chance of winning can be considered a central characteristic of gambling. In addition, four other functions can be distinguished for the players: intellectual challenge, social contact, mood alteration, and the dream of a better life.5 These functions can differ per game of chance. Poker and blackjack, for example, offer the player primarily an intellectual challenge. In the betting on horses, roulette, or bingo, social contact occupies a more central place. With the playing of EGMs, the player can, primarily, alter his mood. The dream of ‘a better life’ is involved primarily with lotteries because of the amount of the main prize. The addiction potential of various kinds of drugs can differ, which also applies for the various kinds of gambling. To begin with, the risk seems to be associated with the length of time between the wager and the result of the game. Games

3 D.S. Inaba, Uppers, Downers, All Arounders – Physical and Mental Effects of Psychoactive Drugs (Ashland, Oregon, CNS Publications Inc., 2000). 4 Science and Technology Committee. House of Commons. Drug Classification: Making a Hash of It. Fifth Report of Session 2005–06 (London, The Stationery Office Limited, 2006). 5 P. Binde, ‘Gambling across cultures: Mapping worldwide occurrence and learning from ethnographic comparison’. International Gambling Studies, 5(1), 2005, pp. 1–27. 111

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in which this time period is short (short-odds games) have a higher addiction potential than do long-odds games. When a wager can be made again directly, one speaks of ‘continuous games’ for which the addiction risk is also higher. The most addictive, therefore, are continuous short-odds games. Examples of this are EGMs, casino games, and scratch cards. On the other end of the risk spectrum are the long-odds games, such as the lotteries with a monthly draw. In addition, other product characteristics can also contribute to the risk of gambling addiction. Indeed, increasing the opportunities of varying the wager can increase the addiction potential. The same applies when the player assumes that skill can increase his chances or when large prizes are involved.6 Whether an individual will actually become addicted to a narcotic or games of chance depends not only on the taxonomy but also on the characteristics of the user or player himself and environmental characteristics: the ‘drug, set and setting.’7 These factors together determine the addiction risk of a specific substance for the individual person. The characteristics of the user or player can be classified in behavioural characteristics, personal characteristics, and the genetic and biological constitution. Behavioural characteristic are, for example, isolation (the ever further withdrawal from normal life), agitation, and lack of confidence in personal relations.8 When the personal characteristics of pathological gamblers are considered, they often turn out to be middle-aged men with a lower socio-economic status. As regards the genetic and biological factors, there are an increasing number of indications that certain neuro-physiological processes are at the foundation of the origin and maintenance of a gambling addiction.9 In particular, a relationship with the neurotransmitter dopamine is assumed. Research indicates that dopamine agonists have the side-effect of impulse-control disorders. For

6 G. Meerkerk, H. van Oers, V. Hendriks and H. Garretsen, De Krasloterij geëvalueerd (Rotterdam, IVO, 1996). 7 N. Zinberg, Drug, Set, and Setting: The Basis for Controlled Intoxicant Use (New Haven, CT, Yale University Press, 1984). 8 T. de Vos (ed.), Gokverslaving. Hulpverlening en preventie (Lisse, Swets & Zeitlinger, 1995). 9 V. Voon, M. Potenza and T. Thomsen, ‘Medication-related Impulse Control and Repetitive Behaviors in Parkinson’s Disease’, Current Opinion in Neurology, Aug. 20(4), 2007, pp. 484–492; A. McKeon, K. Josephs, K. Klos, K. Hecksel, J. Bower, J. Bostwick and J. Ahlskog. ‘Unusual Compulsive Behaviors Primarily Related to Dopamine Agonist Therapy in Parkinson’s Disease and Multiple System Atrophy’, Parkinsonism & Related Disorders, Dec. 13(8), 2007, pp. 516–519. U. Gschwandtner, J. Aston, S. Renaud and P. Fuhr, ‘Pathologic Gambling in Patients with Parkinson’s Disease’, Clinical Neuropharmacology. May-Jun, 24(3), 2001, pp. 170–172. 112



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example, Parkinson patients who use this medication with some regularity report phenomena of addiction to gambling, shopping, or sex.10 Environmental characteristics play an important role in the origin and the maintenance of an addiction,11 and both the physical and the social environment are involved. In the physical environment, there is the ambiance in which the play occurs as well as the accessibility and availability of gambling. In the social environment, the role, for example, of parents, friends, the school, and work is important. Major events in someone’s life can also exercise an influence. Sociocultural factors are relevant to addiction, such as one’s personal norms and values with respect to gambling. Finally, the degree in which games of chance are accepted in the society also plays a role as well as the legal frameworks created by the authorities. In the Netherlands, the supply of gambling has gradually expanded since the 1960s.12 From the middle of the 1980s, ever more signals appeared that the number of pathological players was increasing. From 1986 on, the Consultation Offices for Alcohol and Drugs (CAD) have been provided resources to treat gambling addicts.13 In 1988, some 2,000 pathological players sought addiction assistance and in 1993, a good 6,000. Relatively often, they were boys and young men between 12 and 30 years of age, and EGMs turned out to constitute the greatest risk. In 1994, a peak was reached and then the number of registrations steadily declined. In 2003, there were fewer than 2,800 pathological gamblers registered with the agencies for addiction assistance.14 Good estimates of the total number of gambling addicts, which could prove this trend, however, are not available. The figures diverged over the years from 20,000 to 140,000 addicts.15 Gradually, however, there arose, at least in policymaking circles, a consensus around the number of 70,000 gambling addicts. On the basis of the assumed increase of the number of gambling addicts, the government opted for a considerably more restrictive gambling policy in 1995 and has continued it up to the present. In order to make the effects of the policy comprehensible, an urgent need was perceived a few years go for an up-to-date

10 H. Bogers and D. Wijdenes. ‘Gokken, seks en … de ziekte van Parkinson?’, Papaver, December 2006, pp. 5–6. 11 Zinberg (1984). 12 T. Spapens, ‘Regulating Illegal Gambling Markets: The Case of Illegal Casinos in the Netherlands’ (this volume). 13 This, moreover, was independent of money-paying gambling machines being permitted as of the same year. 14 LADIS Landelijk Alcohol en Drugs Informatiesysteem (1994–2003) (Houten, IVZ. 2005). 15 D. de Bruin, C. Meijerman, F. Leenders and R. Braam, Verslingerd aan meer dan een spel (The Hague, Boom Juridische Uitgevers, 2006), p. 29. 113

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understanding of the nature and scope of the addiction problem. The results of that study were published in 2006 and will be considered below.16

3. Caught Up in More than a Game 3.1. Methodology In the study entitled Verslingerd aan meer dan een spel [Caught up in more than a game], two research methods were applied to obtain an understanding of the scope and nature of gambling addiction. To begin with, a national survey was conducted in which a total of 5,575 people were interviewed. The respondents were contacted by telephone. If they wished, they could receive the questionnaire on paper or fill it in on the Internet. The respondents who could not be contacted by telephone were sent the questionnaire. This survey was intended primarily to provide the basis for an understanding of gambling addiction. In the second phase, 450 players were asked to be interviewed in person. The respondents were recruited, first of all, by asking those who had been identified in the survey as regular players if they would participate in a more in-depth interview. In addition, advertisements were placed in newspapers and on the Internet; contacts were made through social-assistance agencies; visitors to places where gambling was offered were approached; and flyers were distributed to scratch-card sales points and in bars and eating establishments. Finally, the researchers approached people in their own circles and through the networks of other contact persons and respondents. These conversations were intended in particular to provide a more complete understanding of the nature of gambling addiction. In order to determine whether gambling addiction was present, various measurement instruments have been developed. The most commonly used instrument is the South Oaks Gambling Screen (SOGS), which was developed in 1987 on the basis of the DSM III-R.17 This was also used in the present study. To validate the SOGS, the NODS (NORC DSM IV Screen) was also used in the in-depth interviews with regular players.18 The SOGS has the advantage of the

16 De Bruin et al. (2006). 17 H. Lesieur and S. Blume, ‘The South Oaks Gambling Screen (SOGS): A New Instrument for the Identification of Pathological Gamblers’, American Journal of Psychiatry 144, 1987, pp. 1184–1188 18 A comparison between the SOGS and the NODS shows that both screeners strongly correlate but that the use of the SOGS in relation to the NODS leads to an overestimation of the actual number of pathological gamblers. This occurs because the sensitivity of the 114



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necessary research having already been done as regards the reliability, validity, and accuracy of the classification system. Moreover, the SOGS had already been used in many other studies, so the results of this study could be compared with them.19 The SOGS consists of twenty questions that screen for gambling addiction. The respondents can answer these questions positively or negatively. One point is given for each positive answer. If a respondent scores five or more points, one can speak of a ‘probable pathological gambler’. With a score of 3 or 4, one can speak of a ‘possible pathological gambler’. These terms are translated in the study ‘Verslingerd aan meer dan een spel’ as ‘pathological player’ and ‘risk player’, respectively. With an SOGS score of 0, 1 or 2, one can speak of a ‘recreational player’. There were also respondents who did not gamble at all and so were classified as ‘non-players’. With the SOGS, estimates can be made of the number of gambling addicts. As is customary in prevalence studies, a distinction is made between last-year prevalence (LYP) and life-time prevalence (LTP). The respondents were asked whether the items were ever applicable to them or whether they were only applicable in the preceding year, the intention being to identify recent pathological players. Present estimates of the number of gambling addicts are, of course, also based on the LYP. To validate the results of the SOGS, another estimation technique was applied: the nominee technique.20 During the survey, the respondents were asked if they knew people in their households (nominees) who were gambling addicts and whether this addiction had given rise to social and/or financial problems. If this was the case, characteristics of the nominee were also recorded, such as their sex and age. On the basis of these data, an estimate was made of the number of gambling addicts in the Netherlands.

SOGS is high (there are few false negatives) and the specificity is relatively low (relatively many false positives). 19 M. Koeter and W. van den Brink, Een gokje wagen of gewaagd gokken II. Een onderzoek naar deelname aan kansspelen en gokverslaving in Amsterdam en de Provincie Noord-Holland (Amsterdam, AIAR, 1996). C. Jacques, R. Ladouceur, F. Ferland, ‘Impact of Availability in Gambling: A Longitudinal Study’, Canadian Journal of Psychiatry, 45, 2000, pp. 810–815; J. Welte, G. Barnes, W. Wieczorek, M. Tidwell and J. Parker, ‘Gambling Participation in the U.S. Results from a National Survey’, Journal of Gambling Studies, 18, 4, 2002, pp. 313–337; R. Volberg, M. Abbott, S. Ronnberg and I. Munck, ‘Prevalence and Risks of Pathological Gambling in Sweden’, Acta Psychiatrica Scandinavica 104, 4, 2001, pp. 250–256. 20 S. Kingma. Risico-analyse kansspelen. Onderzoek naar de aard en omvang van gokverslaving in Nederland (Tilburg, Katholieke Universiteit Brabant, Vakgroep Vrijetijdwetenschappen, 1993). 115

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3.2. Results of the Study The research showed that participation in games of chance is widespread in the Netherlands, the prevalence figures for which are given in the following table. Table 1. The Prevalence of Participation in Gambling (2005) Lifetime prevalence LTP

Last year prevalence LYP

Last month prevalence LMP

Lotteries

76.2

60.1

49.8

Electronic gambling machines

35.2

9.3

3.7

Instant Lottery

31.0

12.0

5.9

Casino games

23.7

4.4

1.0

Betting on horses

4.4

0.5

0.1

Gambling on the Internet

1.4

0.9

0.3

21

Of the population of 16 years old and older, 76% participated in a lottery at least once; 35% played once on an electronic gambling machine; 31% bought once a scratch card; and 24% went once to a casino. Not all of the forms of gambling offered in the Netherlands are equally popular. For instance, only 4% of the respondents had ever bet on horses, and only 1% had ever played on the Internet.21 Although comparison with research conducted in the past in the Netherlands is problematical because of the differences in methodologies and sampling frames, participation in casino games, in particular, seems to have increased.22 On the other hand, the number of players on EGMs has declined as well as the number of participants in scratch lotteries. Scratch lotteries were introduced in 1994 and were able to enjoy great popularity in the initial phase, but the enthusiasm of the public seems now to have diminished. The opening of new casinos also leads to a temporary increase in prevalence figures. Thus, the highest LYP figures were noted in the provinces of Utrecht and Overijssel, where new casinos have recently been opened.

21 This concerns exclusively participation in the typical casino table games like roulette and blackjack and not the playing of gambling machines that are set up in casinos. 22 P. Hermkens and K. Kok, ‘Kansspelen in Nederland: ontwikkelingen, deelname en risico-aspecten’, Tijdschrift voor Alcohol, Drugs en andere Psychotrope Stoffen, 14, 1988, pp. 62–172. Also See: M. Koeter et al. (1996); S. Kingma (1993). 116



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When various kinds of gambling are investigated further, the personal characteristics of the players turn out to differ, such as age, sex, marital status, education, everyday activities, and ethnic origin. Lotteries are mainly popular among older Dutch residents. Young people and non-Western immigrants, however, participate less often. Young people, primarily young men, play EGMs more than average. They are still in school and belong, if they work, to the lower income groups. Amongst casino players there are more men than women, but the differences here are less great than for EGMs. The average age, level of education, and the income of casino players are higher than among players of EGMs. The average casino player has a paid full-time job or is self-employed. Instant lotteries (scratch cards) attract a broad segment of the population. There are no differences in participation between men and women. However, older people play these lotteries less often and they are popular among members of ethnic minority groups who are not native to the Netherlands (who are called the ‘first generation’ immigrants). Betting on horses, finally, seems to be done primarily by people with a higher educational level and income. Table 2. The Prevalence of Gambling Addiction (2005) Percentage of the population

Number of people

SOGS5+ (LYP)

0.31% (±0.15%)

40,000

SOGS5+ (LTP)

1.02% (±0.27%)

133,000

SOGS 3–4 (LYP)

0.59% (±0.20%)

76,000

On the basis of the study, the percentage of the population with an SOGS score of 5 or more can be estimated at 0.31%.23 This corresponds to 40,000 people24 and concerns last-year prevalence, thus they are recent pathological gamblers. When the life-time prevalence is measured, it turned out that 1.02% of the respondents once had had to cope with gambling problems. Extrapolated to the Netherlands as a whole, this would represent 133,000 people. In view of the difference between the LYP and the LTP, a substantial portion of those who ever could be described as pathological gamblers were apparently able to overcome these difficulties and to succeed in getting their addiction or riskful 23 With a reliability interval of 95%. 24 Of course, the same reliability margins as for the cited percentages are applicable to these figures. 117

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playing behaviour under control, with or without help. The percentage of risk players – those with an SOGS score of 3 of 4 – was estimated at 0.59%. This corresponds to 76,000 people. The estimate that has been made on the basis of the nominee technique results in about 27,000. This is significantly less than the 40,000 pathological gamblers cited above, but the reliability margins of the estimates overlap. The nominee technique, as noted, inquires whether or not the respondents knew and/or supposed that someone in their family had problems with gambling. This assessment by family members is hampered because gambling addicts often hide their gambling very well from their families. The estimation on the basis of the nominee technique, for this reason, must always be considered a low estimate. In a previous study in 1996 in which the SOGS was also used, the number of gambling addicts in the Netherlands was estimated at 50,000 to 65,000.25 This study was the basis for the estimate of 70,000, which was long taken as plausible: the estimate was ‘rounded off up’. Whether there has been a decline in the number of gambling addicts with respect to this number, however, cannot be stated with certainty given the margins of reliability. Compared with figures that have been found in research in other countries, the estimate of the percentage of gambling addicts in the Netherlands is relatively low. In Norway in 2003, a prevalence figure was found of 0.6% of the population (LYP, SOGS5+).26 In Canada and the United States, figures were found in 2000 and 2002 of 0.5 to 1.8% and 1.7%, respectively.27 Only in Sweden was a lower result measured in 2001. There, 0.2% of the population had an SOGS score of 5 or more.28 The profile of the pathological gamblers deviates in a number of respects from that of the participants in gambling. A more than average percentage of unmarried men between the ages of 30 and 50 years are found to be pathological gamblers. Among those over 50 and in the age group between 16 and 30 years of age, gambling addiction occurs proportionately less. When we look at educational level and ethnic origin, the less educated and non-Western immigrants, in particular, are statistically overrepresented. Members of ethnic minority

25 M. Koeter, W. van den Brink and A. Niewijk, Een gokje wagen of gewaagd gokken. Een onderzoek naar deelname aan kansspelen en gokverslaving in Amsterdam en de provincie Noord-Holland (Amsterdam, AIAR, 1996). This was not a national survey but an extrapolation of a figure that was obtained in the Province of North Holland. 26 K. Götestam and A. Johansson, ‘Characteristics of gambling and problematic gambling in the Norwegian context: A DSM-IV based telephone interview study’, Addictive Behaviors, 28, 2003, pp. 189–197. 27 C. Jacques et al. (2000); J. Welte et al. (2002). 28 R. Volberg et al. (2001). 118



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groups do not gamble more often than others, but those who do gamble seem to run into trouble with it more often. Among the unemployed and job-seekers, we also encounter relatively many pathological gamblers. It also appears that respondents who are single or are divorced manifest pathological gambling behaviour more often than married people do. For this, it is stated that primarily short-odds games and then mostly continuous ones involve the greatest addiction risk. From the study, ‘Verslingerd aan meer dan een spel’ it emerges that the pathological players play mostly the EGMs in bars and eating establishments, as well as in entertainment centres. In addition, a larger than average percentage of gambling addicts play casino games. In the Netherland gambling addiction with regard to lotteries and betting on horses is much less frequent. Instant lotteries occupy a middle position. The most important conclusion, however, is that pathological players do not limit themselves to one kind of game but participate in several. Pool betting (at work, in bars), card games and dice appear to be popular among relatively many pathological players. Most of the pathological players are, as indicated by the title of the study, caught up by more than one form of gambling. The analyses also show that it is not so much the location or the kind of game of chance that are associated with gambling problems but rather the frequency with which one plays. Regular visitors of a casino have problems with gambling just as often as frequent players in a gambling arcade. Most of the frequent visitors, however, appear to be found in the latter places. Finally, it can be noted that gambling addicts were strongly statistically overrepresented in illegal gambling. Unfortunately, no distinction could be made as to the form of gambling pursued (black lotto or toto, illegal casino, etc.). Neither could it be ascertained what the respondents understood by illegal gambling. For instance, it may be assumed that many do not realize that gambling on the Internet is illegal in the Netherlands. Surveying the research findings leads to a number of conclusions. First, with the necessary reservations, the number of gambling addicts seems to have declined since the middle of the 1990s. This same picture emerges from the number of registrations with assistance agencies. Second, it is striking that the age of the gambling addicts has shifted. In the beginning of the 1990s, young men between 12 and 30 years of age were statistically overrepresented among the pathological players while this shifted by 2005 to the 30 to 50 year old age group. Therefore, it would be interesting to know what measures were taken by the Dutch authorities to prevent gambling addiction. This will be considered in the following section.

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4. Prevention of Gambling Addiction As noted above, the Dutch authorities received signals at the end of the 1980s that the number of gambling addicts was increasing to which the authorities reacted with a wide range of preventive measures. We will now turn to them. To begin, however, a few general comments regarding prevention are in order. Preventing gambling addiction is a complex matter, and concrete measures can take form in different ways. In the ideal case, prevention is focussed on the causes of addiction, and preventive measures can involve a specific phase in the addiction process. In the prevention policy, one can also distinguish between the various objectives and target groups. Prevention measures are commonly classified into primary, secondary, and tertiary measures. Under primary prevention come activities that prevent an addiction from occurring, so the target group consists of healthy people. Secondary prevention implies that the addiction problem is identified at an early stage so it can be treated before developing further. The target group then consists of people who are already addicted, run an increased risk of addiction, or have a particular genetic predisposition for addiction. Tertiary prevention implies that complications and disease aggravation are being prevented. Here, the objective is to make people in whom the disease is observed more self-sufficient. For example, tertiary prevention in the case of diabetes is focussed on the optimum treatment of the patient in order to prevent or delay complications.29 In mental health care, it is customary to classify preventive measures in function of the target group: we speak then of universal, selective, and indicative prevention. For universal prevention, the entire population is the target group. Selective prevention is aimed at higher-risk population groups. With indicative prevention, the target group consists of people with incipient complaints but for whom the condition has not yet been diagnosed.30 Preventive measures can also be classified in function of the objectives intended. For instance, measures can be taken to protect health, for example, by regulating the supply of gambling, to improve health by supplying health information, or to prevent the disease by screening. An integral approach which applies a mix of these methods is becoming ever more common. In the study ‘Verslingerd aan meer dan een spel’, the preventive measures that were taken in the Netherlands were divided into prevention with regard to the characteristics of the game, of the player, and of the player’s environment. It was accepted that these three factors, related to each other, are the primary

29 K. Witte, ‘Wat is preventie?’, in: Volksgezondheid Toekomst Verkenning, Nationaal Kompas Volksgezondheid (Bilthoven, RIVM, 2007). 30 K. Witte (2007). 120



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determinants for the development of gambling addiction and thus provide the best starting points for prevention measures and assistance. A further distinction is made between prevention measures that are initiated by national and local authorities, and those measures that are taken by the gambling industry itself, often in collaboration with the mental healthcare authorities. Questions as to the effectiveness of these measures have been submitted to experts working within the gambling industry, those caring for addicts and of the authorities responsible for taking preventive measures with regard to gambling addiction. 4.1. Measures Directed Towards the Game Prevention measures with regard to the game were first taken for EGMs. Operating gaming machines have been permitted in the Netherlands for operating both games of chance and games of skill since 1969, albeit under the condition that these machines could not pay out money but could only offer free games. However, in practice these machines were also played for money as the accumulated free games could be cashed. In 1986, the Dutch betting and gambling law was changed to permit and regulate EGMs with cash prizes. EGMs that paid out money directly were installed in the official casinos of Holland Casino and also in amusement centres and in bars and eating establishments. Holland Casino is the only company that is allowed to operate EGMs in casinos. As regards the EGMs in amusement centres and bars and eating establishments, the situation is different: here no limit was set on the number of licenses. Companies that offer EGMs must have a license from the Ministry of Justice. With respect to the installation of the EGMs, local authorities have to issue a license. The EGMs were set up in gambling arcades and also in establishments like community centres, sports canteens, snack bars, restaurants, bars and discotheques. In order to protect the consumers, restrictions were placed already in 1986 on the stake per game, the maximum prizes that could be won, and the pay-out ratio of the machines. An average amount was also established on what the player may lose per hour. However, this last restriction, in particular, left ample space for the operators of EGMs. The average loss was calculated over a reference period of 100 hours. Thus, machines came on the market that were so set that the player lost most of the time, while short peaks occurred in the pay-out pattern. These machines in particular promoted addiction because players were thereby driven to keep on going, particularly when they supposed that the machine was at the point of paying out. In 1995, this kind of gambling machine was prohibited. In 2000, further technical requirements were imposed on EGMs that were intended explicitly to counter gambling addiction. Thus, for example, points could no longer be saved up between games; measures were taken to prevent 121

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people from playing more than one machine at a time; and the time span between placing the stake and the outcome of the game was extended. However, experts are divided on whether these measures have contributed to easing the addiction problem.31 Some hold that obsessive playing of EGMs has decreased, but others are of the opinion that excessive players are not restricted very much by them. In 2000, the Gambling Act was amended as regards gambling arcades. They received more opportunities to differentiate their product offering, but the age limit for access to them was raised to 18 years old. In the amusement centres, for example, machines were installed on which several players could play simultaneously, such as electronic roulette and horse races. The combined jackpot of several EGMs could also be increased to a maximum of 2,500 euros. These new possibilities enabled the gambling arcade operators to enhance the attractiveness of their facilities. Previously the arcades had been frequented mostly by young men, and they hoped to be able to attract a more differentiated public. Although these measures implied an expansion of the offering, it was expected that they would also have a preventive effect. A varied client group would, for example, imply more social control. Because of these changes, the gambling arcades began to look more like the official casinos. The effects of these measures are being monitored in a five-year program.32 This shows that product differentiation leads somewhat to a more mixed public. The share of older people increased during the course of the study, for example, but the share of women in the amusement centres hardly changed. The introduction of product differentiation had no effect on the percentage of pathological players: this share neither increased nor decreased. The percentage of pathological players was influenced by the introduction of the Euro, which increased the amount of money spent on EGMs by 75%. The degree in which the amusement centres devoted attention to prevention also appeared to be closely related to the number of pathological players present. In official casinos, restrictive measures were taken regarding the number of different games that could be offered. This was maximized at twelve. However, Holland Casino could replace existing games by new ones. As regards other forms of gambling – lotteries, instant lotteries and betting on horse races – no specific measures were taken. 4.2. Measures Directed Towards the Players Various preventive measures were also taken with respect to the players. To begin with, the age limit for playing on EGMs in bars, eating establishments and 31 D. de Bruin et al. (2006), p. 148. 32 D. de Bruin, A. Benschop, R. Braam, and D. Korf, Meerspelers. Meerjarige monitor en follow-uponderzoek naar amusementscentra en bezoekers (Utrecht/Amsterdam, CVO/Bonger Instituut, 2006); D. de Bruin et al. (2006), p. 150. 122



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amusement arcades was increased from 16 to 18 years old. The assumption behind this was that the risk of pathological behaviour increases with an increase in the occasions to participate in gambling.33 About the effect of this measure, the experts do not agree. Some see a positive relationship with the lower number of young pathological players. Others argue that, since the introduction of EGMs in 1986, the players have become more accustomed to them and have become more aware of the risks. In addition, in their view the operators put very little effort into controlling of the age of the players. In second place, the Minister of Justice asked all holders of gambling licenses in 2004 to develop a joint advertising code. Holland Casino had already agreed upon a code in which, for example, it was stated that advertising for gambling had to be conscientious and conservative, and could not be aimed at minors or displayed in places frequented by many minors.34 The advertising code took effect on 15 February 2006. The preventative effects could not yet be established since this joint advertising code had not yet been prepared upon the completion of the study ‘Verslingerd aan meer dan een spel’. Anticipating the introduction of this code, moreover, the license holders had already been reducing their advertising since 2003. The third component of the prevention policy directed towards the player are agreements relating to both Holland Casino and amusement arcade operators to routinely approach visitors who gamble frequently or show signs of pathological behaviour and to refer them to assistance agencies. Staff have been given training in reporting and making referrals. Holland Casino works on the basis of a registration system: each customer who visits more often than eight times per month is invited for a conversation. The sector association of operators of EGMs, on its own initiative, has taken measures to report pathological players and, if appropriate, to refer them to assistance agencies or to agree on a temporary entrance prohibition. In the gambling arcades, deviant playing behaviour is reported by staff. In addition, in bars and eating establishments with EGMs, potential pathological players are to be approached, but whether that actually happens more than occasionally is unknown. In any event, the experts are positive about the approach of Holland Casino. Whether or not the policy also functions well in the electronic gambling-machine sector is less clear. Fourthly, preventive measures have been introduced by Holland Casino and the amusement centres: players can voluntarily apply for an entry prohibition or a restriction on the number of their visits over a specific period of time. The

33 D. de Bruin et al. (2006), p. 152; See also: M. Kallick, D. Suits, T. Dielman and J. Hybels, A Survey of American Gambling Attitudes and Behaviour (Ann Arbor, University of Michigan Press, 1979). 34 College van toezicht op de kansspelen. Jaarverslag 2003 (The Hague, 2004). 123

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idea behind this is that pathological players often cannot stop on their own but need external support. Protective measures can then provide such support because with them the behavioural pattern of the player is interrupted. Research shows that when a well-considered protective measure is taken and, perhaps, combined with a form of assistance or support, the chance of enduring success increases.35 4.3. Measures Directed Towards the Environment Finally, preventive measures with respect to gambling addiction were directed to the physical and social environment of the player. The first important measure was the barring of EGMs from snack bars, cafeterias, sports canteens, and community centres. Already in 1990, the authorities in the town of Wierden discovered that licenses for installing EGMs in these so-called low threshold establishments could be legally refused. These establishments were accessible to the very young, who then ran the risk of becoming pathological gamblers. Other towns adopted this policy too and, in 2000, it was declared to be the national principle. Experts consider that this measure in particular has made an important contribution to the prevention of gambling addiction. The number of young people seeking help has steadily declined since 1994. The number of EGMs also declined. It was estimated at being around 50,000 in 1988.36 In 1991, this figure had risen to about 75,000 (including the machines in amusement centres).37 In 2005, the number of machines had fallen to about 40,000 of which 16,000 were in amusement arcades and 24,000 in bars and eating establishments.38 Still criticism remains: the distinction between low threshold and high threshold facilities, such as bars, discotheques, and restaurants, where EGMs may be installed, is considered insufficiently clear. Furthermore although experts see a connection between this measure and the decline in the number of gambling addicts that report to assistance institutions, there has been no scientific research in which this relationship has been established. Second, the local authorities have also been able to regulate amusement arcades since 1986, when the operation of EGMs was included in the law. Since licensing is a municipal matter, limits can be set in local regulations on the 35 D. de Bruin, F. Leenders, M. Fris, H. Verbraeck, R. Braam and G. van de Wijngaart, Gasten van Holland Casino. Effectiviteit van het preventiebeleid kansspelverslaving (Utrecht, Centrum voor Verslavingsonderzoek, 2001). 36 P. Hermkens and K. Kok, ‘Kansspelen in Nederland: ontwikkelingen, deelname en risico aspecten’, TADP, 14, 1988, pp. 162–172. 37 NMI, Jaarverslag 1990 (Delft, Nederlands Meetinstituut, 1991). 38 Verispect, Toezicht op de Wet op de kansspelen. Openbaar jaarverslag 2005 (Delft, Verispect bv, 2006). 124



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number of gambling arcades. In addition, further requirements can be placed on the operators of gambling arcades in the licensing conditions. In 1988, for example, it turned out that these licenses could be withdrawn when the operators intervened insufficiently when considerable amounts were being gambled by often youthful players.39 The experts in the field consider these measures to be generally positive. The most important point of criticism concerns the great differences between towns with regard to license allocation and the conditions linked to it. In some towns, the age limit for the players was set at 21 years old, and the operators were refused permission to offer snacks or drinks, while elsewhere a limit of 18 years old was set and no further rules were placed on catering. Finally, combating the illegal circuit can also contribute significantly to the prevention of gambling addiction. In the first place, this is because illegal gambling suppliers are not bound to restrictions intended to reduce the risk of gambling addiction. Obviously, they do not see excessive playing to be a problem: they can allow higher stakes, reduce the time between betting and paying off, for example by making it possible to bet on sports at the last minute, and so on. Experts in the field thus consider illegal gambling to be an important addiction risk. As regards the illegal circuit, a distinction can be made between the illegal supply in the Netherlands itself and foreign operators who are legal in their own country but not entitled to offer gambling in the Netherlands. In the Netherlands, a large number of illegal casinos had long existed where roulette and card games like blackjack and poker were offered. These gaming houses were effectively removed in the past years, and the last was closed in 2005.40 Other important forms of illegal supply are black Lotto and Toto, as well as large scale bingo games.41 Hardly any enforcement action is taken against black Lotto and Toto, but large-scale commercial bingo does receive the necessary attention from the authorities. Further games on television requiring participation via premium rate telephone lines or SMS games are formally considered illegal. In 2007 action was taken against them by the authorities. As far as foreign operators who are illegally active in the Netherlands are concerned, one thinks first and foremost about gambling on the Internet. By the nature of the games offered, which generally have a short-odds character, anonymity and the lack of social control and because of the growing number

39 M. Fris, D. de Bruin, R. Braam and G. van de Wijngaart, Friet zonder fruit. Evaluatie beleid kansspelautomaten gemeente Utrecht, interviews met spelers, exploitanten en sleutelfiguren (Utrecht, Centrum voor Verslavingsonderzoek/University of Utrecht, 1994). 40 T. Spapens, Joker, de aanpak van illegale casino’s in Nederland (The Hague, Boom Juridische Uitgevers, 2008). 41 Regioplan, Verkeerd gokken, oriënterend onderzoek naar aard en omvang van illegale kansspelen in Nederland (The Hague/Amsterdam, 2001). 125

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of websites, Internet gambling is considered to carry a significant addiction risk. Experts in the field thus have recommended that a controlled supply of gambling be created in the Netherlands itself. The proposal for an experiment with it was, however, rejected in April 2008 by the First Chamber of Parliament. Previously, the Minister of Justice, following the American authorities, opted for a prohibition of payment traffic in relation to foreign gambling sites via Dutch banks and financial institutions.

5. General Conclusion Conclusions regarding the effectiveness of the Dutch gambling and addiction prevention policy in order to counter gambling addiction have to be accompanied by the necessary reservations. The results of an initial national study on gambling addiction were published only in 2006. The number of pathological players was estimated at about 40,000. Previously, a number of around 70,000 gambling addicts was considered plausible. A probable decrease was also reflected by the drop in the number of people who turned to institutions for addiction assistance. In comparison with other countries, the number of gambling addicts in the Netherlands may be considered low. The prevention policy concentrated particularly on casinos and the electronic gambling-machine sector. For want of scientifically supported research, however, it is unclear whether these measures have made a substantial contribution to the low percentage of gambling addicts. Experts in the field assume that primarily the barring of EGMs from the premises of bars and eating establishments, where juveniles also have access (snack bars, sports canteens) has had a positive effect. Another possible explanation for the assumed decline in the number of gambling addicts are the prevention measures taken by Holland Casino and operators of EGMs. For the future, developments outside of the Netherlands will influence the gambling problem. Particularly, the developments in the framework of the European Union will here be of great importance. A liberalisation of the supply of gambling throughout Europe would lead to foreign gambling operators having access to the Dutch market. What consequences this will have for the present Dutch prevention policy is uncertain. For example, could foreign operators, when they physically develop activities on Dutch territory, be forced to conform to the prevention policy in force? What will this mean for prevention measures that have been taken by the Dutch operators on their own initiative? Obviously, the possible ‘opening’ of the European gambling market should not occur without accompanying measures as regards the prevention of addiction.

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The Role of Crime and Addiction in the Gambling Policy of France François Trucy

1. Introduction In this paper three separate aspects of regulating gambling in France shall be considered.1 Firstly the current system for managing gambling in France will be described through a breakdown necessary to study the various components of the regulatory regime. Secondly, attention will then be paid to these various components, such as crimes and misdemeanours, while discussing the numerous conflicts, both major and minor in scale and nature, which have arisen for a number of years in France particularly since the sudden appearance of internet gambling sites. Indeed, the rapid spread of such sites led to my description of them as ‘a storm sweeping across games in Europe.’2 Thirdly and finally, the serious issue of gambling addiction, which is a growing problem in France, causing vast individual and social damage will be considered.

1 These aspects are dealt with in considerable depth in two reports completed on behalf of the French Senate. F. Trucy, Les jeux de hasard et d’argent en France, Rapport d’information no. 223 (2001–2002) du 13 février 2002, fait au nom de la commission des Finances, du contrôle budgétaire et des comptes économiques de la Nation; F. Trucy, L’évolution des jeux de hasard et d’argent: le modèle français à l’épreuve, Rapport d’information no. 58 (2006–2007) du 7 novembre 2006, fait au nom de la commission des Finances, du contrôle budgétaires et des comptes économiques de la Nation. 2 F. Trucy (2006), p. 15. Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 127–139 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

2. The Organisation and Regulation of Games in France by the State 2.1. The Traditional Approach of French Gambling Policy Ever since it has had a State worthy of the name, France has always regarded money-making games with much distrust.3 When there was a very close connection between lay and religious power, the very notion of ‘toil-free gain’ was considered utterly immoral. Following the division between Church and State, a lay moral system co-habited increasingly with religious morals before replacing them in terms of public life. Yet, the same reticence can be found in the authorities’ attitude whenever the issue of money-making games was broached. Ministers in charge of such issues were very loath to address them. Civil servants in ministries and in particular in the police were therefore stuck for most of the time in an attitude of extreme reserve and even a desire to repress games. The Ancien Régime was replaced by the Republic, followed by the Premier Empire, a brief Restoration of the monarchy and then by modern successive republics but throughout, the State’s attitude never changed in substance, irrespective of the political leanings of its governments. In fact, given the practical impossibility of prohibiting games and also of their financial advantages, the State pursued a very ad hoc gaming policy. Although it is possible to describe the current regulatory regime as a ponderous, pernickety and in part obsolete juggernaut, it is in many ways a relatively simple legal system based on very few statutes, which can be succinctly defined in the following manner: ‘In France all paying games are prohibited except specific exemptions issued by the State and by the State alone. Thus, all games invitations and practice apart from the said exemptions shall be deemed illegal and punishable.’ My work in this field as a senator is that of an ‘in-the-field’ parliamentarian who has a pragmatic concern which is solely rooted in how some vital elements have developed, along with their political, economic and social ramifications. Every nation and every society, irrespective of its political or social system, considers money-making games as activities different from others.

3 Use of the word ‘State’ refers only to the State in France, i.e. the French Republic. The expression ‘French State’ is avoided since it was a reprehensible form of government, the Vichy regime, which coincided with the Nazi occupation of France during the Second World War and the collaboration of some French nationals with the Nazi forces. Reference will also be made to ‘games’ and ‘gaming’ as opposed to ‘gambling’, since ‘games’ and ‘gaming’ are the accurate translation of the French term ‘jeux’. 128



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From this premise it is of vital importance that the State discharges all of its responsibilities regarding public policy. In France this has given rise to the State possessing very extensive policing resources to ensure compliance with its legislative and regulatory arsenal. Given the considerable potential for crime, and the extensive ‘resources’ which games and gaming offer for crime, such extensive policing is of the greatest necessity. In fulfilling this policing task, the relevant ministry may avail itself to the services of the police, the gendarmerie, the customs service, the competition service and the French anti-fraud squad, TRACFIN.4 Naturally, this is a difficult and dangerous task given that games can provide many opportunities for crime to flourish at the expense of society. Subsequently in this paper it will be considered whether the State has been effective, and has ultimately successfully discharged its responsibilities in this regard. It should be highlighted that the State closely monitors the direct and indirect resources it obtains from games – charity begins at home. 2.2. The Government’s Creation: Three Distinct Sectors Today three distinct sectors can be observed in France reflecting the State’s segmentation of the overall gaming market. Française des Jeux (hereinafter ‘FDJ’) has been awarded two distinct monopolies for lotteries,5 while the Pari Mutuel Urbain (hereinafter ‘PMU’) enjoys a similar position with respect to horseracing.6 Finally, casinos and ‘games circles/gaming circles’ (circles de jeux) form the third distinct sector and in contrast to the lotteries and horseracing sectors are not characterised by monopolisation.7 Instead, in place of monopoly restrictions there exists an excessively rigorous and closely monitored authorisation system in which authorisations can be revoked whenever deemed useful.

4 Traitement du renseignement et action contre les circuits financiers clandestins. 5 La loi du 21 mai 1836 prohibited all lotteries in France, however article 136 of la loi de finances du 31 mai 1933 derogated from this general prohibition and authorised the creation of a national lottery (la Loterie nationale). By way of décree no. 78–1067 du 9 novembre 1978, the Française des Jeux in its current form was created, however the name ‘Française des Jeux’ has only been in existence since 1990. 6 The legality of betting on horse races was codified by la loi du 2 juin 1891 with la loi du 16 avril 1930 providing for the possibility of creating undertakings for providing betting services. The PMU came into existence on 3 March 1931. 7 La Loi du 15 juin 1907 réglementant les jeux dans les casinos des stations balnéaires, thermales et climatiques authorised games circles and casinos in thermal resorts, bathing resorts and spa towns, excluding Paris. Arrête du 23 décembre 1959 defines casinos as locations where three events take place; shows, catering (restaurant) and gaming. The so-called ‘Chaban amendment’ (Loi no. 88–13 du 5 janvier 1988 d’amérlioration de la décentralisation) in allowed for authorisations to be provided for casinos in cities with a population of at least 500,000. Furthermore the Minister of the Interior, Charles Pasqua allowed casinos to install slot machines, See: l’arrêté du 26 août 1987. 129

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Traditionally the State has long retained direct control over lotteries positioning itself as the monopoly provider, and thus guaranteeing a major source of income. In 1989 the operation of to the lotteries was delegated to a public-private partnership, FDJ, in which the State holds 72% of the shares. Subsequently, the State extended the monopoly of the FDJ to an activity analogous to football pools, thus beyond the original remit regarding prize draws and scratch-card games. As will be seen later this particular exemption created a special situation and exposed the State to criticism from the European Commission. A second monopoly for the organisation of horse races was issued to the PMU, which arranges the races using two parent companies, France Galop for flat and jump races and Cheval Français for trotting. Horseracing constitutes a vast sector; in 2005 there were 255 race courses, 249 of which were in the provinces, with 247 racing companies spread across the country. In total 2005 saw 17,300 races held involving some 30,000 horses.8 It should be noted that a significant proportion of bets (7%) is used to support the horse-racing sector with activities ranging from breeding to racing and thus supporting some 61,000 jobs directly.9 Such financial support is vital for a highly vulnerable agricultural sector in particular given the major tax disparities in Europe. It is necessary to stress this point because while the European Commission is very demanding in terms of Member States’ compliance with the Treaties it does appear to be quite indifferent to the vast distortions of competition which still exist within some fields in our European Union. Another potential problem in the horseracing field is that the State has authorised to the PMU to use the Internet which significantly increases its activities and turnover. Finally there is the third sector, consisting of ‘bricks-and-mortar’ casinos (as opposed to ‘virtual’ casinos on the Internet) and games circles. 197 casinos are found in mainland France and the overseas territories, all being regulated by temporary games permits which are extremely specific and capped at five years, after which an application for renewal has to be submitted to the State, in this case the Commission Supérieure des Jeux [National Games Commission] within the Ministry of the Interior.10 In all cases, the formalities are very burdensome and this is more so than is the case for the two State backed monopolies.11

8 F. Trucy (2006), p. 19. 9 F. Trucy (2006), p. 36. 10 Ministère de l’Intérieur. 11 Indeed this was recently commented upon by one casino operator at a recent conference on the regulation of gaming in France; Colloque pour une adaptation du modèle français des jeux de hasard et d’argent, hosted by François Trucy, 17 October 2007, Paris, France. 130



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2.3. The National Games Commission The Commission Supérieure des Jeux is chaired by a State Councillor and consists of senior civil servants from various ministries and several elected representatives including one senator (yours truly) and a member of the National Assembly. The Commission appraises applications for casino authorisations, issues opinions to the Ministry which makes the decision on whether to grant such an authorisation, and may also sanction breaches on the basis of reports from the Renseignements Généraux and may even suspend or revoke games authorisations.12 French regulations concerning casinos are utterly draconian, with the ‘Racing and Games Police’ applying them consistently to the various aspects of daily casino management. While the countless details of the regulations are beyond the scope of this short paper, they are without doubt impressive and demand the almost continuous presence of a police officer in each casino premise. It is important that reference is made to this because it is painful to see the European Commission only highlighting aspects of French gaming policy which are open to criticism while ignoring attempts, contributions and achievements that have been made in the regulation of gaming.13 This is utterly unfair! An important distinction to make in the French regulation of gaming is the existence of gaming circles, which differ considerably from casinos. These circles are ‘associations’ as defined by the law of 190114 with members making financial contributions. There are fewer than 20 gaming circles, and the vast majority of them are all to be found in Paris where casinos are prohibited.15 Many of the circles were established during the First World War and primarily focus upon traditional table games and more recently upon poker, a game which is currently very much in vogue. In contrast to casinos slot machines are not to be found in gaming circles. 2.4. The Ministries Exercise Sole Jurisdiction Regrettably authority for the regulation of gambling has been dispersed between three major ministries, each of which being responsible for upholding French gaming regulations.

12 Renseignements Généraux, formally called the Direction Centrale des Renseignements Généraux (Central Diretion of General Intelligence) is the intelligence service of the French police under the authority of the Ministry of the Interior. 13 In particular it shall be seen that numerous precautions have been taken by the State to counter money laundering and criminal activity in casinos. 14 Loi du 1er juillet 1901 relative au contrat d’association. 15 La loi de finances du 31 juillet 1920 confirmed the exclusion of casinos from within 100km of Paris. 131

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Very briefly, the Ministry for the Economy, Finance and Employment is the supervisory authority for the FDJ and its associated lotteries,16 while the Ministry for Agriculture supervises the activities of the PMU,17 and the Ministry of the Interior manages the casinos, games circles as well as overseeing all game and horseracing related police operations. Furthermore, the directorate for Civil Liberties and Legal Affairs within the Ministry of the Interior is involved when amendments are made to gaming regulations and legislation. In common with what could be imagined in any country, supervision by the Ministry of Finance is obstinate, weighty and imperious. Annually the State draws very extensive direct resources from gaming. In 2005 the FDJ posted €8.13 billion in turnover, the PMU’s turnover amounted to €8.9 billion and the gross gaming turnover of the casinos, which constitutes the tax base for the casino industry, amounted to €2.7 billion. From a total industry turnover of €20 billion the State deducted €6 billion. Not only do the FDJ and PMU contribute resources directly to the State budget, there is of course another major financial stake held by the State; the PMU annually pays €600 million to the horseracing industry and in 2007 the FDJ will contribute €200 million to the National Fund for the Development of Sport.18 Such a dispersion of the State’s authority gives rise to concern, since the Finance Commission of the Senate believes that this does not ensure a genuinely coordinated gaming policy. This is especially important at a time when the government is implementing, and wishes to further promote, a responsible gaming policy. The decision to devise a national plan for responsible gaming was long awaited by the Senate and demands major investment from the operators within the French market, as well as offering a response to the criticism from the European Commission. However, undoubtedly more is still to be done. Indeed three other ministries should be involved with gaming policy in France. Firstly the Ministry of Health should be involved regarding addiction policies,19 while the Ministries of Justice20 and Tourism21 should play a role concerning casinos as part of measures concerning regional development and local economies.

16 Ministère de l’Économie, des Finances et de l’Emploi. 17 Ministère de l’Agriculture et de la Pêche. 18 Fonds national pour le développement du sport (FNDS). 19 Ministère de la Santé, de la Jeunesse et des Sports. 20 Ministère de la Justice. 21 Ministère du Tourisme. 132



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2.5. Towards a New Policy The success of the national gaming policy can be considered with respect to six different points; 1) the quality of the games on offer; 2) public policy; 3) player satisfaction; 4) economy and employment; 5) the State budget; and 6) addiction. 1. Quality of the games on offer – the State has cleaned up games relating to horseracing, as well as the casinos and gaming circles. Historically lotteries have never raised major problems. All games are now operated in a transparent and honest manner with reputable operators. The overall reputation of the industry can be considered as being satisfactory. 2. Public policy – the national public policy objectives are obtained at the cost of the praiseworthy, expensive and constant effort of all the parties involved. 3. Player satisfaction – generally speaking gamers are basically satisfied with the offerings of the State’s monopolies and the casinos, even if the redistribution rates applied by the FDJ and PMU are not the most generous in their respective fields compared to operators in other jurisdictions. While the French gamble on a large scale, and gamblers continue to increase their expenditure on gambling, they are not the world’s biggest gamblers and so much the better. 4. Economy and employment – the gaming sector accounts for 105,000 jobs and constitutes an extensive economic activity throughout France. 5. State budget – the budget of the State benefits greatly from the gaming sector, with a direct income of €6 billion in 2005. 6. Addiction – The first consequence of the national responsible gaming policy was the establishment by the Finance Minister of COJER.22 This body is responsible for monitoring and guiding the FDJ in the development of new games so as to avoid the introduction of ‘toxic’ games, such as ‘Rapido’, to the market. Increasingly in 2007 there were calls to extend COJER’s scope to cover the PMU, which could possibly herald the introduction of a single authority, something for which I have long called for.

22 Comité consultatif pour l’encadrement des jeux et de jeu responsable (Consultative Committee for the Responsable Games and Gaming Framework). 133

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3. Fraud, Misdemeanours and Other Misappropriations 3.1. In Relation to ‘Old’ Games In principle all games are prohibited, thus even the parish vicar, sports club or non-profit organisation wishing to hold a lottery or even a simple tombola to replenish their funds must obtain authorisation from the prefect of the department. Since charity and welfare is encouraged, such authorisations raise no problems. Nevertheless it may transpire to be the case that the police or the anti-fraud squad examine a particular request in greater detail if it is from an unknown party of if all of the necessary guarantees are not offered. However, it is not to say that there are no problems at all with such traditional games. Increasingly we see that ‘turnkey’ lotteries are proposed to vicars, with the aim of laundering money (not the vicar’s, needless to say!). Furthermore, we also witness lotteries offering cash prizes which are strictly prohibited, along with large-scale recurrent lotteries which are for all intents and purposes commercial operations and which fail to meet the target attitude. We have all witnessed the rise in television based games and commercial games. In my opinion these offer a fantastic avenue of opportunity for fraud in the future. Problems will soon be forthcoming. To date I have not encountered fraud in greyhound racing which operates on a small scale in France, and nor with regard to betting on pelota matches, which has recently been permitted. 3.1.1. In Relation to Horseracing Match fixing of horse races organised by the PMU has long been a thing of the past, although there remains the risk of money laundering in as far as some ‘money launderers’ buy back winning tickets at 120% or 150% of their value. Detecting such activities at race courses and betting points is one of the tasks of the Racing and Games Policy. All the parties involved at the PMU are required to comply with the prohibition on under-age gambling. Race organisers are very concerned about the risk of doping and take scrupulous measures to ensure that it does not take hold within the industry. To this end, tests are systematic; of 8,000 horses tested in 2005, there were only 30 positive results. The implementation of such anti-doping measures must remain extremely vigilant given the fact that new products and methods are constantly appearing. 3.1.2. In Relation to Lotteries The FDJ guarantees gamblers that they can bet with complete security. Games are transparent with extreme technical proficiency and security guaranteed.

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However, this does not stop some extremely rare and spectacular incidents happening. One player has taken the FDJ to court citing the randomness of the manufacturing of a particular scratch-card game. Although the player did not claim that there was a case of misappropriation, the argument was based on the possibility of a technical error. The investigation is currently in progress at the time of writing. Very recently, two customers at a café which retails FDJ products teamed up to swindle an over-confident winner. The winner’s foolishness, however, does not bring into question the worthiness of the operator. Nevertheless it is necessary to remind the FDJ of the need to be vigilant with regard to the (prohibited) sale of games to minors and that it may not install automatic sales machines out of the sight of individual retailers (for example, on the pavement outside of the retailer’s premises). There is also a risk of money laundering, with the same methods being used as with the PMU. 3.1.3. In Relation to Games Machines Recreational machines placed in bars, cafés and other establishments constitute another phenomenon. Such machines are not harmful per se – the industry takes umbrage at the State’s rejection of all of its proposals to manufacture and place new ‘recreational machines featuring small stakes and small gains’. The reason is that the State is concerned that these inoffensive machines may surreptitiously be changed into something quite different: illicit slot machines. Furthermore the State also has reservations because such abuses have already occurred in the past. 3.1.4. In Relation to Slot Machines ‘Genuine’ illegal slot machines are considered as a gateway to organised crime. Adapting legal gaming machines into illegal slot machines is extremely simple; an everyday gaming machine effectively becomes a slot machine by the use of a simple electronic card which will be operated either by an ‘informed’ punter who knows a particular manoeuvre or by activation from a place behind the bar, hidden from public view. Should the punter win, he or she is paid from behind the bar with winnings which are less than they would have been had the punter used a slot machine in a casino. How many such machines are there? Of course, no one really knows, 13,000, 30,000? Frequently mafia networks are the force behind the appearance of these machines in bars. Simultaneously, the very same networks are waging a deadly war to control this highly lucrative market, which is much easier to

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manage than prostitution.23 Nevertheless there have been 48 fatalities in the underworld of the south of France which can be attributed to the operation of illegal slot machines. Some may consider that this clears the ground of criminals and saves the taxpayer money. While this may be true, in terms of the rule of law it is nonetheless slightly disturbing. Police measures against these machines and the practices of criminal organisations encounter many difficulties. Considerable patience is required to put together a genuinely combined policy, gendarmerie and customs operations. Nonetheless, the record is acceptable: a thousand successful cases, three thousand machines confiscated, bars closed and millions of Euros in fines. Yet the potential profit for these criminal organisations is so vast that the underground has not given up, and all the money circulating in the underworld, laundered and unlaundered, is reinvested in even more, and different, criminal activities such as drugs and weapons trafficking, and even terrorism. Another novel approach entails criminal organisations trying to place a machine in a bar or café and offering the owner not only the machine but a very expensive, yet false, lease contract of €15,000 per month. This amount is provided up front by the criminal organisation in cash to the café owner, who then signs a cheque for €15,000, thus permitting the criminal to instantly launder €15,000. Consequently it is easy to imagine how difficult police operations are and to understand the State’s reticence about allowing an increase in the number of machines found outside of casinos. Furthermore, it is easy to imagine how much it costs to enable the surveillance measures needed for such police operations. 3.1.5. In Relation to Casinos All slot machines in casinos are inventoried, sealed and monitored on a daily basis. This eliminates the risk of fraud by operators, especially since the penalties they face are such to ensure that they fully appreciate the interest of virtue. Today this is an industry which has achieved a genuine state of maturity and professionalism making the era of mobsters truly a thing of the past. There is, however, a risk in casinos of people being allowed to launder money by gambling just enough, going to the cashier’s desk and leaving with a cheque. Even if this method concerns quite minor amounts, the risk nonetheless still exists. Consequently anyone winning more than €1,000 must provide proof of identity when collecting the winnings, of which a log is kept.

23 In my first report in 2002, I listed 48 underworld fatalities in the south of France in a few short years. F. Trucy (2002), p. 164. 136



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3.1.6. In Relation to Poker New problems arise from poker and the surrounding excitement. To date the State has taken measures against what was once considered as a ‘peripheral’ game and illicit games taking place in the back of cafés are just as prohibited as other forms of illegal gaming, exposing both the organisers and players to the full weight of the law. Currently strong pressure comes from a vast number of new players who rave about Texas Hold’em poker and who want to play in casinos, take part in huge tournaments which receive a lot of media coverage, as well as wanting to play at home with friends. The police have responded, impounding equipment used in forbidden tournaments while at the same time four casinos have offered poker on an experimental basis. Given the positive note upon which this experiment concluded all casinos will be able to make this practice widespread. 3.2. Anti-Money Laundering Measures Anti-money laundering measures are a major concern for the European Commission and Member States, although for the time being the EU is more fulsome in advice and instructions than in concrete actions. France, however, is acting: – By monitoring capital movements, particularly the origin of the capital, when there is an intention of acquiring casinos or even shares in particular establishments or casino operating groups.

– By investigating the structure of some pension funds which are not so well known in Europe in light of their investment attempts.



– By fighting against the purchase of winning PMU and FDJ tickets.



– By identifying people winning over €1,000 in casinos or from the FDJ.

TRACFIN is at the front line in the application of these measures and is assisted by banking institutions as well as the legal and stock market professions all of whom are required to declare any suspicious transactions. It should never be forgotten that laundering money obtained from drug trafficking, prostitution, extortion and organised crime necessarily has an impact upon gentler activities such as property investment, the hotel industry and even the bloody battle against terrorism. 3.3. Internet – New Games – Many Conflicts and the ‘Psychodrama’ between France and the European Commission The Internet has been called a ‘wonderful trouble-maker’, but why? Legal and economic systems implemented by nations are being radically overturned by the Internet, which also offers sports betting opportunities and casino games. 137

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Leaving aside the 2,000 or so ‘exotic’ sites which offer no serious guarantee of transparency or security, there are at least another dozen major sites which are solidly established, listed on stock markets and are in possession of genuine permits issued by some EU Member States, and some of these sites are members of the European Gambling and Betting Association (EGBA). Operators of such sites are trying to penetrate closed markets such as that of France. Although reference was made to the ‘storm sweeping across European gaming’,24 it is in France that conflict is brewing between French casino operators, Internet-based operators, the State, its monopolies and, ultimately, the European Commission. However note should be taken of the recent and spectacular hardening of French laws against gaming offers on the Internet which are deemed illegal by the French legal system; penalties for advertising these games are greater; prohibitions on sponsoring contracts with football clubs now exist; legal provisions prohibiting banks from carrying out instructions concerning Internet-based games have been introduced … and many others. There have also been sudden demonstrations such as the arrest and refusal to release on bail two Austrian directors from Bwin.25 This act of ‘sabre-rattling’ has exasperated the European Commission which is already in conflict with the French government and is trying to compel it to reform its gaming statutes using free movement principles to secure an opening up of the French sports betting market. Yet this is being done without consideration for the fact that ministers and the European Parliament have decided to exclude gambling from the Services Directive!26 The seriousness of this conflict should not be underestimated; France’s response to the European Commission’s letter of formal notice was considered unsuitable and a reasoned opinion is the harbinger of threats to refer the matter to the European Court of Justice.27 Nonetheless a negotiated settlement still seemed possible as of the end of July 2007 given the change in the French government.

24 F. Trucy (2006), p. 173 25 See: Le Monde, ‘La France fait arrêter le patron de la société de paris en ligne Unibet’, 23 October 2007; BBC News, ‘Betting boss detained by police’, 23 October 2007; Le Monde, ‘Bruxelles conteste la légitimité de l’arrestation du patron d’Unibet’, 24 October 2007. 26 Directive 2006/123/EC on services in the internal market, [2006] OJ L376/36. 27 See: European Commission Rapid Press Release IP/07/909, Free movement of services: Commission acts to remove obstacles to the provision of sports betting services in France, Greece and Sweden, 27 June 2007. 138



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4. Gambling Addiction Gambling is an atypical activity; although it is part of society it can lead to a powerful addition which becomes a public health issue. Although this paper is not the place to enter into a lengthy discussion of gambling addiction per se it is necessary to bear in mind the gravity of its human and social consequences. Hopefully France will act quickly enough to avoid what has happened in those countries which have been ill-advised to allow gambling to expand out of all reasonable proportions so that the social cost of addiction has outstripped the resources the State obtains from such activities. The Finance Commission of the Senate has concurred with my reports and criticised the State for having failed to take this form of addiction into account, failing to commission vital studies and not sufficiently organising the requisite preventive and curative actions. Compared to the sizeable volume of studies conducted abroad, France has scarcely begun to launch high level work. Requirements of prevention, medical research and specialist consultation dictate a strong nation-wide health policy involving various authorities, operators as well as public and private health organisations. It is questionable as to how such a policy can succeed when so many important factors are lacking; there is no single game regulation authority, no games observatory to perform the task of a laboratory, no specialist studies and neither is there any financing for such actions which could make use of State and operator contributions.

5. Conclusion France with its sound laws and results in this field is facing completely new issues which its statutes and regulations were not designed for. The sudden advent of the Internet in gaming has caught the French system unawares. Yet, France must react quickly because vigorous pressure from the European Commission will only narrow the margin for manoeuvre.

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The German Market for Gambling and Betting Tilman Becker

1. Introduction The gambling market is an important and expanding market, particularly in the area of sports betting. Sales from the gambling and betting market in Germany, before the payout of winnings, are estimated by the author to be over €31 billion in the year 2005.1 The amount paid out to winners varies, depending on the type of gambling and the provider. Gambling revenues received by the state were roughly over €4 billion. This paper will clarify the difference between the legal and economic definitions of gambling. The different segments of the gambling market will be examined in detail and the various market offerings will be presented. The gaming turnover or total sales and the gross gambling revenue, the latter defined as revenue remaining after the deduction of winnings, will be calculated for each market segment. The payout ratio for the various types of games of chance will be examined. In the course of examining such data, it can be observed that the payout ratio for one type of game can vary greatly, and that the payout ratios are often not transparent to the consumer. Due to the current debate, the market sector of sports betting will be more thoroughly examined. Games of chance are an important source of revenue for the state. The sources of public revenue from betting are discussed in detail. This report will close with calculations that estimate the number of players and the money spent per player, for the various different types of gambling.

1 It is interesting to compare with the expenditures of public and private universities, that also are in the range of €31 billion, and thus are just as high (Forschung und Lehre, no. 9/2005, p. 458), or with the value of agricultural production which amounts to €39,9 billion. See: Bundesministerium für Ernährung, Landwirtschaft und Verbraucherschutz, Agrarpolitischer Bericht der Bundesregierung (2007). Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 141–164 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

In this contribution the focus is on three constituent elements of the gaming market: the industry or the production value net as the supply side, the consumers as the demand side and the state or government as the third element. Figure 1: The Market for Gambling 2 State

Supply

Demand

2. Problems with a Legally Oriented Segmentation of the Market The segments of the gambling market are not clearly defined. A legally oriented segmentation differs from the economic oriented segmentation of the market. In the economic definition of gambling, a participant pays a financial sum (a stake), and chance determines a win or loss. Here, contrary to the legal definition of gambling, the amount of the financial sum plays no role, nor does the degree of randomness. When spinning a roulette wheel, the results are clearly determined by randomness, and thus roulette is clearly a game of chance when played for financial stakes and may be regarded from economic and legal perspectives as gambling. It becomes more complicated if there is or seems to be some skill involved. An example of a game which is regarded as possibly the most skilful game is chess. But even for the case of chess, it depends on the perspective if this game is regarded as a game of skill or a game of chance. Zermelo illustrated that in a game with perfect information, such as chess, there is, in modern words, a Nash-equilibrium.3 There is either a strategy, a plan for sequences of moves to play contingent on the moves of the other player, where white always wins, a strategy where black always wins, or a strategy where a draw always occurs.

2 Source: author created graphic. 3 E. Zermelo, ‘Über eine Anwendung der Mengenlehre auf die Theorie des Schachspiels’, Proceedings Fifth International Congress of Mathematicians 2, 1913, pp. 501–505. 142



The German Market for Gambling and Betting

The strategy is extremely complex and we are not able to identify the precise strategy, although it theoretically exists, as chess is a game of perfect information solvable by backward induction. Therefore, when at the beginning of the game a financial wager is placed and the colour black or white is allotted, the game is in principle a game of chance, because with perfect information the result will be determined solely by the random decision on the colour for each player. This argument holds in principle for poker as well. If an expert player plays against a novice, the game might be regarded as game of skill. But if two expert players play against each other, it is a game of chance. Under German law the distinction between games of skill and games of chance is controversial. If in gaming with dominant elements of chance, an exchange of money is involved, it is regarded by law as gambling and may only be offered by the state. In Germany, poker is regarded as a game of chance, a form of gambling, and is forbidden outside of casinos if a monetary stake is involved. On the other hand, skat is a well established German card game which is played with monetary stakes since a long time, indeed skat has a cultural tradition. In this case, tournaments are regarded as games of skill, because, this is the argument, in the long run skill will dominate chance. The same legal distinction holds in Austria. Poker with money at stake is regarded as a game of chance, a form of gambling, and forbidden outside of casinos, but other card games with money at stake, like tarot or bridge, are regarded as games of skill. We will regard card games, if money is involved, as part of the segment of casino games, even if these games are played on the internet. The turnover for card games regarded by the law as games of skill is negligible. Card games also pose difficulties in legal categorisation, as the difference between gambling and social gaming is not always clear. In cases where significant financial sums are involved as a stake for a single round of play, it is clearly legally considered gambling. However, at what threshold level for a player’s stake, and at what winning level of these stakes by a successful player, does the definition of gambling start? When the participation fee is used only to cover the costs of the gaming event and does not exceed €15, and the winnings are not drawn from the participation fee, but instead is donated by sponsors, the current judgement is that this does not constitute gambling. Another somewhat artificial distinction from the economic perspective is made by law between betting and gambling. Betting is defined by law as the settlement of a controversy with money at stake, where the main motive is the dispute and the aim is to convince the opponent. The main motives defining gambling are regarded as amusement or the realisation of profits. While betting on horses is regarded by law as betting, betting on other sport events like football is regarded as gambling. Bookmakers may offer bets on horses, but only the state monopoly may offer bets on football and other sport events. We will regard horse betting together with other sports betting as one segment of the gambling market.

143

Crime, Addiction and the Regulation of Gambling

Furthermore the law differentiates between gaming machines with the possibility of winning money, which are defined by trading and gaming regulations, and on the other hand gambling machines, which are addressed by the state monopoly. Gaming machines, which offer a cash prise for winning and are located in amusement arcades or in restaurants and pubs have to be constructed in a way proven by the federal authority: Federal Physical-Technical Department (PhysikalischTechnischen Bundesanstalt), according to the regulation (Spielverordnung) of the year 2005. Gambling machines are only available in state owned or state licensed casinos. The amusement arcade slot machines and the casino slot machines are often visually identical from manufacture. They differ only in placement, such as in a casino or an amusement arcade, and in the regulation of the cash payout for winnings, such as the amount of the jackpot and the maximum amount of the stake. Slot machines in casinos fall under the jurisdiction and regulatory law of the federal state governments, slot machines in amusement arcades fall under the jurisdiction of the national government. The legal differentiation is made by allowance or prohibition of a jackpot and the maximum amount of money to wager in one game. Gaming machines played for money and offering the possibility to win money, as located in amusement arcades and restaurants, and gambling machines, as located in casinos are represented here together in the slot machine segment. Furthermore the law differentiates between sweepstakes and lotteries. While sweepstakes may be offered by any company, lotteries are part of the state gambling monopoly. From a legal view point, a sweepstake is a game where the stake involved covers only the cost of participation, such as postage or its equivalent. A stake must not necessarily consist of a non-negligible sum. The legal determination of the threshold value lies between €0.05 and €2.50, however even this threshold remains poorly defined, or even contradictory. Thus it remains legally unclear, for example, exactly when calls to a toll number cross the boundary levels and become a stake as opposed to merely covering the cost of participation. Particularly with the television sweepstakes, this differentiation is more than questionable. Repeatedly dialling the number to take part in the game quickly leads to a significant financial loss for the player much higher than the postage equivalent, when the fees are summed together. We will differentiate here between lotteries, which may only be offered by the state monopoly and sweepstakes, which are not regarded by law as gambling.

144



The German Market for Gambling and Betting

3. Sales Figures in the Various Segments of the Gambling Market As the legal classification of the individual market segments has not been realistically justified, the following view of the economic classifications of the individual market segments should be considered a base to start from. Albers categorized three segments: Lotteries, sports betting, and casino / slot machines.4 Here, traditional casino games and slot machines will be considered as two different segments. In addition, we will be including contests, which are ever growing in popularity, as games of chance, even though they do not fit into the narrow legal parameters laid out for games of chance. The market for games of chance is regarded here to consist of the following market segments: – Slot machines

– Lotteries



– Casino games like black jack, poker or baccarat and roulette



– Sports betting



– Contests and sweepstakes

Slot machines can be found in casinos, arcades, pubs, and bars. In arcades, pubs and bars, sales from slot machines in the year 2004 totalled €5.83 billion.5 The gross gaming revenue from slot machines in casinos that same year was €736 million.6 If a payout rate for these machines of 91% is assumed, the turnover from slot machines in casinos would be €8.18 billion. This results in sales, for all slot machines, of €14.00 billion. Included in the lottery category are the number lottery ‘6 out of 49’ and other lotteries offered by the federal states (Spiel 77, Super 6, Glücksspirale, lottery scratch tickets, Keno, Bingo, Plus 5, class lotteries, television lotteries). In the year 2004, these games have brought in total sales of €9.78 billion.7 The casino games category includes roulette and card games in casinos as well as from private internet gambling providers. The estimated total sales from these sources are in the range of €5.84 billion. Sales from casino games consist of the sales from casinos and that of private providers, with the following breakdown:

4 N. Albers, Ökonomie des Glücksspielmarktes in der Bundesrepublik Deutschland (Berlin, Duncker & Humblot, 1993). 5 G. Meyer, ‘Glücksspiel – Zahlen und Fakten’, in: Deutsche Hauptstelle für Suchfragen e.V. (ed.), Jahrbuch Sucht 2006 (Geesthacht, Neuland, 2006), pp. 114–128. 6 Ibidem. 7 Author calculation as per Meyer (2006). 145

Crime, Addiction and the Regulation of Gambling



– The gross gaming revenue (stakes minus winnings) from casinos in the year 2004 amounted to €220 million for roulette, black jack, and similar card games. Assuming a payout rate of 95%, this would amount to sales of €4.40 billion for casino games in casinos.



– Bwin states in its 2006 annual report that the gross gaming revenues for the casino sector are around €79 million. According to Bwin's annual report Europe accounted for 75% of the net gaming revenue (gross gaming revenue minus sales commission and bonuses granted to players).8 When it is calculated that 50% of this revenue comes from the German gaming market, the result is an estimated €29.6 million in gross gaming revenue. When a winnings payout rate of 95% is assumed, the turnover is €592 million.



– Bwin states in its 2006 annual report, that in the poker segment, gross gaming revenue (rake) from poker excluding the US business was €61 million.9 Assuming an average fee of €3 per hand, and an average stake of €50 per hand, and that the German market share represents 50% of the total European market, sales taken in by Bwin from the German market is an estimated €508 million.



– In addition, the sales from other private gambling providers were an estimated €300 million, with gross gaming revenue of €60 million.

The total sales for the online casino market add up to €1.4 billion. MECN reports a higher total, estimating sales of €2.1 billion for the online casino market.10 This number was based on an estimation of €190 million in gross gaming revenue. The estimated €1.83 billion sales from sports betting can be broken down into the following components: – Sales worth €342.3 million from ODDSET (2006).11

8 Bwin, Annual Report for 2006, p. 36, <www.bwin.ag/media/pdf/berichte/bwin_GB06_ en.pdf>. 9 Bwin (2006), p. 35. 10 Media & Entertainment Consulting Network (MECN), Der deutsche Wettmarkt im Umbruch (München, 2005). 11 Compare with the press release from the German Toto and Lotto Block (Deutschen Toto- und Lottoblock) from 5 January 2007 for the lottery year 2006, 114 Millionäre, Rekordjackpot und geringere Einsätze, <www.lotto.de /presse_detail_199.html>. In the year 2005 sales for ODDSET still amounted to €431.8 million. 146



The German Market for Gambling and Betting



– As per the 2006 annual report from Bwin,12 sports betting accounted for sales of €1.992 billion. Europe accounted for 75% of these sales, and 50% of European sales came from Germany, resulting in gaming sales worth €747 million from the German market. The sports betting gross gaming revenue was €175 million, of which, the estimated German gross gaming revenue was roughly €66 million.13



– The sales of other private providers is estimated to amount to €500 million.



– Pari-mutuel football betting (Toto) offered by the state and betting on horse racing brought in sales of €241 million (Meyer 2006).14

Here once again MECN reports slightly higher figures for sales from betting, in the range of €2.18 billion.15 MECN assumes a market share of 70% for private providers and 22% for ODDSET. The rest is composed of horse racing and Toto. Attributing a market share of 70% to private providers for the whole betting market sector appears to be a rather high estimate.16 The German Bookmaker Association (Deutscher Buchmacherverband) estimated that 1.575 billion Euro in sports betting were placed in betting shops in 2005, and that the sales for internet betting consisted of €1.360 billion. In addition the sales from horse race betting and ODDSET are to be added. The resulting total, as estimated by the German Booking Association, amounts to an estimated €3.65 billion in sales for the year of 2005.17 The sales figure from television sweepstakes lie roughly in the range of €150 million. Alone for the year 2008, Goldmedia estimates that roughly €782 million was spent on telephone calls to premium rate numbers.18 According to its own reporting, the ProSiebenSat.1 Media AG19 generated sales of €96 million from 12 Bwin (2006), p. 75. 13 Ibidem. 14 G. Meyer (2006). 15 MECN (2005), p. 4. 16 Markus Meyer, responsible for business in Germany for Betandwin, was interviewed by Die Welt on 8 November 2005, with the title: Der Sport-Wettumsatz wird um 30% zulegen, and estimated roughly €1.5 billion in sport betting sales for Germany in 2004. 17 Compare to the Deutscher Buchmacher Verband, Marktanteile in Deutschland 2005, <www.buchmacherverband.de>. 18 Goldmedia comes to this result in the study T-Commerce 2008 cited here through M. Hecker and M. Ruttig, ‘Versuchen Sie es noch einmal’, in: Gewerblicher Rechtsschutz und Urheberrecht, Vol. 5, 2005, pp. 393–398. 19 ProSiebenSat1 Media AG, Geschäftsbericht (2006), p. 113, <www.prosiebensat1.com/ imperia/md/content/investor_relations/2007/GB2007/Geschaeftsbericht_ohneBilder. pdf>. 147

Crime, Addiction and the Regulation of Gambling

45 31 18 6 0

Figure 2: Market Segments of Sales of the €31.6 Billion Gambling Market, in Percentages.20 Sport betting 6%

Contests 0%

Casino games 18% Slot machines 45%

Lotteries 31%

its Transaction TV segment, run on its separate Neun Live sender. In addition, the sales from other television contest providers are estimated to amount to €54 million. These figures agree with the estimates from MECN of €150 million. In addition to Neun Live, RTL Nachtquiz, Sat1 Quiznight, Kabel 1 and MTV Quiznacht offer contests.20 The graph (Figure 2) makes clear that slot machines, with 45% of the market share, and lotteries, with 31% of the market share, dominate the gambling market. Casino games are the next largest segment, representing 18% of the market. The market share represented by sport betting is 6%, and contests account for under 0.5% of the market. For the year 1988, Albers reported that slot machines accounted for 47.6% of the market, the lottery 34.3%, and casino games 15.7% of the market.21 Contests were not included in his report, and the market for sport betting was still limited to bets on horse racing, which accounted for 0.2% of the market. According to Albers (1993) since the middle of the 1970’s, after the slowing of the casino expansion in various German states, there has been no significant change in the market segment proportions. Even until today, there has been little to no change in these market segment proportions, with the exception

20 Source: author’s calculations. 21 N. Albers (1993). 148

The German Market for Gambling and Betting

32 58 4 4 2

Figure 3: Market Segments of the €8.4 Billion Gross Gaming Revenue for the Gambling Market, in Percentages.22 Casino games 4% Sport betting 4%

Contests 2% Slot machines 32%

Lotteries 58%

of the sport betting market share, which has increased at the expense of the other market segments. In addition, the total market for games of chance has greatly expanded. In the year 1988, total sales for the gambling market amounted to 28.7 billion DM or €14.4 billion, by the middle of this decade it had grown to over €31 billion, and has more than doubled in sales in the last 17 years. Another view arises when the payout for winnings are deducted from the sales. This net sum is also referred to as the gross gaming revenue. Here, the gross gaming revenue from the lottery market segment dominates, with €4.89 billion, where a payout ratio of 50% is assumed. Next in significance are the slot machines, with gross gaming revenue of €736 million in casinos, and €1.92 billion from EGMs, whereby for the latter a winnings payout of 66% is assumed. In addition to the gross gaming revenue from casinos, which total €220 million, the revenue from private providers is to be added. If it is estimated that the private providers will have gross gaming revenues similar to those of Bwin, the resulting sum for the the net market revenue is €340 million. Assuming a payout rate of 50% for sport betting through ODDSET results in a gross gaming revenue of €171 million. In addition, the gross gaming revenue for Bwin in Germany is estimated to be €66 million. In estimations of the gross gaming revenue from 22 Source: author’s calculations. 149

Crime, Addiction and the Regulation of Gambling

other private gaming providers and from horse racing, a payout rate of 90% is assumed. Thus it is estimated that these bring in a gross gaming revenue of around €311 million. In the case of contests, the gross gaming revenue is only marginally lower as the total sales. Neun Live reports that it pays roughly €1 million per month out in winnings. When a payout rate of 12% is assumed for all television contests, the gross gaming revenue is calculated to be €132 million. When comparing the turnover or sale with the gross revenue, casino games are clearly loosing economic significance. In contrast, lotteries are becoming even more dominant in regards to the share of the market. Slot machines are loosing some market significance. It becomes clear that sport betting has acquired at least an economic significance as measured with the gross gaming revenue, comparable to that of casino games. A review of the gross gaming revenue shows that television contests have also proven themselves to be an economically significant segment.

4. Payout Ratio Payout ratios determine the difference between sales, or turnover, and the gross gaming revenue. As a rule, exact figures are not available. The payout ratio represents the percentage of paid out winnings per stakes. Bornecke reports that slot machines in casinos have a payout rate of about 95%. As per the old gaming regulations (Spielverordnung) which were in effect until the end of 2005, EGMss in amusement arcades have a payout ratio of at least 60% of the stakes, and from this 60% the usual sales tax must be deducted.23 This would result in 51.7% of the stakes from the players being paid out again in winnings. As per the new gaming regulations para. 13, the stake can not exceed €0.20 for a minimum play time of 5 seconds. This results in a maximum stake of €144 an hour. The sum of losses (stakes minus winnings) may not exceed €88. When calculated, this results in a payout rate of at least 39%. In para. 12 it is stipulated that over the long term, the balance of money in the machine can not exceed the sum of €33 per hour. Assuming a maximum stake of €144 per hour, this would result in a payout rate of at least 77% over the long term. Dependant on the location of the gaming machine, whether it is in a pub, bar, casino, or gaming arcade, the payout rate may vary from 39% to 97%. Slot machines in bars and pubs are said to have the lowest payout rates and in casinos the highest. The payout rates for arcades are said to lie between the two.

23 J. Bornecke, ‘Glücks- und Gewinnspiele in Deutschland’, in: Taschenbuch der Unterhaltungsautomatenwirtschaft 2006/2007, 20th annual edn (Mainz, Edit Line Verlags- und Produktions GmbH, 2006), pp. 8–28. 150



The German Market for Gambling and Betting

With lotteries it can also be observed that there is great variance in the payout rates. In general, the ‘6 out of 49’ lottery has a payout rate of 50%.24 The payout rate of the two class lotteries as reported by Bornecke, is roughly 55% (NKL), or respectively 53% (SKL).25 The Stiftung Warentest came to similar findings, with 55.2% for SKL and 52.6% for NKL.26 Tolkemitt reports for the class lottery SKL a payout rate of 60%.27 In contrast, Albers reports a 50.7% (NKL) or respectively a 55.2% (SKL).28 The payout rates for Spiel 77 are around 42% and for Super 6, 45%.29 Similar results are reported by Stiftung Warentest, with 43.3% for Spiel 77 and 50% for Super 6.30 For television lotteries there are no current figures available. Albers assumes a payout rate of 25% (ARD) and 27% (ZDF).31 Stiftung Warentest reported a payout rate of 38.8% for the Glücksspirale, 29.2% for Der Große Preis and 31.52% for Die Goldene 1.32 As a rule, the payout rates for casino games are generally high. With roulette the payout rate is 97%. For blackjack, the payout rate is dependant on the game strategy played. If the card dealer’s strategy is copied, the payout rate is 94%. With poker, the payout rate is 100%, minus the event fee, which is kept by the organizer. On the average, this event fee is around 6%. Thus, the actual payout rate is around 94%. In sport betting, the payout rate varies with the provider. For a sure bet, by our own calculations for 2005/2006, the payout rate with a private provider was 90%. For the state provider ODDSET, the payout rate for a sure single bet was around 80%. As only the three combination bet is possible, in this case the resulting payout rate for ODDSET is 50%. The payout rate for horse betting was reported to be 72.5% by Albers, for trotting races 71%, and for horse races 75%.33

24 J. Bornecke (2006); N. Albers (1993); T. Tolkemitt, Die deutsche Glücksspielindustrie: eine wirtschaftswissenschaftliche Analyse mit rechtspolitischen Schlussfolgerungen (Frankfurt am Main, u.a. Lang, 2001). 25 Ibidem. 26 Stiftung Warentest (ed.), ‘Wo die Chance am größten ist’, in: Stiftung Warentest, 7/94, Berlin, 1994, pp. 70–75. 27 T. Tolkemitt (2001). 28 N. Albers (I993). 29 J. Bornecke (2006). 30 Stiftung Warentest (1994). 31 N. Albers (1993). 32 Stiftung Warentest (1994). 33 N. Albers (1993). 151

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As for television contests, Neun Live is calculated to have a payout rate of 12%, as sales were roughly €96 million, and the monthly payouts amounted to €1 million. Table 4: Payout Rates 34 Game

Payout Rate

Gaming machines

39–97%

Lottery

25–70%

Casino games

94–97%

Sport betting

50–90%

Contests (television)

10–12%

5. The Market for Sport Betting For the last few decades, the sport betting market has been characterized by being very dynamic. The classic Toto and horse race betting have a long tradition as a form of sports betting. These were offered in 1974 by the state lotteries to supplement the racing quintet. In 2000, ODDSET was established. In the beginning of the 1990’s, Albers came to the estimation that approximately 20% of the 60 to 70 million DM (€30 to €35 million) from Austrian sport betting providers originated from the betting sales of German consumers, even though bets could only be placed through the postal service.35 Today, Austrian betting providers, particularly Bwin, obtain sales of €750 million from German consumers, as has been mentioned previously. Toto, a pari-mutual soccer bet, sales amounted to €168 million in 1992, and has receded to €93 million in 2004.36 Rennquintett, a horse betting, sales in 1992 had dropped to 3 million (in 1974 it had brought in 30 million Euro), and it has since been discontinued.37 Sales for ODDSET, another soccer betting, in 2002 were still €541 million, by 2006 it had decreased to €342 million (see above).38 This decrease is due to the competition by private providers. As a whole, the market for soccer betting clearly has grown. Sales from betting

34 Source: author’s calculations. 35 N. Albers (1993), p. 201. 36 G. Meyer (2006). 37 Ibidem. 38 Ibidem. 152



The German Market for Gambling and Betting

on horse racing had shrunk from €227 million (445 million DM) in 1992, to €147 million in 2004.39 Significant changes in the market segment distribution can be observed in the sport betting market, indicating a great dynamic. This is recognized already by Albers who states already in the 1990’s that apparently there is demand, particularly for betting on individual football events, which is not met through the current offering in Germany of Toto.40 In addition to the state run ODDSET, there are four private providers with a so called DDR license, a licence from the former German Democratic Republic, as well as a number of active foreign companies. Betandwin, which as of 1 August 2006 has been renamed Bwin, is by a large margin the most significant private provider in the German market. In addition, the companies Sportwetten Gera, Interwetten and Digibet have also been granted a DDR license. Sportwetten Gera is incorporated, and is closely associated with NetX Betting Limited, which is headquartered in Malta. Interwetten is also organized as a corporation and operates under the name Interwetten Limited, headquartered in Malta. Digibet is headquartered in Gibraltar and operates under the name Digibet Limited. The ten most important sports betting providers, as rated by data obtainable through their internet websites, are: Sportingbet (Antigua and Barbuda), William Hill Online Sports Betting (Alderney), Expekt (Malta), Sportsbook.com (Costa Rica), Eurobet (Gibraltar), Pinnacle Sports (Dutch Antilles), Pari Match (Kalmykia41), Bet At Home (Malta), Bet365 (United Kingdom) and Unibet (Antigua and Barbuda).42 In the German market, the following international providers are of the highest significance, as they provide a website in the German language: Sportingbet (Antigua and Barbuda) which is also licensed for the United Kingdom), Bet365 (United Kingdom), Unibet (Malta, licensed for the United Kingdom), Interwetten (Malta), Expect (Malta), Mybet (Personal Exchange International Limited, Malta), Betfair (The Sporting Exchange Limited, United Kingdom), Betway (Carmen Media Group Limited, Gibraltar), Gamebookers (TransGlobal Media Limited, Gibraltar) and Paddypower (Irish stock company).43

39 Ibidem. 40 N. Albers (1993), p. 224. 41 Kalmykia is a Republic of the Russian Federation. 42 Compare to data on: <www.wettbasis.com/wettbuero.html>. 43 Ibidem. 153

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Figure 5: The Market for Football Betting 44

betandwin.com €1,992 billion in sales for sport betting €175 billion gross gaming revenue

B365.com UK

betfair.com UK

82.5 Mill.

Sportwetten-gera.de 7.7 Mill.

8.0 Mill.

Wetten.de Digibet (Berlin) Interwetten (Dresden)

ODDSET €342 mill. in sales

6. State Revenue and State Revenue Spending As the lottery was implemented in Germany, the issues concerning the fiscal aspect came into the foreground. The first number lottery in the German speaking region was introduced in 1735 by the Kurfürst [Elector] Karl Albrecht of Bavaria, with the intent of filling the coffers of the state.45 Since that time, gambling has been of significant importance for the state, due to the revenues associated with it. This is the basis for the differences in the state regulation of the various forms of gambling. In the area of casinos, for casino games and casino based slot machines, the casino tax applies. The casino tax is levied from a percentage of the gross gaming revenue. As gambling, with the exception of EGMs and contests, falls

44 Source: author. 45 U. Näther, Zur Geschichte des Glücksspiels, 2007, <www.uni-hohenheim.de/gluecksspiel/ forschung/u_naether.htm>. 154



The German Market for Gambling and Betting

under the jurisdiction of the individual states, each state has its own gaming laws and regulations, and thus determines the amount of taxation, and how such funds are used. The taxation rates vary from state to state. In Bremen, Hessen, Nordrhein-Westfalen and Schleswig Holstein, the 2004 tax rate was 80% of the gross gaming revenue, and in Hamburg it was 70%, plus an additional special tax of 20% of the gross gaming revenue. In other casino laws, the tax rate is graduated by the amount of the gross gaming revenue, and lies between 50% to 85%.46 In addition to the casino tax, most states levy additional taxes. These are intended to raise the tax burden of the gross gaming revenue once it surpasses a certain level, to at least an 80% taxation rate. Hamburg levies an additional tax, irrespective of the amount of the gross gaming revenue. Kreutz sees the motivating factor for this being that the states can use the revenue from the taxation of gambling to balance state finances, whereas other sources of revenue for the state cannot be used in such a manner.47 The casino tax (Spielbankabgabe) is in particular used for social and cultural programmes and purposes. In all states, the municipality in which the casino is located receives a share of the revenue from the casino tax, roughly 10% to 25%.48 Up until recently, casinos were free from value added taxation, as the casino tax is the payment of an accumulation of various forms of taxes.49 According to a decision by the European Court of Justice the value added taxation of sales from EGMs with winning possibilities is prohibited in cases where similar sales from casinos are non taxable by a value added tax.50 The ECJ recognized a violation against the principle of the neutrality of sales tax law. Effective as of 6 May 2006, the introduction of a sales tax for slot machines in casinos has gone into effect. Thus, as of 6 May 2006, the sales or value added tax applies to casinos as well. The taxation of horse race betting and lotteries is determined by the Race Betting and Lottery Law (Rennwett- und Lotteriegesetz). The race betting tax (Rennwettsteuer) applies to bets placed on public horse races. The race betting tax amounts to 16 2 ⁄ 3 % of the amount gambled. Up to 96% of the race betting

46 Compare in detail: D. Kreutz, Staatliche Kontrolle und Beteiligung am Glücksspiel (München, Martin Meidenbauer Verlag, 91, 2005); P. Bareis and H. Kahle, ‘Besteuerung von Glücksspielen’, in: T. Becker and C. Bauman (eds), Glückspiel im Umbruch (Frankfurt am Main, Peter Lang Verlag, 2007). 47 D. Kreutz (2005). 48 D. Kreutz (2005), p. 96. 49 P. Bareis and H. Kahle (2007), pp. 37–60. 50 C-38/93, H.J. Glawe Spiel- und Unterhaltungsgeräte Aufstellungsgesellschaft mbH & Co. KG v. Finanzamt Hamburg-Barmbek-Uhlenhorst, ECR [1994] I-1679. 155

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tax flows back to the horse racing association, and is primarily spent on horse breeding efforts.51 The lottery tax comprises 16 2 ⁄ 3 % of the sale price and the full amount flows back into the local state budget. Lotteries and ODDSET betting are subject to the lottery tax.52 In addition, the lottery companies pay a concession fee to offer the lottery, or the profits are paid to the local state. The concession fee applies to companies that have been incorporated, that conduct business at their own expense. However, almost all lottery corporations are operated by the state, which send the profits directly to the federal state. Regulations regarding the allocation of funds vary from state to state. Profits and other taxes collected from the lottery company are usually partly earmarked funds, to be spent on social, cultural and sport programmes, and organisations. Non earmarked incoming tax revenues for the year 2003 provided an estimated €2 billion for state budgets.53 State run sport betting, namely ODDSET, is subject to the lottery tax. This does not apply to sport betting that is offered by foreign companies, as they are not subject to the Race Betting and Lottery Tax Law (Rennwett- und Lotteriesteuergesetz). Revenue obtained by the federal states from the casino tax, the race betting and lottery tax, as well as the tax on profits amounted to €4.597 billion for 2001.54 In 2005 that amount had shrunk to €4.430 billion.55 Stakes going into EGMs are subject to sales tax. These machines, which are operated in arcades, pubs and bars, brought in an estimated €5.8 billion in 2004).56 With a sales tax of 16%, the resulting incoming tax revenue for the state amounted to €928 million. In addition, EGMs are subject to an entertainment tax. This tax is a local tax and the revenue obtained from it is used for the local community. Commonly, the individual communities follow one of three tax models.57 As a rule, a tax is charged per gambling machine. This tax can vary widely from location to location, often dependant on machine placement, such whether placed in a pub, bar or arcade. Often the tax charged per EGM in an arcade is double to three times that which is charged for machines that are

51 P. Bareis and H. Kahle (2007). 52 Ibidem. 53 D. Kreutz (2005), p. 130. 54 G. Meyer (2006). 55 Institut der deutschen Wirtschaft Köln, ‘Gnadenfrist für Zocker Staat’, in: Wirtschaft und Unterricht (Sonderbeilage IWD), 4 May 2006, no. 8, (Köln, Deutscher Instituts-Verlag GmbH, 2006), p. 18. 56 G. Meyer (2006). 57 J. Trümper and C. Heimann, Angebotsstruktur der Spielhallen und Unterhaltungsautomaten mit Geldgewinnmöglichkeit in der Bundesrepublik Deutschland (Unna, 2006). The authors provide an overview of all communities in Germany with a population of more than 10,000 inhabitants. 156



The German Market for Gambling and Betting

Figure 6: Federal State Revenue from Gambling, 2005 58 1000

917

900 800 698

700

632

600 476

500 400

333 313

300

218

200

191 177

151 59

Saarland MecklenburgVorpommern Thüringen

53

51

38

Bremen

69

Sachsen-Anhalt

Sachsen

Schleswig-Holstein

Hamburg

Berlin

Rheinland-Pfalz

Hessen

Niedersachsen

Baden-Württemburg

Bayern

Nordrhein-Westfalen

0

83

Brandenburg

100

placed in restaurants. The average tax charged in an arcade generally averages €200 per machine, per month. A second model for taxation is a tax on a percentage of the amount in the till. This percentage amount generally averages 10%, where as a rule, there is a single tax rate in effect for arcades and restaurants.58 The third tax model is taxing the stakes, in other words, the sales. Here, the tax rates as a rule are in the range of 5% to 10%, whereby some restaurants pay only half the tax rate of an arcade. There are municipalities that levy no entertainment tax, and others that apply more than one tax model at the same time. After the estimations of Trümper and Heimann (2006), the studied communities had incoming revenue of €177 million from the entertainment tax in the year 2006. As they only studied communities with populations of more than 10,000, the total entertainment tax revenue lies roughly at €200 million. In addition, the installers of EGMs pay the normal business taxes.

58 Ibidem. 157

Crime, Addiction and the Regulation of Gambling

7. The Number of and Spending of Players for the Various Game of Chance Formats There are various different information sources available for data on the number of players for the different games of chance.Commissioned through the Bermer Institute for Drug Research (Bremer Instituts für Drogenforschung), and sponsored by the Association of Lottery Providers (Verband der Lottovermittler), the Opinion Research Institute TNS Infratest, Social Research Co. (Meinungsforschungsinstitut TNS Infratest Sozialforschung GmbH) conducted a survey, from the 17 November to 5 December 2005, of over 800 people living in Germany as to their gambling behaviour.59 The survey was conducted half by telephone, and half through an online survey. The results are considered to be representative of the population between the ages of 18 to 65. Approximately 40% of the survey participants had participated in a game of chance in the last 12 months. The majority of players had participated in several game types during this time frame. Number lottery was the most commonly played (33%), followed by scratch cards (12%), Glücksspirale (6%), class lotteries (5%), sports betting (4%), slot machines (3%), and casino games (3%). In a survey conducted by TNS Emnid, of 1300 people over the age of 14, 43% have played the number lottery in the last 12 months.60 Figure 7: Participation in Games of Chance, as per TNS Infratest 61 Casino games

3

Slot machines

3

Sport betting

4

Class lottery

5

Glücksspirale

6

Scratch cards

12

Lotto ‘6 / 49’

33.3 0

5

10

15

20

25

30

35 / %

59 H. Stöver, Glücksspiele in Deutschland – Eine repräsentative Untersuchung zur Teilhabe und Problemlage des Spielens um Geld, 2006, <www.gluecksspielsucht.de/materialien/ untersuchungen_glinde_BISDRO. pdf>. 60 Compare to: Lebensmittelzeitung, Kunden lockt das Glück, 25 November 2006, p. 45. 61 Source: H. Stöver (2006). 158



The German Market for Gambling and Betting

Figure 8: Participation in Games of Chance 62 Casino games Poker Black jack Card games Slot machines Betting Lotteries 0

10

20

30

At least once a month

40

50

60

70 / %

Less than once a month

Goldmedia contracted by PAF (Ålands Penningautomatförening) reported slightly different figures.63 This survey did not ask respondents if the response was yes, what game of chance they had participated in during the last 12 months. Rather, it asked if a specific form of game of chance had been played at least one time a month, less than once a month, or had not been played at all. An online panel of the institute, with 3000 participants, was surveyed. Also in this case, the on-line panel is considered to be representative of the general population. The survey was conducted in August and September of 2005. 60% of all questioned had played the lottery, where it was reported that 33.6% of those questioned had played the lottery at least once a month, and 17.9 % had played less than one time a month. Only 38.5% of those questioned had not played the lottery at all. Of those questioned, 9.2% reported participating in betting at least once a month, and 13.8% reported participating less than once a month. The usage of slot machines at least once a month was reported by 3.8% of those questioned, and 14.6% reported playing less than once a month. Participation in card games at least once a month was reported by 6.7% of those questioned, and 13.2% reported less than once a month. If a differentiation between blackjack and poker was made, the results showed that 2.5% (3.9%) of those questioned played at least once a month, and 7.1% (7.0%) played blackjack (poker) less than once a month. Casino game participation of at least 62 Source: Goldmedia. 63 Goldmedia (2006): Nutzungssituation bei Glücksspielen in Deutschland. Studie der Goldmedia im Auftrag von PAF. 159

Crime, Addiction and the Regulation of Gambling

once a month was reported by 3.3% of those questioned, and 14.4% reported playing less than once a month. The results of the two surveys can be summarized as follows: Lottery participation ranged from 40% to 50%. The use of slot machines in pubs, bars, arcades and casinos was 4% to 7%. Participation in casino games ranged from 3% to 6%. For sport betting the range was 4% to 10% of the population over 18 years of age, which were more or less regular participants. In a survey from TNS EMNID in 2006, 1300 people age 14 or older were questioned, and it was found that 40% of those questioned had occasionally participated in free sweepstakes or contests.64 Favoured here were contests in newspapers and magazines, which accounted for 56%, followed by retail sale company contests, with 48%, and contests in advertising papers accounted for 35%. IMAS International reported similar findings in their survey of 2030 people over the age of 16, conducted between 23 May 2006 and 2 June 2006.65 According to this survey, 36% participate occasionally, and 4% regularly, in newspaper or magazine contests, or from a contest flier or supplement. Occasional participation in radio contests through telephone calls was reported by 10% and 1% reported regular participation. With television contests, which are participated in through telephone calls, 12% reported occasional participation, and 1% played regularly. Online contest participation was reported to be 8% for occasional participants and less than 1%, in comparison a very small amount, were regular participants. Figure 9: Number of Players and the Average Spent per Player 66 Number of players

Sales, in €

Average spent per player, in €

27–34 million

13.98 billion

458.36

Slot machines

3–5 million

9.78 billion

2445.00

Casino games

2–4 million

5.84 billion

1946.67

Market segment Lotteries

Contests

25–40 million

Contests (television)

8–10 million

0.15 billion

16.67

Sport betting

3–7 million

1.83 billion

366.00

40–45 million

31.58 billion

743.06

Total

64 Compare to: Lebensmittelzeitung, ‘Kunden lockt das Glück’, 25 November 2006, p. 45. 65 Compare to the article with the title: ‘Verbraucher wollen staatliche Aufsicht’, in Horizont 32/2006, 10 August 2006. 66 Source: authors’ estimates. 160



The German Market for Gambling and Betting

With a population of 67.5 million citizens over 18 years of age, the following figures can be calculated for participation: Between 27 and 34 million German citizens participate at least occasionally in the lottery.67 Roughly 3 to 5 million citizens occasionally use slot machines in arcades, pubs, bars and casinos. 2 to 4 million citizens participate at least occasionally in casino games, such as roulette and card games for money. For contests, the participation numbers are roughly on the order as for that of lottery participation. An estimated 25 to 40 million adult citizens participate at least occasionally in contests, whereby participation is in this case not exclusively limited to those over 18 years in age. Approximately 8 to 10 million citizens participate in television contests, at least occasionally. 3 to 7 million citizens participate at least occasionally in sport betting.68 A total of 40 to 45 million citizens participate more or less regularly in games of chance. From the number of players and the respective sales, the average spent per player can be calculated. When the average for the estimated number of players is used, the yearly amount spent per player for lotteries is around €458. For slot machines the highest average spent per player is €2445 per year. The figure for casino games is €1947 per year. As a rule, for contests, the cost is the amount of the postage, if the contest entry is to be mailed in. For television contests, the average cost per player is €16.67 per year. The average cost per player for sport betting is on the lower end, at €366. In total, each player spends an average of €743 per year on games of chance. It is to be kept in mind regarding these amounts that the average amounts are being discussed, and that an individual player may vary widely from the figures presented here.

8. Pathological Gambling in Germany and the Regulation of the Gambling Market In order to estimate the prevalence of pathological gambling in the German population, two approaches have been pursued so far. The first approach is based on the number of clients in therapy. The second approach is based on population surveys.

67 A study by the Gesellschaft für Kreditversicherungsservice (GfK) indicates that roughly 24 million adult Germans participate at least once a year in a lottery or other game offered by the federal state lotteries. Regretfully the study itself was never made available to the public. These figures were cited in a press release of the German lotteries, from 11 August 2005, with the title: Lotto informiert: 56 Lottomillionäre in der ersten Jahreshälfte. 68 A study of the Cologne Institute of Sport and Market (Kölner Instituts Sport und Markt) reported that 5 to 7 million citizens are active betters. Cited In Lebensmittelzeitung, ‘Kunden lockt das Glück’, 25 November 2006. 161

Crime, Addiction and the Regulation of Gambling

The number of clients in therapy is well known from the treatment monitoring system. Many of the institutions involved in addiction therapy in Germany publish annually the number of clients per type of addiction. Assuming a certain percentage of pathological gamblers in the population seek treatment, the prevalence of pathological gambling in the population may be estimated. The number of pathological gamblers in therapy in the institutions taking part in the monitoring system was 3,375 in 2006. The overall number in all institutions is estimated as 4,362 clients.69 In the case of alcohol addiction, about 3%-5% of the people addicted to alcohol in the population seek treatment.70 If the same percentage is assumed for pathological gambling, the prevalence of pathological gambling in the population is estimated to be between 87,240 and 145,400 persons. The results of two very recent epidemiological addiction surveys are available as well.71 Based on these population surveys the number of pathological gamblers is estimated to be between 33,604 and 364,375 members of the German population. Furthermore there are a number of surveys among clients in therapy available.72 In these surveys clients are asked for the kind of games which they regard as a problem for them. Most of the clients have a problem with only one particular kind of game. Only a few of the clients experience problems with a number of different games. If the clients are asked which type of game causes them problems, or causes most of their problems, about 77% named slot machines in gambling arcades and casinos. About 8% had problems with roulette and black jack. Sport betting was regarded as a problem by 6% of the interviewed clients and lotteries by 1%.73

69 D. Sonntag, A. Hellwich and C. Bauer, ‘Deutsche Suchthilfestatistik 2006 für stationäre Einrichtungen’, in: Sucht, Vol. 53 Sonderheft, 2007, pp. 42–64; D. Sonntag, C. Bauer and A. Hellwich, ‘Deutsche Suchthilfestatistik 2006 für ambulante Einrichtungen’, in: Sucht, Vol. 53 Sonderheft, 2007, pp. 7– 41. 70 G. Meyer, ‘Glücksspiel – Zahlen und Fakten’, in: Deutsche Hauptstelle für Suchtfragen e.V. (ed.): Jahrbuch Sucht 2006 (Geesthacht, Neuland Verlag 2006), pp. 114–128. 71 G. Bühringer, L. Kaus, D. Sonntag, T. Pfeiffer-Gerschel and S. Steiner, ‘Pathologisches Glücksspiel in Deutschland: Spiel- und Bevölkerungsrisik’, in: Sucht Vol. 53(5), 2007, pp. 296–308; S.Buth and H. Stöver, ‘Glücksspielteilnahme und Glücksspielprobleme in Deutschland: Ergebnisse einer bundesweiten Repräsentativbefragung’, in: Suchttherapie, Issue 9, 2008, pp. 3–11. 72 An overview on these studies is given in T. Becker, Prävalenz pathologischen Spielverhaltens in Deutschland (forthcoming). 73 G. Meyer and T. Hayer, Das Gefährdungspotential von Lotterien und Sportwetten – Eine Untersuchung von Spielern aus Versorgungseinrichtungen, 2005, <www.mags.nrw.de/pdf/ gesundheit/gefaehrdungspotenzial.pdf>. 162



The German Market for Gambling and Betting

Given this data, the numbers of pathological gamblers in each segment of the market may be calculated. According to these numbers, for between 1,000 and 5,000 persons lotteries are the only or main cause of problems. Between 5,000 and 23,000 persons are addicted only or mainly to sports betting and 7,000 to 28,000 to casino games. The slot machines are the kind of game causing the greatest problems in Germany. About 67,000 to 280,000 pathological gamblers regard this game as the only or main problem causing game. Figure 10: Pathological Gambling per Market Segment Percentage of pathological gamblers

Prevalence of pathological gamblers (n=87,000 – 364,000)

Lotteries

1.3%

1,131 – 4,732

Slot machines

77.0%

66,990 – 280,280

Casino games

7.8%

6,786 – 28,392

Sport betting

6.2%

5,394 – 22,568

Others

7.7%

Market segment

In Germany, like in most countries of Europe, a state monopoly is offering lotteries. Private companies are not allowed to offer lotteries. Casino games may be offered only in state owned or in state licensed casinos. In the last decade, the market for sport betting has been growing. On this market both state bodies and private companies offered their products. Since the beginning of 2008 a new regulation is in place in Germany, stating that sport betting may be only offered by the state monopoly. In order to justify the state monopoly, it is argued, that it is too dangerous to allow private companies to offer sport betting because of the problem of gambling addiction. Only the state may offer such a dangerous product. It becomes obvious that this argument is pretended to save the state income from the state monopoly in gambling, if we look at the numbers of pathological gamblers in each segment of the market. While lotteries and casino games may be offered only by the state or state licensed companies, gambling on slot machines may be offered to consumers in amusement arcades by private companies. Though the most pathological gamblers have problems with these privately offered slot machines, the state took the argument of addiction to maintain the state monopoly in the lottery market segment and to establish it in the sport betting market segment.

163

Crime, Addiction and the Regulation of Gambling

9. Conclusions The German market for gambling and betting is a large market. The total sales amount to €32 billion and the gross gaming revenue to €8 billion. Due to the state monopoly for lotteries and casino games, the revenue obtained by the federal states from the state monopoly on gambling amounts to roughly €5 billion. In order to justify the state monopoly the danger of gambling addiction is used as an argument. However this argument is not put forward in a coherent and systematic manner. Slot machines in amusement arcades may be offered by private companies. Here the role of the state is limited to regulating the design of the slot machines. Taking the addiction argument seriously, the regulation of the gambling market in Germany must only allow the state to offer gambling on slot machines. The present regulation of the gambling market in Germany is contrary to all logic. There are basically two routes for the future: either slot machines have to be included in the state monopoly, like recently done in Norway, or for the other less dangerous forms of gambling the state monopoly has to be abandoned.

164

The Culture of Gambling in Great Britain: Legislative and Social Change Gerda Reith

1. Introduction This paper intends to examine some social and cultural perspectives on gambling in Great Britain. To do so, it will trace the changing culture of gambling in Britain between two landmark pieces of legislation: the 1968 Gaming Act and the 2005 Gambling Act, the latter of which came into force in September 2007. In between, the introduction of a National Lottery in 1994 initiated a process of piecemeal market deregulation, which will be briefly examined. The shifts brought about by these processes are part of wider international trends of proliferation and expansion of gambling markets, and the increasing participation and normalisation of gambling. As part of this, concerns are often raised about the problems associated with gambling, including fears of addiction, and problems concerning youth and criminal behaviour. Such concerns also apply in the British context, and the paper will briefly review the issues involved here. In Britain however, these concerns were vocalised in particular ways, and the paper will examine the hostile public reception to the proposed legislation, and the way that this forced the government to change certain aspects of it: most notably, the plans for Regional casino developments. These shifts show that, although the current legislation allows for increased commercial expansion of the industry, gambling is still regarded with ambivalence and, in some circles, hostility, within Great Britain.

2. The Legacy of the 1968 Gaming Act In the past fifteen years, the culture of gambling in Britain has been characterised by change: by a proliferation of gambling opportunities and a gradual expansion of the market. In relation to international trends this change has been slow and Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 165–179 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

has lagged behind other jurisdictions such as the US, Canada, Australia, New Zealand and parts of Europe, many of whom expanded and deregulated their markets decades before Great Britain. Until very recently, the culture of gambling in this country was given its character by the 1968 Gaming Act, as well as, to a lesser extent, the Betting, Gaming and Lotteries Act 1963 and the Lotteries and Amusements Act 1976. The 1968 Act was a paternalistic piece of legislation that attempted to limit the provision of gambling to the general public. The Act stipulated that gambling facilities should not encourage gambling in any way, but could only ‘satisfy existing demand’. Supply was to be strictly regulated by limits on advertising and anything that might be considered ‘promotion’, so, for example, casinos and bingo halls could not advertise through the usual channels, while betting shops were required to conceal their interiors from the outside world. The principle of unstimulated demand continued inside venues, where an austere design and a lack of refreshments were deliberately intended to discourage patrons from doing any more than placing their bets and leaving. In casinos, the principle was applied through limits on the number of machines allowed, restrictions on alcohol at gaming tables and the prohibition of credit. The Act imposed a membership requirement on casinos and bingo halls, as well as a ‘cooling off ’ period which required individuals to wait either 48 or 24 hours respectively between applying for membership of a venue and being allowed to play in it. Assuming the fundamentally impulsive and irrational basis of the desire to gamble, this was designed to give potential gamblers the opportunity to reconsider their decision – and presumably, come to the conclusion not to play. So, the legislation was designed to limit demand for what was regarded a potentially harmful product. It is also possible to see it as being tinged with an element of Puritanism within a hierarchical system of social class. Gambling was perceived to oppose the principle of the work ethic, in which hard work and effort were rewarded with commensurate and deserving gains, and instead encourage a ‘something for nothing’ ideology where rewards were distributed by sheer luck instead.1 None of this meant that gambling was not popular in Britain. On the contrary, it was widely practiced, particularly by working class males, although subject to a certain degree of stratification along the lines of class and gender. Lower socio-economic males favoured betting on horses, dogs and sports in betting shops, women preferred playing bingo, and higher social groups tended to favour casinos and on-track racing. In general then, until the 1990s gambling in Britain was a form of leisure that was engaged in predominantly by males and the working class. Although

1 G. Reith, The Age of Chance: Gambling in Western Culture (London, Routledge, 1999 & 2002). 166



The Culture of Gambling in Great Britain: Legislative and Social Change

legal, the activity was somewhat marginal and perceived by many to be not entirely ‘respectable’.2

3. International Trends Elsewhere, recent trends have been of proliferation and deregulation. From being strictly limited, if not outlawed altogether, in the last two decades most Western nations have been increasingly allowing the expansion of the gambling industry – albeit in a way that is closely regulated by the state. Beginning in the 1970s and gathering momentum throughout the 1980s, other countries began to expand their gambling markets, first introducing lotteries, then casinos, racetracks and continuous forms of gambling such as EGMs. This pattern of proliferation has swept through jurisdictions such as the US, Canada, Australia, New Zealand and South Africa, and has resulted in increased participation in commercial gambling among the population, and a corresponding increase in problem gambling in those countries.3

4. The National Lottery Into this climate, the Conservative government introduced a National Lottery in Britain in 1994.4 In terms of both supply and demand, the Lottery was a significant break with the past. Most strikingly, this was a state sponsored form of gambling where monopoly status was granted to the supplier, the company Camelot. It was not subject to the same legal restrictions on ‘unstimulated demand’ as the rest of the industry, but on the contrary was widely advertised and promoted on prime time television, in national newspapers and magazines. Initially, demand for the Lttery was huge, with approximately 80% of the public playing in the first year, spending £100 million a week on tickets and transforming the consumption economy almost literally overnight.5

2 See, for example: D. Dixon, From Prohibition to Regulation: Bookmaking, Anti-Gambling and the Law (Oxford, Clarendon Press, 1991); R. Munting, An Economic and Social History of Gambling in Britain and the USA (Manchester, Manchester University Press, 1996). 3 M. Abbott, R. Volberg, M. Bellringer and G. Reith, A Review of Research on Aspects of Problem Gambling (London, Responsibility in Gambling Trust, 2004). 4 The term ‘re-introduced’ might be more accurate, as Britain had run lotteries between the sixteenth and eighteenth centuries, with the last one drawn in 1826. 5 L. Fitzherbert. C. Giussani and H. Hurd, The National Lottery Yearbook (London, The Directory of Social Change, 1996). 167

Crime, Addiction and the Regulation of Gambling

Essentially, the Lottery changed the culture of gambling in Britain. Its association with ‘good causes’ made buying a ticket more like donating to charity than ‘real’ gambling, and the fact that the purchase was carried out in everyday locations such as supermarkets and newsagents, while the draw was broadcast on national television, normalised the very act of gambling itself. This was reflected in the euphemistic language that was used to describe players, who were generally determined to be ‘having a flutter’, ‘playing’, ‘taking a chance’, but seldom actually ‘gambling’. The Lottery changed the demographic profile of gamblers in Britain. Its legitimation made it more appealing to a wider cross section of the public, expanding the consumer base of gambling and introducing it to groups who had not previously played, such as women, the middle class, and younger people. Significantly, the Lottery helped to change public perceptions of gambling, which was increasingly coming to be seen as a part of a global leisure industry, rather than a dubious pastime on the fringes of respectability. However, it remained a legislative anomaly. While the Lottery was allowed to advertise and promote itself, the rest of the industry were restricted by the 1968 legislation, which began to seem archaic in the changing climate. This new culture of gambling and accusations of inequity led to demands to ‘level the playing field’, which have historically been found to precede industry expansion, and, in Britain, began a process of deregulation that eventually culminated in the 2005 Act. It is worth noting at this point that, from a regulatory viewpoint, the Lottery is still regarded in a different light from other forms of gambling. For example, it retains its own regulator – the National Lottery Commission – while the rest of the market is regulated by the Gambling Commission (with the exception of spread betting, which is regulated by the Financial Services Authority).

5. Late 20th Century Trends In the decade or so since the Lottery was introduced, some of the tight restrictions that regulated gambling were gradually eased, albeit in a piecemeal and incremental fashion. This process of selective deregulation was described as ‘salami slicing’ by the House of Lords Committee.6 This was something the 2005 legislation would eventually address.

6 Delegated Powers and Deregulation Committee. See: D. Miers, Regulating Commercial Gambling: Past, Present and Future (Oxford, Oxford University Press, 2004), Chapter 16, for an overview of these trends. 168



The Culture of Gambling in Great Britain: Legislative and Social Change

5.1. Easing Restrictions Many rules on advertising and promotion were relaxed so that, for example, betting shops were allowed to display odds, permit advertising in their windows and offer refreshments inside. Membership requirements on casinos and bingo halls were eased, and casinos allowed more machines, the use of debit cards and the consumption of alcohol at the gaming tables. Bingo halls were allowed to offer larger prizes and selective promotion and in 2001, betting duty was abolished, effectively making gambling cheaper for the player. 5.2. Industry Niche Marketing In addition, all sectors of the industry began marketing themselves as social venues offering food, drink and entertainment in order to reach out to a wider customer base and attract more affluent players and women. Changes in design and imagery were intended to make bingo halls, betting shops and casinos more appealing to leisure consumers in general, rather than those perceived simply as ‘gamblers’. 5.3. New Forms of Gambling At the same time, new forms of gambling, encouraged by advances in technology, appeared at great pace, expanding not only the types of games that were available, but also the times and the locations they could be played in. These included, for example, Internet gambling, spread betting, mobile phone gambling, and a variety of new types of machines, such as Fixed Odds Betting Terminals (FOBTs): a form of electronic roulette. 5.4. Demographic Changes The result of all this was a demographic shift in the consumer base of gambling, with games increasingly played by a large cross-section of the public in Britain. Expanding numbers of female players has led to the description of a ‘feminisation’ of gambling, and more middle income groups and younger players also helped widen the demographic base as gambling becomes increasingly widespread. Currently, in Britain, 68% of the population participate in some form of gambling. Excluding playing the National Lottery, the figure is 48%.7 5.5. Increased Expenditure These changes have been matched by increased expenditure. A report published by Nottingham Business School in 2007 found that over the past eight years 7 H. Wardle, K. Sproston, J. Orford, B. Erens, M. Griffiths, R. Constantine and S. Pigott, British Gambling Prevalence Survey (London, National Centre for Social Research, 2007). 169

Crime, Addiction and the Regulation of Gambling

expenditure on gambling had increased by 36% from £7 billion to £9 billion. However, excluding the Lottery, expenditure on ‘hard’ forms had risen much more dramatically, increasing by 56% to £7 billion in the same period.8 All of these trends have been accompanied by concerns about the problems associated with gambling – particularly regarding addictions, youth gambling and crime.

6. Problem Gambling in Britain The most immediate and frequently asked question around this legislative and cultural change is – will problem gambling increase? Internationally, the evidence is that when availability increases so too does participation and with it problem gambling, although it is also the case that other factors, such as public health measures and processes of adaptation, can mitigate these increases.9 Indeed, the Gambling Review Body, which was given the task of reviewing gambling in Britain prior to legislative change, concluded: ‘A central question for us has been whether increasing the availability of gambling will lead to an increase in the prevalence of problem gambling. The weight of evidence suggests that it will do so.’10 As a consequence of traditionally restrictive legislation, Britain has long enjoyed low levels of problem gambling. There have been two prevalence surveys carried out in the past ten years: one in 1999 and another in 2007.11 In both, the prevalence of problem gambling among the population was found to be the same – 0.6% – compared with rates of between around 0.2 – 4% worldwide. This unchanged figure is somewhat surprising, given the gradual expansion of participation and expenditure in the eight years since the first survey was conducted, and is something of a departure from international trends, where

8 See: H. Wardle et al. (2007); Also: special report prepared for The Guardian by Prof Leighton Vaughn Williams, Nottingham Trent Business School. Advisor to DCMS and Revenue and Customs Department. 29 September 2007. 9 M. Abbott et al. (2004). 10 Gambling Review Body, Department for Culture, Media and Sport, Gambling Review Report (Norwich, HMSO, 2001), p. 85. 11 Both were carried out by the National Centre for Social Research, and used the DSM-IV, the SOGS and the PGSI screens to measure problem gambling. Estimates of the prevalence of problem gambling are based on the DSM-IV screen, which has comparability across both surveys. K. Sproston, B. Erens, and J. Orford, Gambling Behaviour in Britain: Results from the British Gambling Prevalence Survey (London, The National Centre for Social Research, 1999). 170



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such expansion tends to be accompanied – at least initially – by increased rates of problem gambling. 6.1. The Profile of Problem Gamblers Consistent with the demographic profile of problem gamblers in other countries, both British surveys provided a profile of a problem player who was male, aged 35 or under, had parents with gambling problems and was on a low income. Problem behaviour was also associated with starting gambling at an early age and being separated or divorced. Prevalence amongst men was found to be two to three times higher than amongst women. The 1999 survey found a significant correlation of problem gambling with household income, with those in the lowest income categories nearly three times as likely to be defined as a problem gambler.12 In 2007, problems were still associated with lower socio-economic class,13 as well as poor health and low levels of education. The 2007 survey also found differences related to ethnicity, with the odds of being a problem gambler more than three times higher among Asian and Black than among White players.14 6.2. New Types of Games The types of games that individuals played was correlated with problem gambling, although this has changed over the past eight years as new forms of gambling

12 This is typical of international trends, where research has found that disadvantaged social groups spend a much greater proportion of their income on gambling, and suffer far greater problems with it. This is true despite the fact that these groups may not spend more on gambling in absolute term. They do however; spend a higher proportion of their income than wealthier players. National Gambling Impact Study Commission, Final Report (Washington D.C, 1999), ; Productivity Commission, Australia’s Gambling Industries, Report No. 10 (Canberra, AusInfo, 1999), <www.pc.gov.au/>. 13 The 2007 survey used a new measure of social position – the NS-SEC, which has similarities with the Registrar General’s Social Class classification. Respondents are assigned a category based on the current or former occupation of the household reference person. The classifications are: Managerial & Professional Occupations, Intermediate Occupations, Small Employers and Own Account Workers, Lower Supervisory & Technical Occupations, Semi Routine and Routine Occupations. The study found that problems were least prevalent with the upper groups – managerial & professional households (0.2%), and most prevalent with small employers & own account workers (1.2%), followed by semi routine and routine occupations (1.0%). 14 The prevalence of problems was significantly higher among those of Asian or Asian British origin (1.4%) and Black or Black British origin (2.0%) than those whose ethnic group was White (0.5%). The group of ‘other’ ethnic group, which included Chinese gamblers, also had much higher prevalence: 2.2%. H. Wardle et al. (2007). 171

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have been introduced. The most problematic types of games, and the differences over time, are shown below: Table 1: Percentage of Participants who have Gambling Problems (DSM-IV), by Type of Game and Year (n- unweighted)15 1999

2007

Bookmakers

5.8 (210)

Spread betting

14.7 (53)

Casino table games

5.6 (188)

FOBTs

11.2 (186)

Dog races

3.7 (282)

Betting exchanges

9.8 (74)

Machines

2.6 (993)

Online gambling

7.4 (191)

Online betting

6.0 (303)

As the table shows, currently the highest rates of problems are all associated with new forms of gambling that have been introduced since the previous study in 1999. These new types of games are typical of those that are associated with problems internationally: i.e continuous forms of gambling, which allow for continual re-staking and have a fast rate of play.16 Other aspects of problem gambling not covered in the prevalence surveys include youth gambling, and the associations with crime. Both of these are relevant to the 2005 Act. 6.3. Adolescent Gambling Britain has high rates of problem gambling among children, which are often tied up with a general pattern of delinquent behaviour that includes truancy and illegal activities such as theft and the consumption of drugs and alcohol. A study from 1999 estimated that nearly 6% of adolescents were problem gamblers, and that the majority – 62% – had problems with slot, or fruit, machines.17 Almost

15 Source: National Centre for Social Research 1999 and 2007. 16 Internationally, the highest rates of problems are associated with EGMs, which are increasingly spreading and displacing traditional forms of gambling in what has been described as a ‘deforestation’ effect. M. Abbott et al. (2004). 17 S. Fisher, ‘A prevalence study of gambling and problem gambling adolescents’, Addiction Research, 7, 1999, pp. 509–538. 172



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90% of the under-18 year olds who call the national problem gambling helpline report experiencing problems with machines.18 These high rates can partly be explained by legislation that allows low stake slot machines in a range of non-gambling locations that are easily accessible to youth, such as fish and chip shops, service stations and cafes, as well as amusement arcades. There are no age limitations to restrict access to these types of (coin or token) machines, which are legally defined as ‘Category D’. 6.4. Crime Criminal activity is often a consequence of problem gambling, although, unfortunately, there has been very little research conducted into the associations between crime and gambling in the UK. Some studies have found, however, that offences are considerably higher among Gamblers Anonymous attendees than amongst the general population, and tend to be related to income generating and property-related crimes, such as fraud, forgery, embezzlement and petty theft.19 Other research has found that 4.5% of offenders on probation could be classed as problem gamblers.20 It remains unclear from this however, exactly what the patterns of associations are, or what the relationships between offending, gambling and other deviant behaviours might be. Despite a weak evidence base, concerns about crime are still part of the policy process, and these issues were important to the Scottish Executive when formulating a decision on whether or not to support Scottish bids for casino licenses in the new legislative regime. In 2006, they commissioned a report on the likely social impacts of increased gambling opportunities, especially as these related to crime. The report concluded that casino development was not likely to increase per capita crime, although total crime in a neighbourhood might increase due to population growth and other factors. The Executive did not, however, lend its support to the applications.21

18 GamCare, GamCare Care Services Report (GamCare, National Association for Gambling Care, Educational Resources and Training, 2003). 19 R. Brown, ‘Dropouts and continuers in Gamblers Anonymous: II. Analysis of free style accounts of experiences with GA’, Journal of Gambling Behavior, 3, 1987, pp. 68–79. 20 T. Rickets, P. Bliss, H. MacDonald and C. Rayer, The Extent of Gambling among Offenders on Probation (Community Health Sheffield Trust, 2000). 21 G. Reith, The Social Impacts of Gambling (Edinburgh, Scottish Executive Social Research, 2006). 173

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7. The 2005 Gambling Act Into this climate of increasing expenditure, technology and concerns over youth and crime came the 2005 Gambling Act, which was fully implemented September 2007. It is in many ways a landmark piece of legislation that signals a dramatic shift away from the 1968 Act’s restrictive policy of ‘unstimulated demand’. 7.1. The Purpose of the Act The legislation aimed to reform Britain’s gambling laws which, in the light of technological developments and international trends were increasingly regarded as outdated and, since the introduction of the National Lottery, regarded by many as untenable and unfair. The stated aims of the Act were to: – Prevent gambling being a source of crime or disorder

– Ensure that gambling is conducted in a fair and open way



– Protect children and other vulnerable persons being harmed or exploited by gambling

Issues of consumer protection, social responsibility and protection of the vulnerable were therefore integral to the legislation The Act also established a unified regulator – the Gambling Commission – which possessed considerable powers to streamline regulation and oversee the entire industry (with the exception of the National Lottery and spread betting) in a way that its predecessor, the Gaming Board, had never been able to do, when regulation was fragmented across a variety of different agencies. It also aimed to regulate gambling in the light of technological innovations such as the Internet and mobile phones, which had developed since previous legislation and were not covered by it. Another key aim of the Act was to allow industry expansion, and to encourage a competitive, commercial market with increased choice for consumers in the broader interests of the British economy. This market philosophy swept away the principle of ‘unstimulated demand’ with the new approach that regulation was to be restricted to that necessary to meet the three aims of the Act (i.e to keep crime out, protect the vulnerable and ensure gambling products were fair to the consumer). Beyond that, ‘unnecessary barriers to customer access and new entrants to the industry will be removed.’22 So, its aims can be seen as both to protect players and regulate industry, but also to enable industry growth. It promised ‘to put the interests of children and vulnerable players first, second and third’ but also to ensure commercial

22 Department for Culture, Media and Sport. Draft Gambling Bill. 2002, 10-9-10. 174



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expansion: ‘gambling is a massive global industry and is entitled to a regulatory framework that ensures continued growth.’23 To this end, the legislation removed membership requirements for clubs, such as casinos and bingo, so opening them up to the general public. It also extended opening hours for betting shops, permitted the development of more casinos with higher stakes gaming machines, allowed access to debit facilities and alcohol at tables and, perhaps most significantly, lifted restrictions on advertising for gaming operators for the first time. It also planned to phase out gambling machines from non-gambling locations where children could access them, although it stopped short of preventing them from playing Category D machines. Most controversially, the Act allowed for the development of new casinos: ‘Small’, ‘Large’ and Regional’, all of which were larger than any currently existent in Britain at the time, and which would house larger numbers of high-payout, high-stake gambling machines. Regional casinos were planned to be allowed up to 1,250 ‘Category A’ machines, offering unlimited, multi-million pound prizes and accepting large stakes. These very large resort or ‘destination’ casinos would provide a range of facilities such as restaurants, bars, cinemas, shopping and entertainment, so creating an entire leisure experience, of which gambling may be only one aspect. Large casinos were to be permitted up to 150 ‘Category B’ machines with maximum jackpots of £4000, and Small casinos would have up to 80 Category B machines. All three would be allowed to offer betting, with Regional and Large casinos allowed to offer bingo as well.24 7.2. The Reception of the Act The two years between the Bill receiving Royal Assent in 2005 and coming into force in 2007 were characterised by controversy and government climbdown over some proposals: a response which provides a case study in the continued ambivalence and hostility of attitudes towards gambling in Britain. Criticism and debate focused almost solely on a single aspect of the proposed legislation – Regional casinos, or ‘supercasinos’ as they became known colloquially. A coalition of critics developed around this contentious proposal, including religious leaders, community groups, academics, public figures, cross-party politicians and sectors of the gambling industry itself. They were given voice by equally hostile elements of the national media. A campaign was spearheaded by the tabloid newspaper, The Daily Mail, which started a ‘kill the casino bill’ campaign, running daily criticisms on the legislation and petitioning for signatures to put to the government. The newspaper began their campaign with an appeal 23 The then Culture Secretary, Tessa Jowell, Draft Gambling Bill: government Response to the First Report of the joint committee on the Draft Gambling Bill, June 2004. 24 Pion Economics, Casinos in England’s Northwest: An Assessment of Market Demand. Final Report. June 2005. 175

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to the socialist principles of the Labour party, which it claimed the proposals for gambling undermined. They wrote that the party used to have an: ‘instinctive understanding of human weakness and the need to contain the destructive forces that could tear families apart, destroy the concept of self worth and prevent the poor pulling themselves up by their own bootstraps … so they untied against the twin evils of drunkenness and gambling that scarred society and blighted so many lives.’25 It was not only the tabloids who voiced opposition: the broadsheets were hostile too, with The Times writing: ‘gambling is another drug, another glittering route to misery, violence and family poverty’; and The Guardian bemoaning ‘a vast and irreversible cultural change’ that the new laws would bring about.26 And it was not only the media: a majority of the population also opposed the Bill: while 57% of the public supported plans to liberalise drinking laws only 34% approved of the proposals for gambling.27 Opposition also came from community, political and academic representatives as well as parts of the British gambling industry, who feared the threat of foreign competition should the Bill become law. Indeed, much of the tabloid hysteria focused on ‘American conglomerates’ who were seen as interlopers, taking over British culture with their brash developments. Overall, the Bill can be seen as acting like a flashpoint that ignited a deep well of hostility towards gambling. Looked at more closely, however, the criticisms revealed that the real focus of much of the criticism was not so much about the harm new casinos might cause as a tirade against gambling per se. These embodied a range of critical discourses: a puritanical emphasis on the potential for gambling to undermine the work ethic, fears of its ability to undermine family life, patrician disdain for what was regarded as a ‘mindless’ or banal leisure pursuit and an ongoing emphasis on the risk the activity posed to financial and personal well-being – particularly for the young. Gambling itself was presented as a vice that could destroy thousands of lives and bring addiction, poverty and cultural decline to the individuals and the culture who encouraged it. Ultimately, the criticisms levelled against the legislation articulated widespread public hostility towards gambling, and demonstrated quite clearly that it was still seen as a somewhat dubious pastime in 21st century Britain. As such, it was regarded as something that required strong regulation, if not outright prohibition, by government

25 Daily Mail, 1 October 2004, pp. 1 & 14. 26 The Times, 22 October 2004; The Guardian, 25 October 2004. 27 ICI Poll, The Guardian, 26 October 2004. 176



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7.3. The Final Act The widespread hostility to its proposals took the government by surprise, and eventually led to a capitulation on the number of ‘supercasinos’ that would be licensed: from an unlimited number in the original proposals, to ‘a few dozen’, to eight, to only one. Having a single license drove up the value of what would be a monopoly, and competition was fierce. Eventually, the independent Casino Advisory Panel (CAP) that was appointed to judge the bids selected the city of Manchester as the location of Britain’s first Regional casino. Again, however, controversy followed, with the decision questioned in the Houses of Commons and Lords, and accusations of favouritism and bias levelled at the Panel and politicians involved in the process. However, in the interim, the Prime Minister, Tony Blair, stood down and Gordon Brown took over. Brown’s policies on gambling were somewhat different from those of his predecessor, and he gave voice to his concerns over the potential negative social consequences of gambling expansion as the decision of the CAP was still being reviewed in Parliament. Finally, he effectively made clear that there will now be no Regional casino development. It was politically expedient for Brown to sever links with the Blair leadership by a turnaround on Regional casino policy, but the decision was also perceived to be influenced by his background: Brown frequently referred to his puritan roots, implicitly invoking an alternative moral perspective that included opposition to casinos in particular, and possibly gambling in general. Ultimately then, a combination of public reaction and political expediency meant that the legislation that came into force on 1 September 2007 was somewhat different to what had been proposed two years before. The provisions of the eventual Act have been subject to criticism from a range of angles, of which two of the most pertinent are outlined below. 7.4. Vulnerable Groups, Social Responsibility and Consumer Protection Although issues of consumer protection, social responsibility and protection of the vulnerable are central tenets of the legislation, the requirement for socially responsible behaviour on the part of operators and consumers is not complemented by the provision of resources on the part of government. Rather, the issue of social responsibility is based on the premise that the simple provision of information will facilitate informed choices, but that from there, any decisions players make are their own responsibility – however misjudged they might be.28 In this sense, the legislation differs from, for example, the 2003 New Zealand Gambling Act, which is designed around a public health model. This legislation provides resources for public education and awareness programmes, and for 28 D. Miers (2004). 177

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the provision of specialist treatment services for problem gamblers – measures which have been found to limit increases in problem gambling when availability increases. In contrast, in Britain, existent provision for the treatment of vulnerable groups is provided by charities, which are already under funded, and there are no plans for developing measures to provide information and advice to the general public on the potential risks of gambling. In addition, the government has been criticised for its stance on children and gaming machines since, although it phases out gambling machines from many locations where children can access them, the Act does not prevent them from playing Category D (low stake) fruit machines. 7.5. Online Gambling The legislation aimed to make Britain ‘world leader’ in online gambling. To this end, it prohibits advertising in this country of gambling websites that operate outside of designated ‘whitelisted’ jurisdictions, which are judged by their stringent regulations and commitment to responsible operations. These include territories within the European Economic Area and Gibraltar. Others may apply to the Secretary of State to be whitlelisted, but as of January 2008 only three, including Alderney, the Isle of Man and Tasmania, have been granted such status, meaning that over one thousand online operators will be banned from advertising in Great Britain. Those companies who sign up to operate within the UK will incur a rate of 15% tax, which has effectively prevented many from doing so. As of September 2007, only 14 online poker and casino sites had registered with the Gambling Commission to run UK-licensed sites. Many more continue to operate offshore – beyond the jurisdiction of British law, but still accessible to British players. It has been suggested that it is unlikely that the legislation will be able to effectively regulate the Internet: which is, as many admit, an extremely challenging task.

8. Concluding Comments One of the most pressing – and certainly one of the most controversial – questions at the current time is: How – if at all – will the 2005 Act impact on problem gambling? It is difficult to answer this. The results of the recent prevalence survey show no increase in problem gambling during a period when deregulatory measures expanded gambling opportunities, participation and expenditure in this country. However, the research is only a baseline survey, and the next one will be conducted after the availability of gambling has expanded considerably further and so may show a very different pattern. It can be noted that the new legislation allows increased availability of and access to gambling products, as well as permitting advertising to stimulate demand: 178



The Culture of Gambling in Great Britain: Legislative and Social Change

arguably the measure with the greatest potential to alter the climate of gambling in the near future. In addition, it makes no provision for harm minimisation measures, which have been shown to mitigate the negative consequences of gambling expansion in other jurisdictions. By failing to develop public health policy around the new legislation, it could be argued that the government has missed an opportunity to reconcile its twin aims of protection of the vulnerable and the facilitation of commercial expansion. Whatever future trends may bring, we can see from this short review that the culture of gambling in Britain has changed dramatically in the past decade or so. It has been characterised by an expansion of availability and opportunities to gamble, by a proliferation of new types of games and ways to play them, and by an ongoing normalisation of the activity as increasing numbers of the population participate in games of chance. Despite this however, we have also seen how gambling remains a deeply ambiguous and often problematic activity in British culture, as the hostile response to the initial proposals for change testify.

179

Preventing Problem Gambling on the Internet Through the Use of Social Responsibility Mechanisms Caroline Jawad and Stephen Griffiths

1. Introduction Throughout history, from the pastimes of ancient civilisation to those of the twenty-first century, gambling has offered excitement and inevitable dilemmas.1 Gambling is a compulsive and potentially addictive activity and societies have traditionally sought to control it proactively. More liberal attitudes to gambling, the unseen Internet gambling revolution and a proliferation of gambling services and opportunities have fuelled the industry’s growth.2 The emergence of Internet gambling and its exponential growth has been one of the most significant and contentious developments in gambling over the past two decades. Though evidently economically substantial, little is factually acknowledged about the Internet gambling industry, its customers and its social and economic impacts.3 However, the technological, regulatory and global transformations that have taken place in the gambling industry have led to gargantuan changes in the way operators and customers do business. The Internet gambling sector is the most dynamic segment in gambling and has caused governments to change their restrictive policy toward gambling law.4 Miers attributes the re-introduction of Britain’s 1

D. Schwartz, Roll the Bones. The History of Gambling (New York, Gotham Books, 2006).

2

D. Miers, Regulating Commercial Gambling: Past, Present, and Future (Oxford: OUP, 2004); R. Light, ‘The Gambling Act 2005: Regulatory Containment and Market Control’, Modern Law Review 70, 4, 2007, p. 626.

3

Nottingham Trent University, An Exploratory Investigation into the Attitudes and Behaviours of Internet Casino and Poker Players, 2007, <www.ecogra.org/Downloads/eCOGRA_ Global_Online_Gambler_Report.pdf> (accessed 15 February 2008).

4

Global Betting and Gaming Consultants, Internet Gambling, 2007, <www.gbgc.com/ index/page.asp?page_no=57> (accessed 2 February 2008).

Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 181–215 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

National Lottery in 1994 as a major factor in the modernisation of gambling.5 Aitken argues that the National Lottery is responsible for the de-stigmatising of gambling.6 The slackening of restrictions on, for example, advertising and accessibility of the National Lottery, were seen as discriminatory by the rest of the gambling industry which continued to operate under tight regulation. In addition to gambling going beyond the mainly male orientated domain of the casinos and betting shops of local high streets, it burst into the home and workplace by way of the National Lottery and the Internet.7 Legislation urgently required updating to bring the law into line with the developments that had taken place and the prospects of fattened gambling industry revenues further fuelled government ambition, despite the government dismissing as a ‘myth’ the suggestion that the reforms are ‘driven by a craving to raise tax’.8 ‘Internet gaming is a dollar-earning export business. Almost all sound strategy relating to its regulation follows from this fact,’ provides a sound basis for Light’s supposition.9 The Gambling Act 2005 is the second chapter of the government’s liberalisation of leisure legislation.10 It comes after the Licensing Act 2003 which swept away the antiquated laws regarding alcohol, dancing and other entertainments.11 Both Acts share numerous characteristics most notably an important swing in policy from regulatory control to market-led development. In both cases, the provision of greater autonomy for operators and customers is to be balanced by better controls and protection for the vulnerable. It will always be argued that the gambling industry requires a system of checks and balances to prevent problems from arising and an environment which promotes integrity, ethical values and competence.12

5

D. Miers, ‘The implementation and effects of Great Britain’s National Lottery’, Journal of Gambling Studies, 12, 1996, p. 343.

6

M. Aitken, Gambling Industry Faces Addiction Tax, Daily Mail, 3 March 2008, <www. sundaymail.co.uk/news/scottish-news/2008/02/03/gambling-industry-faces-addictiontax-78057-20307223/> (accessed 5 February 2008).

7

R. Light (2007).

8

See: A. McIntosh cited in: R. Light (2007).

9

National Centre for Academic Research into Gaming, Internet Gaming and South Africa: Implications, Costs and Opportunities. Interim Report for the National Gambling Board, 1999, <www.ngb.org.za/uploads/5_InteractiveGambling.pdf> (accessed 2 February 2008).

10 R. Light (2007). 11 R. Light, ‘The Licensing Act 2003: Liberal Constraint?’, Modern Law Review, 68, 2005, p. 268. 12 M. Herschman, The Global Implications of Responsible Gaming, Special Report (Corporate Social Responsibility, 2006), <www.world-lotteries.org/documents/magazine/wla19/ WLA19_CSR.pdf> (accessed 4 February 2008). 182



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In 2000 Sir Alan Budd was appointed to carry out a government report investigating the modernisation of the gambling laws. Economic pressures, the growth of e-commerce, technological and leisure industry developments were considered as well as global trends and gambling’s social impacts. The Gambling Act 2005 is the culmination of this progression and whilst it attempts to increase protection of the vulnerable and regulate Internet gambling, it has ‘more U turns than a London black cab’.13 Many of the restrictions thought to impede access to, or enjoyment of, gambling have disappeared. Many requirements of casino gambling been scrapped such as a customer being a member for a minimum of 24 hours; revoking the bar on live entertainment at casinos and allowing alcohol on the gaming floor. The ‘cooling off time’ that prevented ‘spur of the moment’ gambles or deterred the less committed customer has gone, as has the need to leave the gaming floor or the premises to consume alcohol or be entertained. Now perhaps some customers attracted to the premises by the entertainment available will engage in gambling, and despite calls of a ‘win for freedom of choice,’ it also allows operators to increase customer numbers.14 The relaxation of the restrictions on advertising, can only cause demand to be stimulated further. Indeed, it appears to be government policy that Britain should become a world leader in Internet gambling.15 Whilst, technological developments have lead to the emergence of more refined and diverse forms of gambling, deregulation has enhanced the industry’s labours to create more attractive gambling environments and to refashion gambling closer to other less contentious leisure activities.16 The Budd Report17 accepted that the modernisation of gambling would lead to an increase in problem gamblers, even if only as a consequence of the increased number of participants. And despite the assiduousness of the government and industry to persuade us, gambling is not just an industry like any other and it appears that the modernisation ignored the entrenched literature connecting volume of gambling with the prevalence of problem gambling.18 Griffiths and

13 D. Miers, ‘Another U-Turn: Great Britain’s Casino Questions and Other Gambling Issues’, Gaming Law Review 11, 6, 2007, p. 699. 14 R. Light (2007). 15 D. Gadher and M. Goodman, ‘Labour bids to put UK at heart of online gambling’, Sunday Times, 8 October 2006, <www.timesonline.co.uk/article/0,,2095-2393518,00.html> (accessed 14 January 2008). 16 R. Light (2007). 17 DCMS, Gambling Review Report, 2001, <www.culture.gov.uk/reference_library/ publications/4642.aspx>. 18 Henley Centre, Economic and Social Impact of the Proposed Gambling Bill, 2004; See also: L. Farrell, Economic and Social Impact Study of the Proposed Gambling Bill: A Henley Centre report commissioned by BACTA, Technical Paper no. 8 (London, DCMS, September 2004); 183

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Orford argue that the government was highly selective in its use of gambling literature and had written reports in a way minimising the issues of young adult and problem gambling. In its final report, the Gaming Board (replaced by the Gambling Commission) argued that there is no conclusive scientific research determining what causes people to gamble or become problem gamblers or on effective preventive and remedial measures (Report of the Gaming Board for Great Britain, 2005).19 There appears to be limited research which examines the onset of problem gambling.20 Consequently, there is a knowledge-gap regarding the fundamental elements that drive the transfer from non-problem to problem gambling.21 This situation is of particular interest because the causes underlying problem gambling are a requirement for the successful design of treatment including prevention and harm minimisation strategies.22 This chapter focuses in particular on recent UK experience, particularly the Gambling Act 2005, and seeks to examine the UK’s position in Internet

M. Griffiths, Internet gambling and Internet addiction: Is there a relationship? Paper presented at the International Symposium on Problem Gambling and Co-Occurring Disorders, Mystic, Connecticut, 2004; M. Griffiths, and J. Orford, ‘Young People and Gambling in Britain A Critique of the DCMS Technical Paper Number 8’, International Journal of Mental Health & Addiction, Vol. 2, no. 2, 2005, pp. 69–79, <www.ijma-journal.com/ pdf/v2i2a09.pdf> (accessed 26 February 2008). See also: R. Light (2007). 19 Report of the Gaming Board for Great Britain 2004–2005, <www.gamblingcommission. gov.uk/UploadDocs/publications/Document/reportGamingBoard.pdf> (accessed 4 February 2008). 20 See: B. Rush, R. Moxam, and K. Urbanoski, ‘Characteristics of People Seeking Help from Specialized Programs for the Treatment of Problem Gambling in Ontario’, E-Gambling: The Electronic Journal of Gambling Issues, February 2002, <www.camh.net/egambling/issue6/ research/> (accessed 15 February 2008); S. Tse, M. Abbott, D. Clarke, S. Townsend, P. Kingi and W. Manaia, Why people gamble. Examining the determinants of problem gambling, Prepared for Health Research Council of New Zealand (Auckland, UniServices Limited, University of Auckland, 2005); D. Clarke, S. Tse, M. Abbott, S. Townsend, P. Kingi and W. Manaia, ‘Religion, Spirituality and Associations with Problem Gambling’, New Zealand Journal of Psychology, 2006, (accessed 18 February 2008). 21 D. Hodgins, ‘Processes of changing gambling behaviour’, Addictive Behaviors, 26, 2001, pp. 121–128; P. Adams, ‘Towards a National Strategy for the Development of Research on Tobacco, Alcohol, Other Drugs and Gambling’ (New Zealand, University of Auckland, 2002), in: Tse et al. (2005). 22 C. DiClemente, M. Story and K. Murray, ‘On a Roll: The Process of Initiation and Cessation of Problem Gambling Among Adolescents’, Journal of Gambling Studies, Vol. 16, (2/3), 2000, pp. 289–313; E. Robson, J. Edwards, G. Smith, and I. Colman, ‘Gambling Decisions: An early intervention program for problem gamblers’, Journal of Gambling Studies, Vol. 18 (3), 2002. pp. 235–255. Both in Tse et al. (2005). 184



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gambling. The chapter also seeks to analyse responsible gambling programs in order to better safeguard consumer rights and interests.

2. The Expansion and Popularity of Internet Gambling Several factors have contributed to the dramatic growth of Internet gambling.23 Firstly, Internet access has increased throughout the world and as interest in the Internet has increased, technologies that drive the Internet have improved. There has been an increase in people’s confidence in conducting financial transactions on the Internet.24 Many operators are now licensed in their countries of origin supplying Internet gambling products and are subject to regulation by authorities in countries with highly esteemed legal systems, including Great Britain, Gibraltar and Malta.25 Internet gambling allows ‘anonymous gambling without necessitating physical travel’ and provides the highest level of anonymity for conducting gambling to date.26 It has the potential to reach anyone with a computer or remote device that can connect to the Internet. The personal computer also extends greatly the range of choice. If gambling in a land-based casino, you must play the games available at that particular gambling venue, however, the Internet lets players move through cyberspace to explore and play the games they are interested in.27 The more pervasive concern has been that the Internet attracts people away from person-to-person contact, fostering alienation and real-world disconnection.28 The ability to gamble anonymously in the privacy of one’s home provides pathological gamblers with a safe haven without scrutiny

23 M. Griffiths, Internet gambling: Preliminary results of the first U.K. prevalence study (Centre for Addiction and Mental Health, 2001), <www.camh.net/egambling/issue5/research/ griffiths_article.html> (accessed 3 April 2008). 24 Ipsos, Canada And US Public Perceptions Of Internet Gambling, 2008, <www.marketwire. com/mw/release.do?id=813779> (accessed 5 February 2008). 25 B. Dayanim, ‘Internet Gambling Under Siege’, Gaming Law Review, 11 (5), 2007, pp. 536–550. 26 M. Griffiths, ‘Gambling technologies: Prospects for problem gambling’, Journal of Gambling Studies, 15, 1999. 27 Gambling.com, Internet Gambling, <www.gambling.com/Internet-gambling.htm> (accessed 2 January 2006). 28 J. Boase, J, Horrigan, B. Wellman, and L. Rainie, The Strength of Internet Ties. The Internet and email aid users in maintaining their social networks and provide pathways to help when people face big decisions, 2006, <www.pewInternet.org/pdfs/PIP_Internet_ties.pdf> (accessed 5 April 2006). 185

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or surveillance.29 The Internet offering anonymity, accessibility and interactivity makes it a particularly appealing gambling platform. One reason why Internet gambling alarms many, is that it is prolific and expected to grow;30 though compared to other forms of gambling, like casinos and lottery, its consumer growth is slow.31 Other concerns about potential dangers particular to Internet gambling include the evident lack of safeguards, such as the ability to protect individuals who are underage or problem gamblers. There is also the unease over unprincipled marketing techniques, such as pop ups and ‘embedding’ when Internet gambling sites use keywords like ‘compulsive gambling’ for search engines.32 Similarly, it has been argued that Internet gambling sites can do little to prevent gambling while intoxicated or gambling at work.33 Since August 1995, when the first Internet gambling operator commenced business, there has been an upsurge in the number of gambling websites.34 Internet gambling, along with sex services, appears to be one of the largest sources of revenue generation on the Internet.35 Recent statistics state there are as many as 2,500 gambling websites currently operating, consisting of 1,083 online casinos, 592 sports and race-books, 532 poker rooms, 224 online bingos, 49 skill game sites, 30 betting exchanges, 25 lottery sites and 17 backgammon

29 M. Scharf and M. Corrin, ‘On Dangerous Ground: Passive Personality Jurisdiction and the Prohibition of Internet Gambling’, New England Journal of Internation and Company Law, Volume 8, Issue 1, 2002, <www.nesl.edu/intljournal/vol8/scharf_v8n1.pdf> (accessed 1 February 2006). 30 Christian Capital Advisers, Global Internet Gambling Revenue Estimates and Projections (2001–2010, $M, US), 2001. 31 For the United States and Australia, see: R. Miller, ‘The need for self regulations and alternative dispute resolution to moderate consumer perceptions of perceived risk with Internet gambling’, University of Nevada Las Vegas, Gaming Research and Review Journal, 10 (1), 2006, pp. 51–58 <www.abgaminginstitute.ualberta.ca/pdfs/internet_gambling. pdf> (accessed 3 February 2008). Regarding the United Kingdom, see: H. Wardle, K. Sproston, J. Orford, B. Erens, M. Griffiths, R. Constantine and S. Pigott, British Gambling Prevalence Survey 2007, <www.gamblingcommission.gov.uk/UploadDocs/publications/ Document/Prevalence%20Survey%20final.pdf> (accessed 6 April 2008). For further information, see: European Commission, Study of Gambling Services in the Internal Market of the European Union, 2006, <ec.europa.eu/internal_market/services/docs/gambling/ study5_en.pdf> (accessed 6 April 2008). 32 R. LaBrie, D. LaPlante, S. Nelson, A. Schumann and€H. Shaffer, ‘Assessing the Playing Field: A Prospective Longitudinal Study of Internet Sports Gambling Behavior’, Journal of Gambling Studies, Volume 23,€no. 3, 16 September 2007, pp. 347–362. 33 M. Griffiths (1999). 34 C. Janower, ‘Gambling on the Internet’, Journal of Computer-Mediated Communication, Volume 2, no. 2, 1996. 35 Australian Parliamentary Librarian, ‘Wait – there’s more: the Internet on your very own home television!’, Australian Parliamentary Library Research Notes, 24, 1997. 186



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sites.36 Internet gambling revenues in a single year were $651 million in 1998, more than double the estimated $300 million from 1997.37 Further, the global Internet gambling industry is forecast to grow from about $9,000 million in 2004 to $25,000 million in 2010.38 If the estimated figures are accurate, then the importance of Internet gambling will continue to rise. It remains to be seen if countries will try to ban Internet gambling offshore operators however, customers are likely to continue to ‘indulge their passion,’ as the US has discovered. The British public generally accepts gambling as ‘part of the fabric of British society which people had accepted for some time’.39 ‘Britain is the natural world centre of gambling. There is nowhere else that has the size, the tradition, the marketing and the probity’.40 86% of Americans have gambled at least once in their lives and only Hawaii and Utah ban all forms of gambling.41 The arguments against gambling have remained fairly consistent over time. Moral claims made by some religious groups tended to be based less on reference to a prohibition found in a scripture, and more on the belief that it promoted idleness.42 And whilst, gambling is seen as producing rewards at the expense of others without the commensurate effort43 it is seen by other as buying a form of entertainment more than trying to win money.44 Internet gambling will continue to be pursued by land-based operators to develop and extend their total sales, even though some of the revenue will probably

36 Casino City, Online Casino City, 2006, <www.casinocitypress.com/> (accessed 19 November 2007). 37 S. Sinclair, ‘The Birth of an Industry: Gambling and the Internet’, in: A. Cabot (ed.), The Internet Gambling Report III (New York, Christiansen Cummings Associates, 1999). 38 European Commission (2006). 39 Her Majesty’s Stationery Office, Briefing from the Prime Minister’s Official Spokesman on: Iraq and Gambling, 2004, <www.pm.gov.uk/output/Page6462.asp> (accessed 5 February 2008). 40 Economist, 10 May 2003, cited in R. Scott, Towards the One Stop Gambling Shop in Europe? (UNI, 2004), p. 5, <www.union-network.org/unicasinos.nsf/387f3bf7bcdf52d0c1256 e3800412d4a/ae4815176a0460cfc1256e5b00499a88?OpenDocument> (accessed 15 February 2008). 41 National Opinion Research Center, Gambling Impact and Behaviour Study, Report to the National Gambling Impact Study Commission, 1 April 1999, p. 6, (accessed 3 April 2008). 42 F. Walther, Internet Gambling Related Regulatory Questions and Enforcement Problems: A Comparative U.S.–Swiss Perspective, 2002, <stlr.stanford.edu/STLR/Events/gambling/ contents_f.html> (accessed 5 April 2006). 43 DCMS (2001). 44 M. Griffiths, Interview: The gambling man? Prof. Mark Griffiths, 2008, <www.psychblog. co.uk/interview-the-gambling-man-prof-mark-griffiths-119.html> (accessed 8 February 2008). 187

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be a substitute for their land-based sales. It is possible that levels of taxation will be an important issue in determining the comparative success of Internet versus land-based gambling. Whilst Internet gambling is unlikely to replace land-based gambling, it is probable that the two forms are likely to fuse, for example in branding and marketing, such as in high street betting shops, where it is already possible to gamble on Internet sites. Also, new gambling products are likely to emerge which particularly suit delivery by remote channels and which secure a very large share of the market very quickly with a simple billing and payments system as has happened with poker and bingo.45 It is likely that customers will discover ways of gambling via the games console; that interactive television gambling and mobile phone gambling will extend and the remote market will be increased further. Whilst currently, the online gaming and Internet gambling genres are very different it remains to be seen what will happen in the future.46 Further, it is almost impossible to foresee the variety of products and services the gambling industry will execute in the next decade and beyond. The government however, has possibly envisaged further developments in remote gambling and has hinted at further deregulation down the line.47 The Internet is a highly competitive market in all areas of e-commerce and in this environment it will be difficult for operators to survive. The ‘dot com boom’ followed by the ‘dot com crash’ has also had Internet gambling casualties. Several Internet gambling operators have gone bankrupt Netbetsports and Luvbet owing their Internet customers money.48 These firms had a relatively high profile within the industry; Luvbet was one of the first bookmakers to promote an Internet site as one offering tax free betting to clients; Netbetsports offered Internet customers high bet limits and tax free betting when rates were still nine per cent.49 Internet gambling is growing among ever-changing, unregulated

45 European Commission (2006). 46 Personal communication between the author and Professor Mark Griffiths of Nottingham Trent University. 47 See: Secretary of State, Business in Sport and Leisure Conference, 19 November 2003, cited In Light (2007), p. 653; D. Miers (2004). 48 J. Barker, Owning a Sportsbook is Not a Licence to Print Money, 2007, <www.puntingace. com/bettingguide/own_sportsbook.html> (accessed 15 January 2008). 49 This refers to the General Betting Duty, a tax which was abolished in 2002. The General Betting Duty of 6.75 per cent on total stakes was replaced with a 15 per cent tax on bookmakers, gross profits, defined as the difference between the stakes laid with them and the winnings they pay out. The change made it possible for bookmakers to absorb the tax and to end the 9 per cent ‘deduction’ on stakes, which means that gamblers pay no tax. It was hoped that this would allow UK operators to develop domestic and international business from an onshore base, competing from a position of strength in the growing global market for telephone and Internet betting. See: HM Treasury, Budget 188



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websites and or disreputable operators.50 However, it remains to be seen whether problems are in fact realised and if an unintended consequence of the legislation is that people who want to wager their money actually become more at-risk financially because of dealing with unscrupulous vendors. The Internet gambling industry is theoretically very fluid; costs to establish Internet gambling businesses are considerably less than those of land-based gambling operations51 and operators have a propensity to locate where the regulation is negligible.52 A land based casino may require an investment of $300 million and thousands of employees for operation, whereas entering the Internet gambling market can cost as little as $135,000 with relatively small operating costs.53 Penetration of the Internet has broadened considerably, along with improved software technologies encouraging Internet counterparts for casinos, lotteries, bingo and betting on most sports in the world.54 With the low barriers to entry and exit within the Internet gambling industry, operators will probably move to jurisdictions that take a laissez-faire approach to regulation if the regulatory burden in one country becomes too onerous.55 Although there is no research recording examples of companies moving jurisdictions due to onerous regulations, the vast majority of operators are in locations that take a more liberal approach to regulation. The move to make Internet gambling illegal in the US, wiped £4 billion off the online sector’s London Stock Market valuation in October 2006.56 The Internet Gambling Prohibition and Enforcement Act 2006 explicitly bans Internet gambling by prohibiting Internet gambling operators to ‘knowingly accept’ 2001, Press Notices, <www.hm-treasury.gov.uk/budget/budget_2001/press_notices/ bud_bud01_pressbet.cfm> (accessed 3 April 2008). 50 B. Hartman, No Neteller, Prohibition, No Problem: Gamblers Find Alternatives, 2007, CasinoGamblingWeb.com; C. Holahan, ‘Betting Against Online Gambling’, BusinessWeek, 12 July 2006 <www.businessweek.com/technology/content/jul2006/tc20060711_ 816005.htm?campaign_id=ds3> (accessed 3 April, 2008). 51 H. Marsh, ‘Upstarts Raise the Odds for Online Gambling Bookies’, Marketing, February 24 (19), 2000. 52 DCMS, A Literature Review and Survey of Statistical Sources on Remote Gambling, 2006, <www.culture.gov.uk/reference_library/publications/3487.aspx> (accessed 13 July 2008). 53 A. Flatt, ‘Overview of Internet Gambling’, in: Testimony to the National Gambling Impact Study Commission Hearing, 21 May 1998, <www.ngisc.gov/>; R. Clarke and G. Dempsey, ‘The Feasibility of Regulating Gambling on the Internet’, Managerial and Decision Economics, 22, 2000, pp. 125–132, <www.anu.edu.au/people/Roger.Clarke/ II/FeasIGR.html> (accessed 26 February 2006). 54 R. Clarke and G. Dempsey (2000). 55 DCMS (2006). 56 R. Light (2007). 189

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money from US based customers and encourages financial institutions to refuse Internet gambling transactions.57 However, despite Internet gambling companies generating half of their revenues from US gamblers, the industry is operated almost completely by operators beyond the reach of US regulation. Indeed, the new law will do little to stop Internet gambling, say customers, operators and industry analysts alike.58 It could be argued that the law will drive out regulated, publicly traded companies and make way for private gambling companies and banks based in nations where such industries are loosely policed at best. As a result, the law could ultimately make billions of dollars in US Internet gambling transactions more difficult to trace, and increase the likelihood that funds end up in criminal hands. One by one the US government will take out these entities, and one by one new ones will arise.59 In this respect Holahan argues that the Internet Gambling Prohibition and Enforcement Act 2006 will force out regulated, publicly traded companies such as PartyGaming, and these will be replaced by private gambling companies (and banks) located in countries which do not rigorously regulate the gambling industry and thereby Internet gambling transactions will be more difficult to trace and increase the likelihood that funds end up in criminal hands. Holahan continues to say that the ‘exodus’ has already started and the companies that are on the way out are those with the most financial transparency.60 PartyGaming, 888Holdings, and SportingBet, all of which are traded on the London Stock Exchange, have said they intend to exit the US market. Roughly 70% of PartyGaming’s $319 million in second-quarter sales and 50% of 888 Holdings’ revenue came from the US.61 Private Internet gambling companies however, ignored the new law, arguing it does not apply to them and cannot be enforced. Holahan refers to Bodog Entertainment Group, which operates a Costa Rican online gambling site, has no plans to prohibit US customers. Recent research has found a significant trend in Internet sites either clearly barring American players or not. By no means are all Internet gambling sites preventing American access.62 Private Internet

57 C. Holahan, ‘Online Gambling Still in the Cards?’, BusinessWeek, 4 October 2006, <www. msnbc.msn.com/id/15118962/> (accessed 4 April 2008). 58 C. Holahan, ‘Online Gambling Goes Underground’, BusinessWeek, 19 October 2006, <www.businessweek.com/technology/content/oct2006/tc20061019_454543.htm> (accessed 4 April 2008). 59 B. Hartman (2007). 60 C. Holahan, (19 October 2006). 61 K. Norton, ‘Party’s Over for Online Gambling’, BusinessWeek, 2 October 2006, <www. businessweek.com/globalbiz/content/oct2006/gb20061002_683714.htm?chan=tc> (accessed 13 July 2008). 62 Own research paper to be published late 2008. 190



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gambling companies are interpreting the law to suit themselves and as Holahan continues, these operators believe that the final version of the law, unlike an earlier version (and passed by the House of Representatives) does not unambiguously ban casino-style games and argue that this is a legal grey area. However, many operators are now licensed in their countries of origin supplying Internet gambling products and are subject to regulation by authorities in countries with highly esteemed legal systems, including Great Britain, Gibraltar and Malta.63 However the relevance for this article is that the Internet ahs created a borderless global market for gambling products and this borderless market terminated one of the foundations of legal gambling: licensing. Without borders there is no jurisdiction, and without jurisdictions there are no gambling licenses. The British government is keen to establish itself as a world leader in the gambling industry. By giving Internet gambling operators the thumbs-up, Britain is hoping to lure many offshore internet gambling businesses back onshore, taxation being a small price to pay for the seal of approval.64 Revenues for PartyGaming were $978m last year, with profits of $325m and so, it is a ‘decent-sized catch that the Chancellor is fishing for’.65 It remains to be seen how many offshore operators will come back onshore; and consequently how many private operators which will be licensed on the London Stock Exchange.

3. The Causes of Problem Gambling The term ‘problem gambling’ has been used by many researchers, bodies, and organisations, to describe gambling that compromises, disrupts or damages family life, employment, personal or recreational pursuits.66 In its most severe forms, it has been recognised as a psychiatric disorder.67 The personal and social costs involved can be very high and range from financial, health, psychiatric, family,

63 B. Dayanim (2007). 64 M. Atherton, ‘The Ultimate Gamble’, The New Statesman, 24 July 2006, <www.newstates man.com/200607240032> (accessed 6 April 2006). 65 Ibidem. 66 K. Sproston, B. Erens and J. Orford, Gambling Behaviour in Britain: Results from the Gambling Prevalence Survey (London: National Centre for Social Research, 2000); DCMS (2001); M. Griffiths (2006). 67 R.Volberg, ‘The future of gambling in Britain’, British Medical Journal, 320, 1556, 2000, <www.bmj.com/cgi/content/full/320/7249/1556?ijkey=97f2195e88a5dfa4fb766ec 8a1cd57fb20bd7678&keytype2=tf_ipsecsha> (accessed 26 January 2008). 191

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employment and illegal activities.68 British legislation defines problem gambling as any gambling that is not responsible gambling and is harmful to the person concerned and others and further, responsible gambling is gambling within a player’s limitations of time and money.69 However, establishing when a customer has exceeded his or her limitations is problematic even for the most responsible operator and to complicate matters further, problem gambling is an insidious form of social malaise manifesting itself in private rather than in public.70 It will be easier said than done to for an operator to know when a customer has exceeded his or her limitations.71 A Department of Trade and Industry report72 concludes that gambling is likely to become one of Britain’s most serious addictions by 2026, ranking with the problems posed by drug addiction due to the relaxed gaming laws and new gambling technology. The report concludes that the government has not paid enough attention to the long-term effects the new gambling laws will have on the public73 and it has been suggested that it will create more than one million gambling addicts in a year.74 It is argued that the government has based its entire strategy for combating problem gambling on the Gambling Commission’s responsibility to ensure that measures are taken to protect the vulnerable, with the possible advantage being that when things go wrong, the Commission can be blamed and not the government (Light, 2007).75 Research has identified the factors that create excessive participation: – incentives to play and repeat play;

– ‘situational characteristics’ which attract people to gambling

68 L. Dewar, ‘Regulating Internet Gambling: The net tightens on online casinos and bookmakers’, ASLIB Proceedings, Volume 53, no. 9, 2001. 69 DCMS, Responsible Gambling, 2005, available at: <www.culture.gov.uk/>. 70 R. Room, N. Turner and A. Ialomiteanu, ‘Community effects of the opening of the Niagara Casino: A first report’, Addiction, 94, 1449, 1999; R. Light (2007). 71 M. Dickerson, Exploring the Limits of ‘Responsible Gambling: Harm Minimisation or Consumer Protection? Annual Conference of the National Association for Gambling Studies, Melbourne, 2003, <www.ncalg.org/Library/Studies%20and%20White%20 Papers/Addiction%20and%20Health/dickersonexploringthelimitsofresponsiblegambling. pdf> (accessed 2 February 2007). 72 J. Orford, Problem Gambling and other Behavioural Addictions, 2005, available at <www. foresight.gov.uk/> (accessed 13 July 2008). 73 R. Ford, ‘Relaxed gaming laws “will cause extensive damage within 20 years”’, The Times, 12 August 2006, <www.timesonline.co.uk/tol/news/uk/article606758.ece> (accessed 4 April 2008). 74 See: N. Temko, ‘Gambling addicts on the rise’, The Observer, 2 September 2007, <www. guardian.co.uk/uk/2007/sep/02/gambling.theobserver> (accessed 4 April 2008); D. Miers (2007). 75 R. Light (2007). 192



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– ‘structural characteristics’ which induce gambling or a continuation of gambling



– ‘situational determinants’ that draw more and bigger spending gamblers.76

However, when it comes to problem gambling, the most important factors are the accessibility of the activity and frequency of the event.77 It has been argued that recent legislation has ignored this and that liberalisation such as, relaxation of advertising rules;78 the removal of the demand criterion whereby gambling activities should be no more than are sufficient to satisfy an unstimulated demand;79 increased availability of mixed gambling opportunities and promotion of Internet and remote gambling, are precisely the reverse of the measures recommended as necessary to address problem gambling.80 However, whilst studies investigating the characteristics and motivations of gamblers and Internet gamblers are emerging, substantially more research needs to be conducted on a wide range of issues as the industry has been presented with an extensive opportunity to develop incentives to gamble. There is an insufficient knowledge of Internet gamblers, the dynamics of Internet gambling behaviour, the potential relationship between Internet gambling and problem gambling, and the most appropriate regulatory framework for Internet gambling.81 Gambling presents a large set of negative social consequences and Internet gambling has its own struggle beyond those of gambling in general introducing many new potential problems and rekindling many old ones.82 It has been argued that Internet gambling provides a natural fit for problem gamblers.83 Specific to Internet gambling is the role that technology contributes towards alterations in gambling behaviour.84 There are no closing times as exercised by land-based 76 M. Griffiths and J. Parke, ‘The Social Impact of Internet Gambling’, Social Science Computer Review 20, 2002. 77 M. Griffiths (1999). 78 M. Griffiths and J. Orford (2005). 79 D. Miers (1996). 80 M. Griffiths and J. Orford (2005); R. Light (2007). 81 H. Shaffer, D. LaPlante, R. LaBrie, and S. Nelson, Detecting At-Risk Internet Gambling Behaviour, 2007, <www.basisonline.org/2007/12/op-ededitorials.html> (accessed 13 July 2008); R. Wood, R. Williams and P. Lawton, ‘Why do Internet gamblers prefer online versus land-based venues?’, Journal of Gambling Issues, Issue 20, June 2007, <www.camh.net/egambling/issue20/pdfs/07wood.pdf> (accessed, 13 July 2008). 82 M. Griffiths (1999). 83 K. O’Neill, Internet Gambling, Paper presented at the 13th National Council on Problem Gambling Conference, Las Vegas, June 1998. 84 M. Griffiths (1999). 193

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operations, and it is possible to continue gambling for as long as desired.85 There is the departure from reality in the sense that gambling on the Internet does not involve ‘real cash,’ and it has been suggested that a gambler may lose control as he or she cannot see a money balance.86 The social environment may have been desensitised to the harm, seeing gambling as a harmless indulgence. Further, he states that Internet gambling departs from the social aspect of gambling with others, creating the disadvantage that there are no friends or peers to discourage a gambler from going too far. However, makes a plausible argument that there are distractions at home, such as the dog barking and the phone ringing, which can rouse the gambler back to a state of reality.87 Griffiths reports that most problem gamblers indicate that at the height of their addiction, gambling becomes a solitary state of affairs.88 The author has written that ‘to a gambling addict, the Internet could potentially be a very dangerous medium,’ because the Internet can provide vast resources which can feed the addiction of problem gamblers. Kyl views the concept of acute Internet Gambling addiction, the ‘crack cocaine of gambling.’89 The Internet gambling industry has numerous options of addressing problem gambling on their websites. Many sites have links to GamCare and Gamblers Anonymous and visual reminders for gamblers to gamble responsibly.90 Sites have facilities such as cooling off periods and self-exclusion features. Changes made by the Gambling Act 2005 require British sites to show clocks and timers indicating the current time, time in play and prominent displays of how much money is being bet, won and lost in pounds and pence.91 Griffiths discusses the idea that the very technology that has allowed Internet gambling can be used to track patterns of behaviour that point to problem gambling and can be used both in the identification of problem gamblers and to help understand in greater depth problem gambling.92 Computer-based systems can allow gamblers to self-exclude or establish loss limits and may stand a better chance of being effective than the current systems in most conventional casinos today. Whilst a determined gambler can hop from site to site, reports of a player’s activities can 85 Ibidem. 86 Ibidem. 87 T. Bell, ‘Internet Gambling Ban Faces Losing Odds’, Times Union, 6 January 1998, <www. tomwbell.com/writings/GamblBan.html> (accessed 4 April 2008). 88 M. Griffiths (1999). 89 J. Kyl, Bringing the law up to date with technology, 2000 (accessed 2 February 2008). 90 DCMS, Gambling Act – Regulatory Impact Assessment, 2005, <www.culture.gov.uk/images/ publications/GamblingAct2005RIA210405.pdf> (accessed on 13 July 2008). 91 Ibidem. 92 See: M. Griffiths (1999). 194



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be made readily available with contact details for bodies that aim to assist those with problem gambling issues. Internet gambling operators are equipped to collect adequate data and information to be able to identify patterns of problem gambling.93 There is the technological ability for operators to collect enough data and information to be able to identify patterns of problem gambling and this is a requirement of the 2005 Act. However, this is a prescription only for operators with a British licence and the position of the European Gambling and Betting Association is that it is extremely difficult to monitor and identify when someone has started to gamble irresponsibly.94 Therefore according to EGBA, offline and online gambling operators should not collect information about a customer’s financial situation, spending or habits, for both practical and privacy issues. Operators that do, do it because reputation is important in such a competitive industry. A person who has developed a problem must identify it themselves and take their own constructive steps to deal with their problem and operators only train staff to help those who believe they have a problem and approach customer services. The issue for regulators is acquiring the power to compel operators to intervene in the event of identifying a problem gambler. The technical provisions in the Britain for Internet gambling relating to social responsibility have been drafted and are in the process are being applied. Assessment of the effectiveness of regulations in curbing problem gambling has yet to be done. An important factor in tackling problem gambling is to address the issue of continuous and repetitive play.95 Allowing players some control over their playing environment can mitigate the risk of problem gambling; for example, breaking up continuous and repetitive play on Internet gambling websites can be an effective tool to combat problem gambling by offering fewer opportunities to place impulsive bets.96 The dilemma for Internet gambling operators in establishing measures to delay play, designed to break up continuous and repetitive play, is that the quality of the game might be affected and in turn, this could lead to customers leaving the site and to move on to other unregulated sites and incurring a revenue loss for the regulated site. In some jurisdictions the only regulation that addresses problem gambling is the requirement that operators must display on the entry screen a warning of the addiction possibilities of gambling and information on

93 DCMS (2006). 94 European Gaming & Betting Association, Tackling some of the popular gaming myths, 2007, <www.eu-ba.org/en/about/mythbusting> (accessed 19 November 2007). 95 R. Breen, ‘Rapid Onset of Pathological Gambling in Machine Gamblers: A Replication’, International Journal of Mental Health & Addiction, 2(1), 2004, <www.ijma-journal.com/ content/full/2/1/00007> (accessed 28 January 2008). 96 DCMS (2006). 195

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sites to assist compulsive gamblers.97 This has ramifications in so far as responsible gambling is concerned. New South Wales Lotteries for example has yet to receive a single complaint regarding problem gambling.98 Various characteristics inherent in lottery play render it less attractive to problem gamblers than continuous forms of gambling, like Internet gambling.99 As a result, responsible gambling strategies should not be applied uniformly across all sectors, with more intensive responsible gambling strategies applied to the forms of gambling, like Internet gambling, that involve continuous and repetitive play. The research findings of Wood, Williams and Lawton however, are interesting in that the study found problem gamblers significantly less likely than non-problem gamblers to prefer Internet gambling.100 The authors conclude more ambiguously that while many of the factors associated with problem gambling appear to be related to Internet gambling, the profile of Internet gamblers does not conclusively match that of problem gamblers. Internet gambling operators are trying to create computer programmes to identify people who are at risk of developing problematic gambling behaviour.101 Unfortunately, success is not in sight given the considerable lack of research, which is unable to establish the most important identifying characteristics of problematic gambling behaviour. There is a lack of empirical research about Internet gambling behaviour and characteristics of problematic Internet gambling and as a result, efforts to develop appropriate programmes have a high risk of miscalculation. Researchers are even unable to determine characteristics of problematic gambling behaviour in land-based gambling to apply to Internet gambling behaviour. Internet gambling is dissimilar to land-based gambling and whilst some aspects might apply, other factors, possibly exclusive to Internet gambling must be exposed. Presently there is no comprehensive research or definitive standard as to how to identify someone who has developed a gambling problem

97 C. Jawad, An Analysis of Responsible Internet Gambling Websites (Swansea Metropolitan University, 2006). 98 NSW Lotteries Submission to the Independent Pricing and Regulatory Tribunal (IPART) Gaming Inquiry, Principles and Practices in addressing Problem Gambling in NSW Clubs: A Stakeholder Perspective, 1998, <www.pc.gov.au/__data/assets/pdf_file/0008/50759/ sub152.pdf> (accessed 2 February 2008). 99 J. Orford (2005). 100 R. Wood, R. Williams and P. Lawton, ‘Why do Internet gamblers prefer online versus land-based venues?’, Journal of Gambling Issues, Issue 20, June 2007, <www.camh.net/ egambling/issue20/07wood.htm> (accessed 19 November 2007). 101 See: H. Shaffer et al. (2007). 196



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and the prevailing view is that it is the minority of players who develop gambling problems and the current response to this issue bears this in mind.102 Problem gambling necessitates treatment, research and education and this requirement is enacted in British gambling legislation.103 But funds need to be established and currently, there is very limited help available and mainly in the form of charities, like Gamblers Anonymous or GamCare and there are very few treatment services for problem gamblers available on the NHS.104

4. The Containment of Underage Gambling There are certain demographic and social groups whose gambling behaviour is of greater concern than other groups.105 Concern is due primarily to the perception of increased vulnerability of certain groups to the potentially negative effects of gambling. Shaffer, Hall and Bilt suggest that the prevalence of gambling amongst youth is greater than among adults due to their adolescent lifestyles.106 Internet and land-based casinos have problems detecting and deterring problem gamblers however, even with opportunities presented by the physical presence of underage gamblers at land-based casinos, no gambling jurisdiction is one hundred per cent effective in keeping out underage gamblers.107 Neither are jurisdictions one hundred per cent effective in controlling the purchase of

102 J. Ferris and H. Wynne, The Canadian Problem Gambling Index: Final Report. 2001, <www.ccsa.ca/NR/rdonlyres/58BD1AA0-047A-41EC-906E-87F8FF46C91B/0/ ccsa0088052001.pdf> (accessed 2 February 2008); K. Brown, How should gaming staff identify and respond to a problem gambler?, 2003, <www.responsiblegambling.org/articles/ NewslinkWinterSpring2003.pdf> (accessed 2 February 2008); European Gaming & Betting Association (2007). 103 Gambling Commission, Problem Gambling, 2005, <www.gamblingcommission.gov.uk/ Client/detail.asp?ContentId=101> (accessed 4 April 2008). 104 British Medical Association, Gambling treatment, 2007, <www.bma.org.uk/ap.nsf/ Content/Gamblingbrief> (accessed 24 January 2008). 105 M. Griffiths and P. Delfabbro, ‘The Biopsychosocial Approach to Gambling: Contextual Factors in Research and Clinical Interventions’, Journal of Gambling Issues, Issue 5, 2001, <www.camh.net/egambling/issue5/feature/index.html> (accessed 4 April 2008). 106 H. Shaffer, M. Hall and J. Vander Bilt, ‘Estimating the prevalence of disordered gambling behaviour in the United States and Canada: A Research Synthesis’, American Journal of Public Health, 89, 9, 1999. 107 ‘Technology Is Responsible for the Birth of On-line Gambling. But Let’s Move to the Challenge of Credibility’, Gambling Online Magazine, 2004, <www.gamblingonlinemagazine. com/article-detail.php?articleID=193> (accessed 28 March 2006). 197

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tobacco and alcohol by underage persons despite the person being physically present during the purchase.108 In most jurisdictions, age verification controls are already in place and operators are required to ensure that participants are of legal age (18 or 21 depending on jurisdiction). It is left to the discretion of operators to adopt the most appropriate age verification systems and controls. However, several studies have shown that the checks in place are not sufficiently stringent.109 Research found that very few gambling sites were engaged in socially responsible practice and that much more could be done to protect vulnerable groups.110 Most sites rely on the information supplied during the registration procedure and make little if any attempt to verify the accuracy of the details supplied. 111 Rust however, comments that Ladbrokes customers are checked against the electoral roll and against the credit card company information, which he claims gives around ninety-eight per cent proof of someone’s age.112 Further to Rust’s almost 100% figure, the Chairman of Canbet has indicated that his organisation has never had a case of underage gambling.113 However, Kyl has a different viewpoint claiming that it is all too easy for a child to ‘click the mouse and lose the house,’ and given that children may be more Internet competent than their parents, there is the worry that children could gamble with ease.114 Schneider disagrees with the Kyl scenario because the credit card owner is not responsible for such charges and moreover, children are not responsible for gambling debts.115 The only loser in underage Internet gambling is the operator, who must not only

108 Interactive Gaming Council, Comments on Interactive Gambling Services, 2003, <archive. dbcde.gov.au/__data/assets/word_doc/0018/10953/Interactive_Gaming_Council_ Canada.doc> (accessed 5 February 2008). 109 See: C. Jawad (2006). 110 M. Smeaton and M. Griffiths, ‘Internet Gambling and Social Responsibility: An Exploratory Study’, CyberPsychology & Behavior, 1 February, 7(1), 2004, pp. 49–57; M. Griffiths, Gambling Addiction and its Treatment within the NHS (London, British Medical Association, 2007). 111 L. Dewar (2001). 112 Interview with Mr Nick Rust, Operations Manager of E-Gaming Ladbrokes, 29 August 2000, in: L. Dewar (2001). 113 Report by the Senate Select Committee on Information Technologies, Netbets. A review of online gambling in Australia¸ 2000, <www.aph.gov.au/senate/Committee/ it_ctte/completed_inquiries/1999-02/gambling/report/a01.pdf> (accessed 7 February 2008). 114 J. Kyl (2000). 115 S. Schneider, Internet Gambling Prohibition Act of 1997. Hearings before the Subcommittee on crime, 1999, <www.commdocs.house.gov/committees/judiciary/hju57230.000/ hju57230.htm> (accessed 4 February 2008). 198



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refund any proceeds to the bank but also often must pay a penalty for accepting the transaction in the first place.116 Studies suggest children are more likely to become addicted to something new than adults117 and are more likely to gain access to Internet casinos and act irresponsibly if without effective, enforced identification technology. 118 Another problem involving underage Internet gambling is that it is similar to other games console-based games they may have experienced in the past, where real money was not at stake. This situation may be especially tempting to preteens and teenagers, who are already fans of computer games and may be prone to becoming addicted.119 However, a 1996 Australian study about underage gambling and Internet Gambling, where legalised gambling is much more prevalent, found that there was ‘no apparent correlation between use of the Internet and or video games with gambling behaviours’.120 More availability clearly relates to more exposure but this study shows more exposure by itself, does not necessarily lead to problem gambling.121 Finally, the study concluded that ‘parental responsibility and parental/family influences must be acknowledged as the key factors affecting responsible or irresponsible gambling among youth.’ Smeaton, Poole, Charvis and Carr had a 16 year old volunteer use his debit card to try to register an online account with an Internet gambling website.122 Of the 37 sites tested, only 7 effectively blocked the registration. The residual 30 sites permitted the sixteen year old to open an account that would have allowed him to gamble online. Smeaton and Griffiths studied 30 Internet gambling sites ‘owned’ in the United Kingdom, looking at the safeguards in place to encourage social responsibility.123 They found that half of the sites did not carry an age warning, 116 Ibidem. 117 C. Roney and L. Trick, ‘Grouping and gambling: A Gestalt approach to understanding the gambler’s fallacy’, Canadian Journal of Experimental Psychology, Volume 57, no. 2, 2003. 118 R. Clarke, G. Dempsey, O. Chuin Nee and R. O’Connor, The Technical Feasibility of Regulating Gambling on the Internet, 1998, <www.anu.edu.au/people/Roger.Clarke/II/IGambReg. html> (accessed 4 April 2008). 119 J. LaTessa, ‘Internet Gambling and the regulation of the Internet’, Arkansas Business and Economic Review, Volume 29, no. 1, 1999. 120 M. LeBlanc, The Impact of On-Line Gambling and Gaming Services on Youth, 24 October 1996, (accessed 26 November 2005). 121 Ibidem. 122 M. Smeaton, A. Poole, A. Chevis and J. Carr, Study into underage access to online gambling and betting sites, GamCare, 2004, <ww.gamcare.org.uk/pdfs/StudyReportFinal.pdf> (accessed 15 February 2007). 123 M. Smeaton and M. Griffiths, ‘Internet Gambling and Social Responsibility: An Exploratory Study’, CyberPsychology and Behaviour, 7(1), 1 February, 2004, pp. 49–57. 199

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and 11 had no age verification. Four of the 30 sites demonstrated evidence of a credit check. Twenty-three sites had no reference to controlled gambling and 26 provided no reference to problem gambling support. Further, there was no evidence on 29 of the sites that gamblers could choose to exclude themselves. Instant self-exclusion facilities were present on 11 sites, and 10 had a ‘built-in pause/confirmation.’ Practice modes were available at 17 of the sites. Adolescents could be especially vulnerable to this temptation because it gives them access to and encourages them to learn to play casino games earlier than is legally be permitted. It is suspected that these ‘demo’ games give very good odds (since no money is being wagered). Adolescents who are familiar with success on these games will be vulnerable to losing money when they reach the age of 18 and are legally permitted to gamble for money, and the odds are no longer in their favour.124 ‘Mystery Shopper’ research was conducted on British-based Internet gambling websites by Gamcare, National Children’s Homes and Citizencard, but only two sites, Ladbrokes and Camelot were effective in preventing an underage person from gambling on the site.125 Age verification is a pressing problem testing Internet gambling operators. The industry, underpinned vitally by reputation, involves an automated process of signing up for an account, that ensures an age and or identity is genuine. Unsurprisingly, all the elements of human intervention, whether the customer looks old enough, or whether they have a secondary proof of identity are inappropriate on the Internet. Section 63 of the Gambling Act, uses the key phrases ‘reasonable belief about person’s age’, and ‘reasonable steps to determine the individual’s age;’ however what those steps are, is yet to be determined but it is likely that the industry has the tools to comply with these demands. An important challenge for the operators is to balance the cost of global age verification against the risk of erroneously refusing paying customers. Consequently, the most pertinent verification systems will be sufficiently flexible to include data and telephone checks, and where the data is sourced from a range of international public and commercial sources. The investment made by Internet gambling operators to ensure that customers are aged eighteen, could turn out to be like the ‘cloud with a silver lining’ with the commercial side-effect of eliminating fraud, by running age and identity verification processes as thoroughly as possible. If this can be achieved in a socially responsible manner, it would facilitate the development of a

124 T. Mackay, Internet Gambling in Canada Waits in Legal Purgatory, National Policy Working Group, Policy Discussion Document, 2004, <www.ccsa.ca/NR/rdonlyres/9367E3DE504F-476E-9F02-CBA1BB733C84/0/ccsa0111282004.pdf> (accessed 4 April 2008). 125 Hilton Group Plc, Corporate Social Responsibility Report 2005, <www.ladbrokesplc.com/ images/gallery/!%20Downloads%20!/Reports/CSR%20Report%202005.pdf> (accessed 6 February 2008). 200



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successful, responsible and respected Internet gambling operation and would result in compliance without incapacitating costs. It could be argued that regulation, the emergence of the Gambling Commission, negative brand exposure and the impact on profits associated with underage and fraudulent gambling, have put the industry under pressure and therefore, it is vital that operators prove they can act in a ‘socially responsible’ manner, accepting the responsibility toward the communities in which they operate very seriously.

5. Approaches to Ensuring Fair Gambling The Gambling Commission requires operators to have documented policies and procedures as part of their internal controls and financial accounting systems to combat money laundering. There should be no greater risk to the remote gambling industry in regard to money laundering compared with any other e-commerce business. An example of a regulation targeting money laundering is in Antigua and Barbuda’s legislation whereby no payment in excess of $5,000 may be made from a player account unless there is satisfactory evidence of the player’s age, place of residence and identity. Payouts of over $25,000 are subject of a significant transaction report to the supervisory authority within forty-eight hours of the payment being made. This is an example of how remote gambling offers a significant audit trail of financial transactions compared to traditional cash-based industries.126 There is no common approach between jurisdictions to make remote gambling ‘fair and open’ for example through the use of a standard kite-mark. Licensing authorities have their own kite-marks to signify that licensees offer ‘fair and open’ gambling. The Gambling Commission in Britain has recommended that operators must provide clear information about their rules, odds, house edge, average returns to player and disputes and complaints procedures. Some sort of display of licensed status will be available to British remote gaming operators.

6. Responsible Gambling: Developing a Comprehensive Approach Responsible gambling is an important step in moving the industry closer to social responsibility. Verlik argues that social responsibility is the ethical accountability framework for the gambling industry which defines principles, policies, practices

126 National Gambling Board, Report on the Regulation of Interactive Gambling, 2005, <www. ngb.org.za/uploadsreportOnTheRegulationOfInteractiveGambling1.pdf> (accessed 7 February 2008). 201

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and codes of conduct designed to ensure, the protection of stakeholders, the sustainability of industry, and quality of life improvements in the ‘communities’ in which it operates.127 However, definitions of ‘Responsible Internet Gambling’ are problematic and there is no accepted definition in management or business dictionaries or ethical textbooks. Various definitions are available for Responsible Gambling, but there remains no consensus. The Chief Executive of the Remote Gambling Association writes ‘ there is no universally accepted definition and that is largely because the focus has been on defining ‘problem’ rather than ‘responsible’ gambling. They are inter-related but it is understandable why attention has been predominantly on problem gambling’.128 McMillen and McAllister129 write that responsible gambling is a ‘variable and dynamic concept’ however with little discussion about the precise meaning of the term and the industry offers responsible gambling in terms of a ‘protected environment, playing wisely and within budget’130 or ‘staying in control’.131 Responsible gambling is the continuum of policies, strategies and programs designed to prevent gambling related problems and adverse community impacts by supporting and enabling individuals to make informed choices, to take responsibility for their gambling decisions, and to let them know how and where to get help if they experience problems.132 Responsible gambling is an essential component for both gambling operators and the regulators of the industry. Assisting customers in maintaining control over their gambling, providing options for those who are having problems, and preventing underage access is not only the right thing to do, it is also good business.133 It could be argued, responsible gambling not only benefits the industry by placing it in a better light in terms of social responsibility, but ultimately will win over consumers and possibly legislators. 127 K. Verlik, Social Responsibility: An Evidenced-Based Framework for Gaming, 6th Annual Alberta Conference on Gambling Research, 2007, (accessed 26 April 2007). 128 See: Hawkswood as quoted in C. Jawad (2006). 129 J. McMillen and G. McAllister, Responsible Gambling: Legal and Policy Issues (Australian Institute for Gambling Research, University of Western Sydney, 2000), <www.aic.gov. au/conferences/gambling00/mcmillen2.pdf> (accessed 3 April 2006). 130 See: ParadisePoker.com as quoted in C. Jawad (2006). 131 See: Vegasred.com as quoted in C. Jawad (2006). 132 A. Blaszczynski, L. Sharpe and M. Walker, The Assessment of the Impact of the Reconfiguration on Electronic Gaming Machines as Harm Minimisation Strategies for Problem Gambling, 2006, <www.psych.usyd.edu.au/gambling/GIO_report.pdf> (accessed 24 April 2007); K. Verlik (2007). 133 Gambling Commission, Problem gambling has not increased, but the level remains a challenge, 2007, <www.gamblingcommission.gov.uk/Client/mediadetail.asp?mediaid=244> (accessed 4 April 2008); D. Grayson, Getting Serious About CSR in the Gambling Sector, 2006, <www.davidgrayson.net/display_article?id=2147> (accessed 6 May 2008). 202



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While the technology that allows an individual to gamble 24 hours a day in the comfort of one’s home may increase the risk of problems, that same technology has the potential to provide safeguards at a level that would be difficult in traditional land based sites. Information regarding responsible gambling and problem gambling can easily be communicated. Options for setting time and money limits, including exclusion, are fairly simple. Even advanced responsible gambling initiatives where patrons exhibiting problematic play patterns are approached and provided information, are possible. A recent review of 60 popular Internet poker, casino and sports-betting sites revealed wide variations in the extent and types of player protection strategies.134 A recent analysis of twenty popular Internet gambling sites revealed wide variations in the categories of player protection features. Some sites minimally provided a statement concerning age limits or a link to a Gamblers Anonymous site. At the other end, there were sites that provided self-exclusion options, an on-site counsellor and opportunities for setting time, money and loss limits. Some of this variation is because of territorial or jurisdictional regulatory differences. Some jurisdictions require that Internet gamblers can self-exclude and or set daily or weekly deposit limits.135 To date, the available research offers little insight into the extent and nature of problems associated with Internet gambling, and the effectiveness of player protection options in helping players control their gambling. Most information is based on general population prevalence studies. There is a distinct of lack of research that has investigated features of responsible gambling and their efficacy. What little has been done has been either inconclusive or has only found partial support for their effectiveness.136 Responsible gambling features such as pop-ups for time, cash and cashing out at EGMs, proved to be features that did help customers but were not overly effective.137

7. Regulation and Protecting Consumers The comprehensible advantages associated with regulating the industry are similar to those of the land-based gambling. Regulation means that consumer protection would be enhanced because Internet users could choose to gamble

134 J. Wiebe, Internet gambling safeguards: What are online gaming sites doing to protect customers (Responsible Gambling Council, 2006), <www.responsiblegambling.org/articles/ NewslinkFallWinter2006.pdf> (accessed 27 January 2008). 135 See: C. Jawad (2006). 136 See: A. Blaszczynski et al. (2006). 137 M. Mcgee, Fostering Evidence-Based Decision Making in Responsible Gambling Programming, 2003, <www.international-responsible-gaming.org/wp-content/uploads/2007/10/ margaret-mcgee.pdf> (accessed 4 February 2008). 203

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with a regulated and legitimate gambling operation rather than an unknown and possibly unscrupulous, offshore company.138 Opponents of Internet gambling frequently advance the argument that it should be prohibited because the unregulated nature of the activity is a serious problem and people should not be playing in an unregulated environment.139 Regulation of the Internet by government is seen as important not just to make the activity legal, but because it makes the gambling sites credible to potential customers.140 Existing interpretations of gambling generally fall into two ‘camps’ the ‘medical’ camp which sees gambling as an illness and an addiction from which vulnerable individuals need protection and the ‘commercial’ camp made up of those who believe that the gambling industry should be free to operate without any interference from central government.141 Skolnick highlights the dilemma facing policy makers, in balancing the material benefits that gambling can offer to vulnerable groups in society with curbing the ‘wicked pleasures’ of gambling.142 Gambling regulation traditionally rested on two assumptions.143 Firstly, that gambling is a socially common activity which, if unregulated, can create adverse social costs. To safeguard against these possible harmful effects, regulation extends to cover Internet gambling consequently reinforcing the control. Traditionally, it has been the government’s role to neither prevent people from gambling nor to facilitate them to do so and therefore, liberal regulation is a dramatic shift away from the conventionally strict regulatory control of the supply of gambling facilities and the principle of unstimulated demand largely has been abandoned.144 The easing of restrictions gives the gambling industry more freedom to increase its appeal and choice.145 Despite the efforts of the government and industry to convince us that gambling for the vast majority of

138 S. Kish, ‘Betting on the net: an analysis of the government’s role in addressing Internet Gambling’, Federal Communications Law Journal, Volume 51 no. 2, 1999. 139 G. Wheelwright, ‘Odds Improve on Internet Gaming’, Financial Post, 20 December 1997, (accessed 21 December 2006). 140 D. Schollenberger, Remote Gaming – Will operators now flock to the UK?, 2005, <www. manches.com/text/sectors/gaming/article.php?id=57> (accessed 4 May 2007). 141 G. Reith (ed.), Gambling: Who Wins? Who Loses? (New York, Prometheus Books, 2003). 142 J. Skolnick, ‘Regulating vice: America’s struggle with wicked pleasure’, in: G. Reith (2003), pp. 311–321. 143 D. Miers (2004). 144 Ibidem. 145 See: R. Light (2007). 204



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people is a safe, harmless entertainment and leisure activity146 what can be a harmless pastime for a majority can become a terrible addiction for a few.147 Whilst, the government accepts that people require protection against gambling exploitation or addiction it has dismissed the claim that problem gambling will increase after this legislation.148 A recent survey ascertained that the rate of problem gambling in the adult population was approximately 0.6% and this equates to about 284,000 adults. This is the same percentage of the population the same screen identified in 1999.149 The government’s Review of Gambling Research, Education and Treatment will be published in September 2008 and it will be fascinating to see if the government will act on its findings should they conflict with the modernisation of gambling in Great Britain.

8. The Social Responsibility of Operators Corporate social responsibility in gambling is the operators promoting the well-being and the minimisation of harm among gambling consumers and the wider community bearing in mind customers as key stakeholders.150 As Internet gambling operators look for ways to remain competitive, corporate social responsibility strategies can be a way to comply with licensing conditions and diverse codes of conduct and as a possible means to gain an advantage in an intensely competitive market. In Britain, the Commission is required to publish a social responsibility code for operators to ensure that: – gambling is conducted in a fair and open way

– children and other vulnerable persons are protected from harm or exploitation



– help is available to those affected by problems gambling

146 Remote Gambling Association (RGA), Gambling Industry Code for Socially Responsible Advertising, 2007, <www.rga.eu.com/shopping/images/Code%20on%20SR%20in%20 advertising.pdf (accessed 5 February 2008). 147 See: R. Light (2007). 148 A. McIntosh, Minister for Gambling Regulation, press conference 27 October 2004; see also: DCMS, ‘McIntosh Sets the Record Straight On Gambling Bill’, Press Release, 28 October 2004. 149 H. Wardle et al. (2007). 150 J. Parke, J. Rigbye, A. Parke, L. Williams, R. Wood and J. Sjenitzer, Corporate Social Responsibility (CSR) in Internet Gambling: Players’ Perspectives, 2007, <www.internationalresponsible-gaming.org/wp-content/uploads/2007/10/parke-csr-players-irgo.pdf> (accessed 6 April 2008). 205

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Social responsibility is a British licence condition for operators requiring for example, that products should not be specifically attractive to children however, it remains to be seen how the operators will deal with these requirements. Further, as Light reflects on both a moral and practical note how operators will notify a young person’s parents about their child’s gambling and then how operators will work with parents to overcome these problems.151 The issues are completely distinct; firstly, whether privacy protections are warranted and secondly the practical issues and how they can be implemented. The Commission published a draft consultation paper in March 2006 which stated that operators should, for example, provide information to customers on how to gamble responsibly and obtain information on problem gambling. Also, contained in the paper is that operator policies should be designed to allow staff to recognise and take appropriate action with potential problem gamblers. Furthermore, the Gambling Commission must ensure that operators comply with this social responsibility code. Operators must publish policies and procedures for promoting socially responsible gambling including details of the ways in which they will contribute to research and education on the risks of gambling and the treatment of problem gamblers.152 This is of course the code for operators who choose to hold a British licence for their gambling operation and it will be interesting to examine the numbers of operations that choose this route. On 12 September 2007, the Gambling Commission had received only 146 applications for operating licences that include provision for online gambling, leaving out most of the 2,500 sites worldwide.153 The balance between personal, society and industry responsibility is raised in the Reno Model, a position paper that outlines the principles and strategic framework for responsible gambling.154 They formulated this framework to assist gambling operators, regulatory agencies, health and welfare workers and community members to develop a systematic applied approach to gambling. The basic premise is that the ultimate decision to gamble resides with an individual and represents a choice and governments are responsible for providing regulatory controls and setting the parameters under which gambling can be offered as a product that takes into account consumer protection.

151 See: R. Light (2007). 152 DCMS (2006). 153 C. Jawad and S. Griffiths, A Critical Analysis of Online Gambling Websites (Swansea Metropolitan University, 2008). 154 See: A. Blaszczynski et al. (2006). 206



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9. Responsible Gambling: What Does it Entail? ‘Have fun and please play responsibly.’155 Even this gentle warning about gambling does not have to exist in Britain today and that is despite there being ‘a whole generation who won’t go to betting shops but will instead gamble online’.156 Responsible gambling features have been designed to control excessive play and are being used by the industry and increasingly are stipulated by governments.157 Responsible gambling features that are intended to assist customers in remaining in control of their gambling can be built into software and electronic gaming devices and can reduce the speed of games, the extent intervals between games and modify the size of bets, as well as lay down automatic cash-outs after a set period of playing time. Information also known as reality checks about the amount of time and money a player has spent on a machine can also be programmed to pop up on the screen, along with responsible gambling messages.158 Player protection, player awareness and education, harm minimisation and treatment are all included within the frame of ‘responsible gambling.’ The practices involved include player complaint mechanisms, responsible marketing, gambling information, design of gaming software, self-exclusion procedures and financial support for problem gambling services.159 The technology which has given birth to Internet Gambling can contribute to harm minimisation strategies in the form of player protection for Internet gambling. However, there is generally a failure to draw upon existing literature on harm minimisation as it relates to other leisure or pleasure products that affect public health e.g. alcohol and cigarettes.160 One reason for interest in responsible gambling has been concern about litigation. A problem gambler has taken legal action against a bookmaker for negligence after losing £2 million when he was supposed to be excluded; he wants William Hill to pay back his losses on the grounds it failed in its duty of care.161 The customer upon accepting his gambling

155 See: (accessed 13 July 2008). 156 C. Hawkswood, cited in: M. Aitken (2006). 157 G. Reith, ‘Research on the Social Impacts of Gambling’, 2006, <www.scotland.gov.uk/ Resource/Doc/143770/0036514.pdf> (accessed 3 February 2008). 158 Ibidem. 159 N. Hing, M. Dickerson and J. Mackellar, National audit of responsible gambling in Australia, Melbourne. Report prepared for the Australian Gaming Council, 2001. 160 M. Dickerson (2003). 161 International Responsible Gaming Organisation (IRGO), Compulsive gambler sues bookmaker to recover losses, 2008, <www.international-responsible-gaming.org/category/news/> 207

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was getting out of control, closed his account and suggests he was offered self exclusion, whereby an individual is not allowed to place further bets. However, two months later, the customer opened a new account with the bookmaker, in his own name and went on to lose £2 million. He claims William Hill was negligent permitting him to continue to gamble after agreeing he would be self excluded and it should be held responsible for the consequences.

10. Why was the Legislation in the UK Changed? The government transformed gambling legislation with the 2005 Act for several reasons and there is likely to be some truth in all of the probable answers.162 Firstly, it has been argued that the government wanted to offer a safer regulated Internet gambling environment so that players could gamble on regulated rather than unregulated offshore sites. Banning Internet gambling does not work as the US is finding out.163 It might be argued that it is far better to have revenues from gambling, with some set aside to be used to help problem gamblers, than have no revenue but still have the problems due to unregulated gambling. However, it remains to be seen how the money to be set aside will be calculated and collected. The new gambling laws replaced out of date legislation that did not take account of new developments and technologies. Secondly, gambling as an entertainment generates a significant tax revenue and foreign investment and there is considerable potential exists for UK-based firms to develop foreign markets. Thirdly, it is hoped that regulated gambling will help to avoid the development of illegal and or unregulated gambling.164 Gambling is a supply driven industry and research has demonstrated a tendency to gamble increases with availability and as a result the government and gambling industry support responsible gambling probably because the long term future of gambling is dependent upon it being accepted as a low impact form of entertainment. If problem gambling gets extensively worse then both government and industry look deficient and flawed and it could be argued that it is better to allow something and control it than to prohibit it and have no control and a thriving black market instead.

(accessed 18 February 2008). 162 W. Bartlett, Global Betting and Gaming Consultants (2007). 163 A. LaPlante, ‘Online Casinos Intend to Make a Game of It’, Information Week, February – April 2008, <www.informationweek.com/news/showArticle.jhtml?articleID=198800719> (accessed 2 February 2008). 164 See: W. Bartlett (2007). 208



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11. The Challenge of Internet Ethics The phenomenon of Internet gambling is just one aspect of a plethora of problematic applications of e-commerce and e-business. Many share common concerns, are influenced by the qualities of the Internet and have familiar solutions advocated by competing stakeholders. It is possible that the issues posed by Internet gambling could be informed by the manner in which other Internet business dilemmas are approached, a possible future comparative research project.165 It is difficult to offer definitive analysis of the problem of Internet gambling, let alone solutions to a problem, that is ill defined and where a lack of consensus is evident. Nevertheless the ‘genie is out of the bottle’, as Greenfield asserts the technology is pervasive, its impact is ubiquitous, creating the ‘Everyware’, a new cyber sensitive world which can not be uninvented.166 This world may create new problems which must be managed, but also offers solutions. The fact that society must accommodate Internet gambling does not mean that social responsibility is abandoned. However balance between the advantages of liberal permissiveness and the perceived benefits of more assertive regulation must be approached with caution. The negative spectres of a rule-free Hobbesian state of nature or a draconian police state, need not be the result. The research positively identifies self regulatory practices by Internet gambling sites, which are quickly evolving in the light of dialogue with authorities, conventional gambling regulatory regimes and other stakeholders. While dialogue does not produce speedy frameworks, it allows participants to absorb mutually relevant issues and avoids the disadvantages of over reactive external controls.167 The framework of Lessig168 and Spinello169 is recognisable in this review of development, see Figure 1.

165 L. Lessig, The Future of Ideas: The Fate of the Commons in a Connected World (New York, Random House, 2002); R. De George, The Ethics of Information Technology and Business (Oxford, Blackwell, 2003); N. Bowie, ‘Digital Rights and Wrongs: Intellectual Property in the Information Age’, Business Society Review,110, 1, 2005. 166 N. Bowie (2005). 167 B. Stahl, ‘What is the Social Responsibility in the Information Age? Maximising Profit?’, in: Current Security Management & Ethical Issues of Information Technology (PA, USA, Idea Group Publishing Hershey, 2003). 168 L. Lessig, Code and Other Laws of Cyberspace (New York, Basic Books, 1999). 169 R. Spinello, Cyberethics: Morality and Law in Cyberspace (New York, Jones and Bartlett, 2002). 209

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Figure 1: Constraints of Cyberspace activities. Adapted from Lessig (1999) and Spinello (2003). Core Moral Values [Legacy of individual values of agents including Gambling Site Providers & Internet Gamblers]

Law National Economic region, e.g. EU External constraints

Code

Norms

Physical constraints of Internet architecture

Community sense of standards of behaviour

Market Commercial incentives to be responsible

Self executing

CYBERSPACE

As Spinello170 discusses how core moral values could positively improve the four constraints identified by Lessig.171 Regulators, law makers, cyberspace community members and general market participants, inevitably are influenced by personal ethical precepts, which in turn impact on their activities on the Internet. The need for education and training to develop these, evaluation of common or consensual principles or virtues and practice in application, could help improve the positive impact on the constraining factors. Spinello seems optimistic about the goodness of human values in this area. Others may offer a more critical or sceptical account. The problem of the jurisdiction of the law over the Internet has been discussed. Economic regional organisations and powerful governments continue to attempt to restrict ethical risk factors. It appears that the expense evidenced by the

170 Ibidem. 171 L. Lessig (1999). 210



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People’s Republic of China’s attempt to restrict Internet access,172 the ability of programmers to evade controls173 and the social acceptance of many practices traditionally thought to be unethical, make this element only a partial solution at best or often ‘a futile effort’.174 The IT industry offers hard and software containment solutions. Code limits access to sites, programmes can filter messages, images and verify user identity. Control features empower parents and teachers to censor child access, yet the demand for controversial Internet services often overrides these checks, particularly over time. Cyberspace norms are evolving ‘netiquette’ and acceptable behaviour customs. The Internet community may discipline unethical and irresponsible members, providers and customers, similar to conventional society’s reliance on shame and social stigma to enforce cultural standards. Markets and commercial imperatives, often seen as the cause of unethical behaviour, can drive the responsibility agenda. Particularly for high profile and long term providers, there are monetary incentives to make ‘good ethics, good business’ a reality. Advertisers, IT specialists, customers and competing site providers prefer to deal with responsible organisations. Overlapping with enforcement of cyber community norms, flaming, social networking blogs, professional commentating,175 characteristic components of the ‘Everyware’ paradigm, mean a fast, high volume and powerful reaction to unethical behaviours, which impact on commercial success. As Badaracco and Useem warn this could include irresponsible and unaccountable cyber bullying by ‘vigilante’ commentators in the Everyware community.176 This could include bullying of the innocents as evidenced by the Gogerty case.177 This involved a young student backpacker who was forced to remove his traveller’s blog following 24 hours of flaming, which alleged that he had received nepotistic unfair help in setting up his The Guardian newspaper site. Possible changes in power relationships online need further investigation. Ultimately the appearance of the Internet ‘Everyware’ at once threatens to merge communities in a faceless mass, yet may demand increasing individual responsibility in Internet conduct, self regulation to generate positive ethical

172 J. Watts, ‘Behind the Great Firewall’, The Guardian, 9 February 2008. 173 R. de George (2003). 174 See: R. Spinello (2002). 175 M. Caulkins, ‘Rippers, Portal Users and Profilers: Three Web-based Issues for Business Ethicists’, Business and Society Review, Volume 107, no. 1, 2002, pp. 61–75. 176 J. Badaracco and J. Useem, ‘The Internet, Intel and the Vigilante Stakeholder’, Business Ethics. A European Review, Volume 6, Issue 1, 1997. 177 R. Behr, ‘Backpackers, bullies and internet myths’, The Observer, 17 February 2008; C. Davies, ‘Hate mail hell of a gap-year blogger’, The Observer, 17 February 2008. 211

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consequences and engagement in reform. Individual citizens, corporations and consumers’ values are likely to have more impact than attempts to control externally. The positive evidence of self regulation by gambling sites is a sign that too reactive external censorship could destroy benefits as much as protecting the interests of a vulnerable minority.

12. Conclusion Gambling on the Internet raises some difficult issues, but can provide theoretical opportunities for operators to deliver responsible gaming programs that meet or exceed current standards in the land-based gambling industry. Technological and security controls and safeguards include the ability to control the amount of money wagered, set limits on amounts deposited, restrict the duration that somebody can play, identify and stop players whose gambling patterns seem out of the ordinary and allow for consumers to be excluded from Internet gambling and the Internet gambling websites in this study evidenced these features on their homepage or within their sites, to varying degrees. The graphic-like and interactive structure of the Internet provides a revolutionary opportunity to create informed customers and also to provide access to a variety of information designed to encourage safe choices and discourage unsafe behaviour. Further, the tools of control, for customers experiencing problems with their gambling, can be used effectively. However, it remains to be seen just how effectively the tools of control will be used by operators and customers alike and if they will be valuable for problem gamblers in any way. Researchers, academics, regulators and gambling operators are becoming more interested in the questions surrounding responsible gambling and the duty of care toward their customers, similar to the way that providers of alcohol have been held accountable to their customers.178 It has been argued that these developments have encouraged regulators and operators to do more to prevent and avoid problem gambling. Some governments such as New Zealand and the Australian States of Victoria and New South Wales have introduced Responsible Gambling Acts defining the parameters of responsible gambling.179 It could

178 M. Behrmann and K. Brown, ‘What’s New?’, Newslink, Spring/Summer 2002, <www. responsiblegambling.org/articles/NewslinkSpring2002.pdf> (accessed 16 March 2008). 179 Independent Pricing and Regulatory Tribunal of New South Wales, Gambling: Promoting a culture of responsibility, 2004, <www.responsiblegambling.org/articles/ gambling_promoting_a_culture_of_responsibility_june_2004.pdf> (accessed 13 March 2008). 212



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perhaps be argued that transparent and approved mechanisms are needed to ensure both user confidence and a fair and sustainable industry. As regulators of gambling, governments implement harm minimisation measures to protect the public, including protection for underage and problem gamblers, ensuring gambling is crime free, and conducted in accordance with regulation. If the UK government wants to be the world leader of Internet gambling,180 it could be argued that government would want the sites to be the world leaders of social responsibility and responsible gambling and to provide the best player protection that they can. However, if the UK wants to lead the world, it might be another impossible war to win. This is an international problem – a global industry and global audience and not something the UK can supervise by turning to others and encouraging them to get their own houses in order. Internet operators have welcomed the advantages of being offshore for a number of reasons including relaxed taxation and legislation. If the UK gets too rigorous then operators will navigate this island’s legislation and head for another rock in the sea elsewhere and the UK will have lost the limited control it currently has. Two things are certaIn people will continue to gamble and prohibition by government is not going to happen. Those in favour if regulation insist gambling is a leisure pursuit, a form of social entertainment and a right of adults in a free society and that accordingly, banning Internet gambling is an infringement of this right. This argument advances standards to be put in place to protect consumers. Proponents in favour of regulation stress it will allows for checks and ensure fairness to safeguard gamblers and to provide links to problem gambling support agencies and will ensure that restrictions against underage gambling are implemented and enforced. However, as far as Internet gambling is concerned, ‘the genie is out of the bottle’.181 Whatever actions governments take, gambling opportunities will proliferate in cyberspace. It could be argued that by providing a basic regulatory foundation which would ensure the integrity of domestic Internet gambling enterprises, customers could be confident of getting a fair deal in jurisdictions. The concept therefore of regulating Internet gambling on this global scale demands cooperation over regulation. Jurisdictions go from a free market approach to absolute prohibition. Restrictions on gambling are feeble because the Internet makes it increasingly effortless for customers to access offshore sites and overcome regulatory regimes.

180 D. Gadher and M. Goodman (2006). 181 J. McMillen and P. Grabosky, Trends & Issues in Crime and Criminal Justice No. 88: Internet gambling, 1998, <www.aic.gov.au/publications/tandi/tandi88t.html> (accessed 4 April 2008). 213

Crime, Addiction and the Regulation of Gambling

The UK government has taken the initiative in working towards a political consensus internationally,182 but given the different policies towards gambling and its regulation in jurisdictions across the world, progress is likely to be slow. Therefore, if responsible Internet gambling is to take place, it will be the result of self-regulation and the use of new technology by the industry and regulators. The fact that Internet gambling is not legal in some jurisdictions is not preventing people gambling online. Whether or not Internet gambling is prohibited or regulated it is not going away. Corporate social responsibility (CSR) models vary in scope. Narrow interpretations limit corporations to economic and legal responsibilities. As discussed there may be hope that good ethical practice will be adopted by Internet gambling sites which wish to have a long term presence, in order to achieve economic objectives. Rational gamblers will choose to be loyal to responsible trustworthy sites. However short termist sites may exhibit irresponsible behaviour in order to skim profits and move on. Clearly the lack of global legal or regulatory sanctions removes the ‘legal’ guarantor of the narrow CSR perspective. As a result there will be demands for more stringent governmental controls, in this international legal vacuum, to regulate short term operators and to protect vulnerable irrational gamblers. Broad interpretations of CSR, which add ethical and philanthropic dimensions to the elements of the narrow model, are problematic to apply to regulatory initiatives. Evidence is presented in this contribution to confirm that Internet gambling sites are voluntarily adopting CSR features and that industry norms are being shred. However the apparent altruism of such ethical behaviour may be challenged by viewing the motive for such adoption as being commercial and philanthropic activities are minimal or irrelevant. Stakeholder analysis rarely gives clear guidance to regulatory authorities. This is apparent in the different priorities of EU and UK regulators. The former defends gambler privacy, while the latter encourages monitoring and possible corporate exclusion of problem gamblers. The threat of external regulation combined with the economic drivers could offer the possibility that the industry will take greater steps to address the concerns of society. Ultimately governments, regional authorities, site operators and stakeholders need to clarify good practice, identify irresponsible behaviour and unite to offer collaborative approaches to reduce the negative consequences of growth in the industry. Further research must be undertaken to indicate an accurate picture of Internet gambling. The current body of knowledge on online gambling consists

182 D. Teather, ‘Online gambling firms in £1.6bn merger talks’, The Guardian, 30 October 2006, <www.guardian.co.uk/technology/2006/oct/30/news.frontpagenews> (accessed 2 February 2008). 214



Preventing Problem Gambling on the Internet

of undersized surveys of special populations, and relies largely on self-reporting and anecdotes.183 Recent research suggests that the convenience of Internet gambling together with its immersive qualities, may lead to much higher than average levels of game play. This, for some people, may facilitate the surfacing of a gambling problem. Further validating and untangling the dynamics of this potential relationship between problem and Internet gambling also remains the task of future research.

183 R. Labrie, ‘Need for More Research Before Going “Mad” Over March Madness’, The Wager, Volume 11(3), 2006, <www.basisonline.org/2006/03/the-wager-vol-1.html> (accessed 4 November 2007). 215

Concluding Remarks Cyrille Fijnaut

The various contributions to this book demonstrate in different ways how much the gambling market in the European Union and its Member States is in a state of flux. Not only is the size of this market growing at a fast pace, but also its diversity, the latter mainly as a result of the rapid development of online gambling. The effect of all this, of course, is that it is becoming an increasingly attractive proposition for companies to operate in this expanding market, but it also means that national governments, which traditionally have direct or indirect control of this market, are coming under growing pressure to relinquish their control and open up the market to both national and foreign gambling companies. It is easy to understand why the Member States usually have difficulty responding to this challenge. For centuries national governments in Europe, for all sorts of reasons, have been responsible not only for the organisation of the gambling market, but also for the nature, scale and integrity of the forms of gambling available. There is no doubt that these reasons owe much to political ideology and financial raison d’état; nor can it be denied, however, that social problems are a significant factor in this context. On the one hand, we are talking about various types of crime that are justifiably associated with the organisation of gambling and, on the other, about varying degrees of addiction that participation in gambling, or at least in some forms of it, can cause. Since the Member States together make up the European Union, and within that form the Economic Community, they do not have the liberty or the autonomy to formulate an appropriate answer to the aforementioned challenge of their own individual accord. On the contrary, in working out their response, they are bound by the principles underlying the organisation of the internal market. The problem is that, in a sense, these principles are relative, not absolute, i.e. they offer room for exceptions. This situation creates the major difficulty of determining for which reasons exceptions are justified. In this case it means that many Member States tend to invoke crime and addiction problems to defend their viewpoint that offering gambling activities may be a service in economic terms, but that these same problems justify placing restrictions on providing this

Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 217–220 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

service in the internal market. In many cases these restrictions specifically boil down to maintaining and sometimes even strengthening the monopolies that the Member States have established, directly or indirectly, in the key sectors of their gambling market. This viewpoint is challenged not only by private gambling operators in Europe, understandably so, but also by the European Commission, which – as the Netherlands’ case demonstrates – suspects Member States of improperly invoking these problems in order to ensure that the revenues derived from gambling go into the public treasury and to so-called good causes. In its successive judgments, the European Court of Justice has never dared go this far, though it has sympathised with the problems that the Member States have to contend with in this market. The upshot of these conflicting perspectives on the situation is that not only do Member States not know where they stand in the short and longer term; private entrepreneurs are also left in a state of uncertainty. The consequence of this is that we are seeing all kinds of remarkable developments and happenings in the individual Member States. For instance, the French government recently said that it wants to open up online gambling to private operators, but is unwilling to give up its traditional monopolies under any circumstances. Furthermore, a private sports betting operator claimed some time ago that ‘Europe’ gives him the freedom to open a betting shop in Sweden, in Stockholm, contrary to existing national legislation. These events signal the fact that, sooner or later, the Member States will have to give up their established positions in the gambling market and that private gambling companies will supplant existing national monopolies. We are a long way off reaching that stage, however: not all Member States want to follow the example of the UK, or even that of France, and up to now they have been assured of the support of the European Court of Justice, within certain limits. Another factor that plays into their hands is that so little empirical research into crime and addiction problems has been conducted in the European Union. This enables them to invoke these problems to defend their viewpoints without undue trouble, even up to the level of the Court of Justice. The European Commission may find this regrettable, but it cannot, of course, demand that the Member States make up the huge deficit in research immediately. In any case, they are not in a position to do so even if they wanted to, for the simple reason that most Member States do not have enough researchers with the right qualifications to undertake sound research in this field. Conversely, the lack of sufficient good empirical research in the field of gambling makes it difficult for the European Commission, and perhaps even the European Council and the European Parliament at some stage, to impose its will on the Member States. How could the Commission – without a sound basis – garner sympathy from the Council and the Parliament for its view of the situation? This

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Concluding Remarks

is all the more so since the Commission itself has done absolutely nothing to encourage research on crime and addiction related to gambling in the past. In this kind of scenario the Commission would be unlikely to have major problems challenging the argument of gambling addiction. From the point of view of regulation, this is certainly not the most difficult issue. In the first place, national governments can easily take significant preventive measures themselves, for example barring EGMs from readily accessible premises such as bars, canteens and snack bars. Secondly, they can automatically demand that private entrepreneurs, individually and collectively, build up a comprehensive network of facilities for the treatment of gambling addicts. The funding and set-up of these facilities could easily be covered by the terms of the licences granted to them. The situation is more difficult when it comes to the problem of crime, at least where this involves the illegal supply of specific types of gambling (e.g. in the form of online or other illegal casinos) or illegal control of key areas of the legal gambling market (e.g. the installation and management of EGMs). In this particular case, national governments will not only have to employ criminal, administrative or fiscal measures themselves in order to combat these forms of gambling crime effectively, but will also have to be able to rely on other Member State governments in this respect. The latter will have to be prepared to offer criminal, administrative and fiscal assistance to other EU Member States and also to take continuous positive action against criminal groups or networks wishing to earn money, a lot of money, in the gambling market, both in their own country and elsewhere. It is then reasonable to ask whether these governments will do this generously and, if necessary, on a large scale. Is this truly so, for example, in the case of Italy, when the Italian government itself acknowledges in Placanica that large sections of the gambling market are in criminal hands? Given its rather formal stance in this matter, I expect that the European Commission will argue that Italy, just like other Member States, is obliged to combat serious crime in its gambling market and that there is therefore no reason to bar, for example, Italian gambling operators from the gambling markets of France, Germany, Spain and the Netherlands. But what if Italy does not tackle this effectively and companies controlled by criminals are also seeking to penetrate these foreign markets? Are appropriate channels in place for lawfully collecting the necessary information about these companies in Italy and using it as grounds for refusing a licence in Germany or anywhere else in the European Union? Not in my opinion. In conclusion, the above comments raise the question of whether it is not time for drastic action in the debate about the organisation of the European gambling market. Should the European Council not assume its responsibility in this matter and, with the help of the Commission and the Parliament, develop a cohesive, modern gambling policy for the whole of the EU? It almost goes without saying

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that such a policy – if only because of the time required to create the necessary accompanying measures – could only be introduced in phases. An initiative of this kind by the Council would at least deliver the Commission from the hopeless dilemma of whether it should try to solve the problems of the gambling market by means of harmonisation, or attempt to keep these problems under control by bringing an endless stream of infringement procedures before the European Court of Justice. Moreover, a multinational research programme on the likely success and effects of a new gambling policy might make it easier for the Member States to gradually drop their opposition to the European Commission.

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Appendix Cases C-338/04, C-359/04 and C-360/04, Placanica, Palazzesse and Sorricchio

Joined Cases C-338/04, C-359/04 and C-360/04 Criminal proceedings against Massimiliano Placanica and Others (References for a preliminary ruling from the Tribunale di Larino and the Tribunale di Teramo) (Freedom of establishment – Freedom to provide services – Interpretation of Articles 43 EC and 49 EC – Games of chance – Collection of bets on sporting events – Licensing requirement – Exclusion of certain operators by reason of their type of corporate form – Requirement of police authorisation – Criminal penalties) Opinion of Advocate General Colomer delivered on 16 May 2006€ JUDGMENT OF THE COURT (Grand Chamber), 6 March 2007€ Summary of the Judgment 1. Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Restrictions (Arts 43 EC and 49 EC) 2. Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Restrictions (Arts 43 EC and 49 EC) 3. Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Restrictions (Arts 43 EC and 49 EC) 1. National legislation which prohibits the pursuit of the activities of collecting, taking, booking and forwarding offers of bets, in particular bets on sporting events, without a licence or a police authorisation issued by the Member State concerned, constitutes a restriction on the freedom of establishment and the freedom to provide services, provided for in Articles 43 EC and 49 EC respectively. The objective of combating criminality by making the operators active in the sector subject to control and channelling the activities of betting and gaming into Spapens, Littler & Fijnaut (eds), Crime, Addiction and the Regulation of Gambling, 221–240 ©2008 Koninklijke Brill NV. ISBN 978 90 04 17218 0. Printed in the Netherlands.

Crime, Addiction and the Regulation of Gambling

the systems thus controlled is capable of justifying those obstacles, a licensing system being capable, in that regard, of constituting an efficient mechanism. However, it is for the national courts to determine whether, in limiting the number of operators active in the betting and gaming sector, that national legislation genuinely contributes to that objective. By the same token, it will be for the national courts to ascertain whether those restrictions are suitable for achieving the objective pursued, do not go beyond what is necessary in order to achieve those objectives, and are applied without discrimination. (see paras 49, 52, 57–58, operative part 1–2) 2. Articles 43 EC and 49 EC must be interpreted as precluding national legislation which excludes from the betting and gaming sector operators in the form of companies whose shares are quoted on the regulated markets. Independently of the question whether the exclusion of companies quoted on the regulated markets applies, in fact, in the same way to operators established in the Member State concerned and to those from other Member States, that blanket exclusion goes beyond what is necessary in order to achieve the objective of preventing operators active in the betting and gaming sector from being involved in criminal or fraudulent activities. (see paras 62, 64, operative part 3) 3. Articles 43 EC and 49 EC must be interpreted as precluding national legislation which imposes a criminal penalty on persons for pursuing the organised activity of collecting bets without a licence or a police authorisation as required under the national legislation, where those persons were unable to obtain licences or authorisations because that Member State, in breach of Community law, refused to grant licences or authorisations to them. Although in principle criminal legislation is a matter for which the Member States are responsible, Community law sets certain limits to their power, and such legislation may not restrict the fundamental freedoms guaranteed by Community law. Furthermore, a Member State may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the Member State concerned in breach of Community law. (see paras 68–69, 71, operative part 4) JUDGMENT OF THE COURT (Grand Chamber) 6 March 20071 (Freedom of establishment – Freedom to provide services – Interpretation of Articles 43 EC and 49 EC – Games of chance – Collection of bets on sporting events – Licensing requirement – Exclusion of certain operators by reason of their type of corporate form – Requirement of police authorisation – Criminal penalties) 1 Language of the case: Italian 222



Appendix

In Joined Cases Câ•‚338/04, Câ•‚359/04 and Câ•‚360/04, REFERENCES for a preliminary ruling under Article 234 EC, by the Tribunale di Larino (Italy) (Case Câ•‚338/04) and the Tribunale di Teramo (Italy) (Cases Câ•‚359/04 and Câ•‚360/04), by decisions of 8 July 2004 and 31 July 2004, received at the Court on 6 August 2004 and 18 August 2004 respectively, in the criminal proceedings before those courts against:

Massimiliano Placanica (Case Câ•‚338/04),



Christian Palazzese (Case Câ•‚359/04),



Angelo Sorricchio (Case Câ•‚360/04),

THE COURT (Grand Chamber), composed of V.€Skouris, President, P.€Jann, C.W.A. Timmermans, A.€Rosas and K.€Lenaerts (Presidents of Chambers), J.N. Cunha Rodrigues, R.€Silva de Lapuerta, K.€Schiemann (Rapporteur), G.€Arestis, A.€Borg Barthet and M.€Ilešicˇ, Judges, Advocate General: D.€Ruizâ•‚Jarabo Colomer, Registrar: L.€Hewlett, Principal Administrator, having regard to the written procedure and further to the hearing on 7€March 2006, after considering the observations submitted on behalf of: – Mr Placanica and Mr Palazzese, by D. Agnello, avvocatessa,

– Mr Sorricchio, by R.A. Jacchia, A.€Terranova, I.€Picciano and F.€Ferraro, avvocati,



– the Italian government, by I.M. Braguglia, acting as Agent, assisted by A.€Cingolo and F. Sclafani, Avvocati dello Stato (Cases Câ•‚338/04, Câ•‚359/04 and Câ•‚360/04),



– the Belgian government, initially by D. Haven and subsequently by M.€Wimmer, acting as Agents, assisted by P.€Vlaemminck and S.€Verhulst, advocaten (Case Câ•‚338/04),



– the German government, by C.â•‚D. Quassowski and C.€Schulzeâ•‚Bahr, acting as Agents (Case Câ•‚338/04),



– the Spanish government, by F. Díez Moreno, acting as Agent (Cases Câ•‚338/04, Câ•‚359/04 and Câ•‚360/04),



– the French government, by G. de Bergues and C. Bergeotâ•‚Nunes, acting as Agents (Case Câ•‚338/04),



– the Austrian government, by H. Dossi, acting as Agent (Cases Câ•‚338/04, Câ•‚359/04 and Câ•‚360/04),

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– the Portuguese government, by L.I. Fernandes and A.P. Barros, acting as Agents (Cases Câ•‚338/04, Câ•‚359/04 and Câ•‚360/04), assisted by J.L. da Cruz Vilaça, advogado (Case Câ•‚338/04),



– the Finnish government, by T. Pynnä, acting as Agent (Case Câ•‚338/ 04),



– la Commission of the European Communities, by E. Traversa, acting as Agent (Cases Câ•‚338/04, Câ•‚359/04 and Câ•‚360/04),

after hearing the Opinion of the Advocate General at the sitting on 16€ May 2006, gives the following Judgment 1 The references for a preliminary ruling concern the interpretation of Articles 43 EC and 49 EC. 2 The references have been made in the course of criminal proceedings against Mr€Placanica, Mr€Palazzese and Mr€Sorricchio for failure to comply with the Italian legislation governing the collection of bets. The legal and factual context of these references is similar to the situations that gave rise to the judgments in Case Câ•‚67/98 Zenatti [1999] ECR Iâ•‚7289 and Case Câ•‚243/01 Gambelli and Others [2003] ECR Iâ•‚13031. Legal context 3 Italian legislation essentially provides that participation in the organising of games of chance, including the collection of bets, is subject to possession of a licence and a police authorisation. Any infringement of that legislation carries criminal penalties of up to three years’ imprisonment. Licences 4 Until 2002 the awarding of licences for the organising of bets on sporting events was managed by the Italian National Olympic Committee (Comitato olimpico nazionale italiano (CONI)) and the National Union for the Improvement of Horse Breeds (Unione nazionale per l’incremento delle razze equine (UNIRE)), which had the authority to organise bets relating to sporting events organised or conducted under their supervision. That resulted from Legislative Decree No 496 of 14 April 1948 (GURI No€118 of 14 April 1948), read in conjunction with Article 3(229) of Law No€549 of 28 December 1995 (GURI No€302 of 29 December 1995, Ordinary Supplement) and Article 3(78) of Law No€662 of 23 December 1996 (GURI No€303 of 28 December 1996, Ordinary Supplement).

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Appendix

5 Specific rules for the award of licences were laid down, in the case of CONI, by Decree No€174 of the Ministry of Economic Affairs and Finance of 2€June 1998 (GURI No€129 of 5 June 1998; ‘Decree No€174/98’) and, in the case of UNIRE, by Decree No€169 of the President of the Republic of 8€April 1998 (GURI No€125 of 1 June 1998; ‘Decree No€169/98’). 6 Decree No€174/98 provided that the award of licences by CONI was to be made by means of calls for tender. When awarding the licences, CONI had, in particular, to make sure that the share ownership of the licence holders was transparent and that the outlets for collecting and taking bets were rationally distributed across the national territory. 7 In order to ensure transparency of share ownership, Article 2(6) of Decree No€174/98 provided that where the licence holder took the form of a company, shares carrying voting rights had to be issued in the name of natural persons, general partnerships or limited partnerships, and could not be transferred by simple endorsement. 8 Similar provision was made with regard to the award of licences by UNIRE. 9 In 2002, following a number of legislative initiatives, the competences of CONI and UNIRE with respect to bets on sporting events were transferred to the independent authority for the administration of State monopolies, acting under the supervision of the Ministry of Economic Affairs and Finance. 10 Pursuant to an amendment introduced at that time by Article 22(11) of Law No€289 of 27 December 2002 (GURI No€305 of 31 December 2002, Ordinary Supplement; ‘the 2003 Finance Law’) all companies – without any limitation as to their form – may now take part in tender procedures for the award of licences. Police authorisation 11 Police authorisation may be granted only to those who hold a licence or authorisation granted by a Ministry or other body to which the law reserves the right to organise or manage betting. Those conditions are laid down in Article 88 of Royal Decree No€773, approving a single text of the laws on public security (Regio Decreto No€773, Testo unico delle leggi di pubblica sicurezza), of 18 June 1931 (GURI No€146 of 26 June 1931), as amended by Article 37(4) of Law No€388 of 23 December 2000 (GURI No 302 of 29 December 2000, Ordinary Supplement; ‘the Royal Decree’). 12 Furthermore, by virtue of Article 11 of the Royal Decree, read in conjunction with Article 14 thereof, a police authorisation may not be issued to a person who has had certain penalties imposed on him or who has been convicted of certain 225

Crime, Addiction and the Regulation of Gambling

offences, in particular offences reflecting a lack of probity or good conduct, and infringements of the betting and gaming legislation. 13 Once authorisation has been granted, the holder must, pursuant to Article 16 of the Royal Decree, permit law enforcement officials access at any time to the premises where the authorised activity is pursued. Criminal penalties 14 Article 4 of Law No€ 401 of 13 December 1989 on gaming, clandestine betting and ensuring the proper conduct of sporting contests (GURI No€294 of 18 December 1989) as amended by Article 37(5) of Law No€ 388 (‘Law No€401/89’) provides as follows in respect of criminal penalties for malpractice in the organising of games of chance: ‘1. Any person who unlawfully participates in the organising of lotteries, betting or pools reserved by law to the State or to entities operating under licence from the State shall be liable to a term of imprisonment of 6 months to 3 years. Any person who organises betting or pools in respect of sporting events run by CONI, or by organisations under the authority of CONI, or by UNIRE shall be liable to the same penalty. Any person who unlawfully participates in the public organising of betting on other contests between people or animals, or on games of skill, shall be liable to a term of imprisonment of 3 months to 1 year and a minimum fine of ITL 1€000€000. … 2. Any person who advertises competitions, games or betting organised in the manner described in paragraph 1, albeit without being an accomplice to an offence defined therein, shall be liable to a term of imprisonment of up to 3 months and a fine of between ITL€100€000 and ITL€1€000€000. 3. Any person who participates in competitions, games or betting organised in the manner described in paragraph 1, albeit without being an accomplice to an offence defined therein, shall be liable to a term of imprisonment of up to 3 months or a fine of between ITL€100€000 and ITL€1€000€000. 4a. The penalties laid down in this article shall be applicable to any person who, without the concession, authorisation or licence required by Article 88 of [the Royal Decree], carries out activities in Italy for the purposes of accepting or collecting, or, in any case, of assisting the acceptance or in any way whatsoever the collection, including by telephone or by data transfer, of bets of any kind accepted by any person in Italy or abroad. …’

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Appendix

Case-law of the Corte suprema di cassazione 15 In its judgment No 111/04 of 26 April 2004 in Gesualdi, the Corte suprema di cassazione (Supreme Court of Cassation) (Italy) was called upon to determine whether the Italian betting and gaming legislation is compatible with Articles 43 EC and 49 EC. On completion of its analysis, that court reached the conclusion that the Italian legislation does not conflict with Articles 43 EC and 49 EC. 16 In Gesualdi, the Corte suprema di cassazione noted that, for several years, the Italian legislature had been pursuing a policy of expansion in the betting and gaming sector with the manifest aim of increasing tax revenue, and that the Italian legislation could not be justified by reference to the aim of protecting consumers or of limiting their propensity to gamble or of limiting the availability of games of chance. Rather, the Corte suprema di cassazione identified as the true purpose of the Italian legislation a desire to channel betting and gaming activities into systems that are controllable, with the objective of preventing their exploitation for criminal purposes. That is why the Italian legislation provided for the control and supervision of the persons who operate betting and tipster contests, as well as the premises in which they do so. In the view of the Corte suprema di cassazione, that objective is sufficient in itself to justify the restrictions on the freedom of establishment and the freedom to provide services. 17 As regards the conditions designed to ensure the transparency of the share ownership of licence holders – the principal effect of which is to exclude from tender procedures for licences companies whose individual shareholders are not always identifiable at any given moment – the Corte suprema di cassazione found in Gesualdi that the Italian legislation did not discriminate against foreign companies at all, even indirectly, since it had the effect of excluding not only the foreign companies whose shareholders cannot be precisely identified, but also all the Italian companies whose shareholders cannot be precisely identified. The main proceedings and the questions referred for a preliminary ruling The award of licences 18 According to the documents before the Court, CONI – acting in accordance with the Italian legislation – launched a call for tenders on 11€December 1998 for the award of 1€ 000 licences for sports betting operations, that being the number of licences considered on the basis of a specific assessment to be sufficient for the whole of the national territory. At the same time, a call for tenders in respect of 671 new licences for the taking of bets on competitive horse events was organised by the Ministry of Economic Affairs and Finance in agreement with the Ministry of Agricultural and Forestry Policy, and 329 existing licences were automatically renewed.

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19 The application of the provisions concerning the transparency of share ownership that were in force at the time of those calls for tender had primarily the effect of excluding the participation of operators in the form of companies whose shares were quoted on the regulated markets, since in their case the precise identification of individual shareholders was not possible on an ongoing basis. Following those calls for tender, a number of licences – valid for six years and renewable for a further six years – were awarded in 1999. Stanley International Betting Ltd 20 Stanley International Betting Ltd (‘Stanley’) is a company incorporated under English law and a member of the group Stanley Leisure plc (‘Stanley Leisure’), a company incorporated under English law and quoted on the London (United Kingdom) stock exchange. Both companies have their head office in Liverpool (United Kingdom). Stanley Leisure operates in the betting and gaming sector and is the fourth biggest bookmaker and the largest casino operator in the United Kingdom. 21 Stanley is one of Stanley Leisure’s operational conduits outside the United Kingdom. It is duly authorised to operate as a bookmaker in the United Kingdom by virtue of a licence issued by the City of Liverpool. It is subject to controls by the British authorities in the interests of public order and safety; to internal controls over the lawfulness of its activities; to controls carried out by a private audit company; and to controls carried out by the Inland Revenue and the United Kingdom customs authorities. 22 In the hope of obtaining licences for at least 100 betting outlets in Italy, Stanley investigated the possibility of taking part in the tendering procedures, but realised that it could not meet the conditions concerning the transparency of share ownership because it formed part of a group quoted on the regulated markets. Accordingly, it did not participate in the tendering procedure and holds no licence for betting operations. Data transmission centres 23 Stanley operates in Italy through more than 200 agencies, commonly called ‘data transmission centres’ (DTCs). The DTCs supply their services in premises open to the public in which a data transmission link is placed at the disposal of bettors so that they can access the server of Stanley’s host computer in the United Kingdom. In that way, bettors are able – electronically – to forward sports bets proposals to Stanley (chosen from lists of events, and the odds on them, supplied by Stanley), to receive notice that their proposals have been accepted, to pay their stakes and, where appropriate, to receive their winnings.

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24 The DTCs are run by independent operators who have contractual links to Stanley. Mr Placanica, Mr Palazzese and Mr Sorricchio, the defendants in the main proceedings, are all DTC operators linked to Stanley. 25 According to the case-file forwarded by the Tribunale (District Court) di Teramo (Italy), Mr€ Palazzese and Mr€ Sorricchio applied, before commencing their activities, to Atri Police Headquarters for police authorisation in accordance with Article 88 of the Royal Decree. Those applications met with no response. The reference for a preliminary ruling from the Tribunale di Larino (Case Câ•‚338/04) 26 Accusing Mr Placanica of the offence set out in Article 4(4a) of Law No€401/89 in that, as a DTC operator for Stanley, Mr Placanica had pursued the organised activity of collecting bets without the required police authorisation, the Public Prosecutor brought criminal proceedings against him before the Tribunale di Larino (Italy). 27 That court expresses misgivings as to the soundness of the conclusion reached by the Corte suprema di cassazione in Gesualdi, with regard to the compatibility of Article 4(4a) of Law No€401/89 with Community law. The Tribunale di Larino is uncertain whether the public order objectives invoked by the Corte suprema di cassazione justify the restrictions at issue. 28 Accordingly, the Tribunale di Larino decided to stay proceedings and to refer the following question to the Court for a preliminary ruling: ‘Does the Court of Justice consider Article 4(4a) of Law No 401/89 to be compatible with the principles enshrined in Article 43 [EC] et seq. and 49 [EC] concerning the freedom of establishment and the freedom to provide cross-border services, having regard to the difference between the interpretation emerging from the decisions of the Court … (in particular the judgment in Gambelli and Others) and the decision of the Corte Suprema di Cassazione, Sezione Uniti, in Case No 23271/04? In particular, the Court is requested to rule on the applicability in Italy of the rules on penalties referred to in the indictment and relied upon against [Mr]€Placanica.’ The references for a preliminary ruling from the Tribunale di Teramo (Cases Câ•‚359/04 and Câ•‚360/04) 29 The Atri police authorities charged Mr Palazzese and Mr€Sorricchio with pursuing, without a licence or a police authorisation, an organised activity with a view to facilitating the collection of bets, and placed their premises and equipment under preventive seizure on the basis of Article 4(4a) of Law No€401/89. Upon

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confirmation of the seizure measures by the Public Prosecutor, Mr€Palazzese and Mr Sorricchio each brought an action challenging those measures before the Tribunale di Teramo. 30 In the view of that court, the restrictions imposed on companies quoted on the regulated markets, which prevented them in 1999 from taking part in the last tender procedure for the award of licences for the operation of betting activities, are incompatible with the principles of Community law because they discriminate against operators who are not Italian. In consequence – like the Tribunale di Larino – the Tribunale di Teramo has doubts as to whether the judgment in Gesualdi is sound. 31 In those circumstances, the Tribunale di Teramo decided to stay proceedings and to refer the following question to the Court for a preliminary ruling: ‘The District Court [of Teramo] needs to know, in particular, whether [the first paragraph of Article 43 EC and the first paragraph of Article 49 EC] may be interpreted as allowing the Member States to derogate temporarily (for 6 to 12 years) from the freedom of establishment and the freedom to provide services within the European Union, and to legislate as follows, without undermining those Community principles:

– allocating to certain persons licences for the pursuit of certain activities involving provision of services, valid for 6 or 12 years, on the basis of a body of rules which excluded from the tender procedure certain kinds of (non-Italian) competitors;



– amending that system, after subsequently noting that it was not compatible with the principles enshrined in Articles 43 [EC] and 49 [EC], so as to allow in future the participation of those persons who had been excluded;



– not revoking the licences granted on the basis of the earlier system which, as stated, infringed the principles of freedom of establishment and of free movement of services or setting up a new tender procedure pursuant to the new rules which now comply with the abovementioned principles;



– continuing, on the other hand, to bring criminal proceedings against anyone carrying on business via a link with operators who, [despite] being entitled to pursue such an activity in the Member State of origin, were nevertheless unable to seek an operating licence precisely because of the restrictions contained in the earlier licensing rules, later repealed?’

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32 By order of the President of the Court of 14 October 2004, Cases Câ•‚359/04 and Câ•‚360/04 were joined for the purposes of the written and oral procedures and of the judgment. By a second order of the President of the Court of 27 January 2006, Case Câ•‚338/04 was joined with Joined Cases Câ•‚359/04 and Câ•‚360/04 for the purposes of the oral procedure and of the judgment. Admissibility of the questions referred for a preliminary ruling 33 In Case Câ•‚338/04, all the governments which lodged observations – with the exception of the Belgian government – call in question the admissibility of the question referred. With regard to Cases Câ•‚359/04 and Câ•‚360/04, the Italian and Spanish governments question the admissibility of the question referred. With regard to Case Câ•‚338/04, the Portuguese and Finnish governments submit that the reference from the Tribunale di Larino does not contain sufficient information to enable a reply to be given whereas, according to the Italian, German, Spanish and French governments, the question referred concerns the interpretation of national law, not Community law, and in consequence calls for the Court to rule on the compatibility with Community law of rules of national law. The Italian and Spanish governments express the same reservation as regards the admissibility of the question referred in Cases Câ•‚359/04 and Câ•‚360/04. 34 Concerning the information that must be provided to the Court in the context of a reference for a preliminary ruling, it should be noted that that information does not serve only to enable the Court to provide answers which will be of use to the national court; it must also enable the governments of the Member States, and other interested parties, to submit observations in accordance with Article 23 of the Statute of the Court of Justice. For those purposes, according to settled case-law, it is firstly necessary that the national court should define the factual and legislative context of the questions it is asking or, at the very least, explain the factual circumstances on which those questions are based. Secondly, the referring court must set out the precise reasons why it was unsure as to the interpretation of Community law and why it considered it necessary to refer questions to the Court for a preliminary ruling. In consequence, it is essential that the referring court provide at the very least some explanation of the reasons for the choice of the Community provisions which it requires to be interpreted and of the link it establishes between those provisions and the national legislation applicable to the dispute in the main proceedings (see to that effect, inter alia, Joined Cases Câ•‚320/90 to Câ•‚322/90 Telemarsicabruzzo and Others [1993] ECR Iâ•‚393, paragraph 6; Joined Cases Câ•‚453/03, Câ•‚11/04, Câ•‚12/04 and Câ•‚194/04 ABNA and Others [2005] ECR Iâ•‚10423, paragraphs 45 to 47; and Case Câ•‚506/04 Wilson [2006] ECR Iâ•‚0000, paragraphs 38 and 39). 35 The reference from the Tribunale di Larino (Case Câ•‚338/04) meets those requirements. In so far as the national legal context, and the arguments relied 231

Crime, Addiction and the Regulation of Gambling

upon by the parties are in essence identical to those in Gambelli and Others, a reference to that judgment was sufficient to enable the Court, as well as the governments of Member States and the other interested parties, to identify the subject-matter of the dispute. 36 Admittedly, as regards the division of responsibilities under the cooperative arrangements established by Article 234 EC, the interpretation of provisions of national law is a matter for the national courts, not for the Court of Justice, and the Court has no jurisdiction, in proceedings brought on the basis of that article, to rule on the compatibility of national rules with Community law. On the other hand, the Court does have jurisdiction to provide the national court with all the guidance as to the interpretation of Community law necessary to enable that court to rule on the compatibility of those national rules with Community law (see, in particular, Case Câ•‚55/94 Gebhard [1995] ECR Iâ•‚4165, paragraph 19, and Wilson, paragraphs 34 and 35). 37 In that regard, the Advocate General pointed out, quite correctly, at point 70 of his Opinion that, on a literal reading of the question referred for a preliminary ruling by the Tribunale di Larino (Case Câ•‚338/04), the Court is being asked to rule on the compatibility with Community law of a provision of national law. Nevertheless, although the Court cannot answer that question in the terms in which it is framed, there is nothing to prevent it from giving an answer of use to the national court by providing the latter with the guidance as to the interpretation of Community law necessary to enable that court to rule on the compatibility of those national rules with Community law. 38 As for the question referred for a preliminary ruling by the Tribunale di Teramo (Cases Câ•‚359/04 and Câ•‚360/04), this identifies with precision the effects of a number of national legislative developments and asks the Court whether those effects are compatible with the EC Treaty. It follows that, by that question, the Court is not being called upon to rule on the interpretation of national law or on the compatibility of national law with Community law. 39 The questions referred must therefore be declared admissible. The questions referred for a preliminary ruling 40 It is clear from the case-files forwarded to the Court that an operator wishing to pursue, in Italy, an activity in the betting and gaming sector must comply with national legislation characterised by the following elements: – the obligation to obtain a licence;

232

– a method of awarding those licences, by means of a tender procedure excluding certain types of operator and, in particular, companies whose



Appendix

individual shareholders are not always identifiable at any given moment;

– the obligation to obtain a police authorisation; and



– criminal penalties for failure to comply with the legislation at issue.

41 By the questions referred, which it is appropriate to consider together, the national courts essentially ask whether Articles 43 EC and 49 EC preclude national legislation on betting and gaming, such as that at issue in the main proceedings, in so far as it contains such elements. 42 The Court has already ruled that, in so far as the national legislation at issue in the main proceedings prohibits – on pain of criminal penalties – the pursuit of activities in the betting and gaming sector without a licence or police authorisation issued by the State, it constitutes a restriction on the freedom of establishment and the freedom to provide services (see Gambelli and Others, paragraph 59 and the operative part). 43 In the first place, the restrictions imposed on intermediaries such as the defendants in the main proceedings constitute obstacles to the freedom of establishment of companies established in another Member State, such as Stanley, which pursue the activity of collecting bets in other Member States through an organisation of agencies such as the DTCs operated by the defendants in the main proceedings (see Gambelli and Others, paragraph 46). 44 Secondly, the prohibition imposed on intermediaries such as the defendants in the main proceedings, under which they are forbidden to facilitate the provision of betting services in relation to sporting events organised by a supplier, such as Stanley, established in a Member State other than that in which the intermediaries pursue their activity, constitutes a restriction on the right of that supplier freely to provide services, even if the intermediaries are established in the same Member State as the recipients of the services (see Gambelli and Others, paragraph 58). 45 In those circumstances, it is necessary to consider whether the restrictions at issue in the main proceedings may be recognised as exceptional measures, as expressly provided for in Articles 45 EC and 46 EC, or justified, in accordance with the case-law of the Court, for reasons of overriding general interest (see Gambelli and Others, paragraph 60). 46 On that point, a certain number of reasons of overriding general interest have been recognised by the case-law, such as the objectives of consumer protection and the prevention of both fraud and incitement to squander on gaming, as well as the general need to preserve public order (see, to that effect, Case Câ•‚275/92 Schindler [1994] ECR Iâ•‚1039, paragraphs 57 to 60; Case Câ•‚124/97 Läärä and 233

Crime, Addiction and the Regulation of Gambling

Others [1999] ECR Iâ•‚6067, paragraphs 32 and 33; Zenatti, paragraphs 30 and 31; and Gambelli and Others, paragraph 67). 47 In that context, moral, religious or cultural factors, as well as the morally and financially harmful consequences for the individual and for society associated with betting and gaming, may serve to justify a margin of discretion for the national authorities, sufficient to enable them to determine what is required in order to ensure consumer protection and the preservation of public order (Gambelli and Others, paragraph 63). 48 However, although the Member States are free to set the objectives of their policy on betting and gaming and, where appropriate, to define in detail the level of protection sought, the restrictive measures that they impose must nevertheless satisfy the conditions laid down in the case-law of the Court as regards their proportionality. 49 The restrictive measures imposed by the national legislation should therefore be examined in turn in order to determine in each case in particular whether the measure is suitable for achieving the objective or objectives invoked by the Member State concerned and whether it does not go beyond what is necessary in order to achieve those objectives. In any case, those restrictions must be applied without discrimination (see to that effect Gebhard, paragraph 37, as well as Gambelli and Others, paragraphs 64 and 65, and Case Câ•‚42/02 Lindman [2003] ECR Iâ•‚13519, paragraph 25). The licensing requirement 50 Before an operator can be active in the betting and gaming sector in Italy, it must obtain a licence. Under the licensing system in use, the number of operators is limited. So far as concerns the taking of bets, the number of licences for the management of sports bets on competitive events not involving horses is limited to 1€000, as is the number of licences for the acceptance of bets on competitive horse events. 51 It should be made clear from the outset that the fact that that number of licences for each of those two categories was, according to the documents before the Court, considered on the basis of a specific assessment to be ‘sufficient’ for the whole of the national territory could not of itself justify the obstacles to the freedom of establishment and the freedom to provide services brought about by that limitation. 52 As regards the objectives capable of justifying those obstacles, a distinction must be drawn in this context between, on the one hand, the objective of reducing gambling opportunities and, on the other hand – in so far as games of chance are permitted – the objective of combating criminality by making the operators 234



Appendix

active in the sector subject to control and channelling the activities of betting and gaming into the systems thus controlled. 53 With regard to the first type of objective, it is clear from the case-law that although restrictions on the number of operators are in principle capable of being justified, those restrictions must in any event reflect a concern to bring about a genuine diminution of gambling opportunities and to limit activities in that sector in a consistent and systematic manner (see, to that effect, Zenatti, paragraphs 35 and 36, and Gambelli and Others, paragraphs 62 and 67). 54 It is, however, common ground in the present case, according to the case-law of the Corte suprema di cassazione, that the Italian legislature is pursuing a policy of expanding activity in the betting and gaming sector, with the aim of increasing tax revenue, and that no justification for the Italian legislation is to be found in the objectives of limiting the propensity of consumers to gamble or of curtailing the availability of gambling. 55 Indeed it is the second type of objective, namely that of preventing the use of betting and gaming activities for criminal or fraudulent purposes by channelling them into controllable systems, that is identified, both by the Corte suprema di cassazione and by the Italian government in its observations before the Court, as the true goal of the Italian legislation at issue in the main proceedings. Viewed from that perspective, it is possible that a policy of controlled expansion in the betting and gaming sector may be entirely consistent with the objective of drawing players away from clandestine betting and gaming – and, as such, activities which are prohibited – to activities which are authorised and regulated. As the Belgian and French governments, in particular, have pointed out, in order to achieve that objective, authorised operators must represent a reliable, but at the same time attractive, alternative to a prohibited activity. This may as such necessitate the offer of an extensive range of games, advertising on a certain scale and the use of new distribution techniques. 56 The Italian government also referred to a number of factual elements, including, notably, an investigation into the betting and gaming sector, carried out by the Sixth Permanent Committee (Finance and the Treasury) of the Italian Senate. That investigation led to the conclusion that the activities of clandestine betting and gaming, prohibited as such, are a considerable problem in Italy, which it may be possible to solve through the expansion of authorised and regulated activities. Thus, according to that investigation, half the total turnover figure for the betting and gaming sector in Italy is generated by illegal activities. It was also thought that, by extending the betting and gaming activities permitted by law, it might be possible to recover from those illegal activities a proportion of that turnover figure at least equivalent in value to the amount generated by the activities permitted by law. 235

Crime, Addiction and the Regulation of Gambling

57 A licensing system may, in those circumstances, constitute an efficient mechanism enabling operators active in the betting and gaming sector to be controlled with a view to preventing the exploitation of those activities for criminal or fraudulent purposes. However, as regards the limitation of the total number of such licences, the Court does not have sufficient facts before it to be able to assess that limitation, as such, in the light of the requirements flowing from Community law. 58 It will be for the referring courts to determine whether, in limiting the number of operators active in the betting and gaming sector, the national legislation genuinely contributes to the objective invoked by the Italian government, namely, that of preventing the exploitation of activities in that sector for criminal or fraudulent purposes. By the same token, it will be for the referring courts to ascertain whether those restrictions satisfy the conditions laid down by the case-law of the Court as regards their proportionality. The tender procedures 59 The Tribunale di Teramo (Cases Câ•‚359/04 and Câ•‚360/04) expressly refers to the exclusion of companies whose individual shareholders are not always identifiable at any given moment, and thus of all companies quoted on the regulated markets, from tender procedures for the award of licences. The Commission of the European Communities has pointed out that the effect of that restriction is to exclude from those tender procedures the leading Community operators in the betting and gaming sector – operators in the form of companies whose shares are quoted on the regulated markets. 60 By way of a preliminary point, it should be noted that the question of the lawfulness of the conditions imposed in the context of the 1999 tender procedures is far from having been made redundant by the legislative amendments introduced in 2002 and allowing from then on all companies – with no limitation as to their form – to participate in tender procedures for the award of licences. Indeed, as the Tribunale di Teramo pointed out, since the licences awarded in 1999 were valid for six years and renewable for an additional period of six years, and meanwhile no new tender procedure has been planned, the exclusion from the betting and gaming sector of companies quoted on the regulated markets, and of intermediaries such as the defendants in the main proceedings who might act on behalf on such companies, is liable to produce effects until the year 2011. 61 The Court has already ruled that, even if the exclusion from tender procedures is applied without distinction to all companies quoted on the regulated markets which could be interested in those licences – regardless of whether they are established in Italy or in another Member State – in so far as the lack of foreign operators among the licensees is attributable to the fact that the Italian rules

236



Appendix

governing invitations to tender make it impossible in practice for companies quoted on the regulated markets of other Member States to obtain licences, those rules constitute prima facie a restriction on the freedom of establishment (see Gambelli and Others, paragraph 48). 62 Independently of the question whether the exclusion of companies quoted on the regulated markets applies, in fact, in the same way to operators established in Italy and to those from other Member States, that blanket exclusion goes beyond what is necessary in order to achieve the objective of preventing operators active in the betting and gaming sector from being involved in criminal or fraudulent activities. Indeed, as the Advocate General pointed out in point 125 of his Opinion, there are other ways of monitoring the accounts and activities of operators in the betting and gaming sector which impinge to a lesser extent on the freedom of establishment and the freedom to provide services, one such possibility being the gathering of information on their representatives or their main shareholders. Support for that observation is to be found in the fact that the Italian legislature believed it possible to repeal the exclusion completely by the 2003 Finance Law without, however, adopting other restrictive measures in its place. 63 As regards the consequences flowing from the unlawful nature of the exclusion of a certain number of operators from tender procedures for the award of existing licences, it is for the national legal order to lay down detailed procedural rules to ensure the protection of the rights which those operators derive by direct effect of Community law, provided, however, that those detailed rules are not less favourable than those governing similar domestic situations (principle of equivalence) and that they do not make it excessively difficult or impossible in practice to exercise the rights conferred by Community law (principle of effectiveness) (see Case Câ•‚453/99 Courage and Crehan [2001] ECR Iâ•‚6297, paragraph 29, and Joined Cases Câ•‚392/04 and Câ•‚422/04 iâ•‚21€Germany and Arcor [2006] ECR Iâ•‚0000, paragraph 57). In that connection, appropriate courses of action could be the revocation and redistribution of the old licences or the award by public tender of an adequate number of new licences. In any case, it should nevertheless be noted that, in the absence of a procedure for the award of licences which is open to operators who have been unlawfully barred from any possibility of obtaining a licence under the last tender procedure, the lack of a licence cannot be a ground for the application of sanctions to such operators. 64 Articles 43 EC and 49 EC must therefore be interpreted as precluding national legislation such as that at issue in the main proceedings, which excludes – and, moreover, continues to exclude – from the betting and gaming sector operators in the form of companies whose shares are quoted on the regulated markets.

237

Crime, Addiction and the Regulation of Gambling

The police authorisation requirement 65 The requirement that operators active in the betting and gaming sector, as well as their premises, be subject to ex ante controls as well as to ongoing supervision clearly contributes to the objective of preventing the involvement of those operators in criminal or fraudulent activities and appears to be a measure that is entirely commensurate with that objective. 66 However, it is clear from the documents before the Court that the defendants in the main proceedings were ready to obtain police authorisations and to submit to such controls and to such supervision. Nevertheless, since a police authorisation is issued only to licence holders, it would have been impossible for the defendants in the main proceedings to obtain it. On that point, it is also clear from the case-files that, before commencing their activities, Mr Palazzese and Mr Sorricchio had applied for police authorisation in accordance with Article€88 of the Royal Decree, but that their applications met with no response. 67 As the Advocate General pointed out at point 123 of his Opinion, the procedure for granting police authorisations is, in consequence, vitiated by the defects identified above, which taint the award of the licences. Accordingly, the lack of a police authorisation cannot, in any case, be a valid ground for complaint in respect of persons such as the defendants in the main proceedings, who were unable to obtain authorisations because the grant of an authorisation presupposed the award of a licence – a licence which, contrary to Community law, those persons were unable to obtain. The criminal penalties 68 Although in principle criminal legislation is a matter for which the Member States are responsible, the Court has consistently held that Community law sets certain limits to their power, and such legislation may not restrict the fundamental freedoms guaranteed by Community law (see Case Câ•‚348/96 Calfa [1999] ECR Iâ•‚11, paragraph 17). 69 The case-law has also made it quite clear that a Member State may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the Member State concerned, in infringement of Community law (see, to that effect, Case 5/83 Rienks [1983] ECR 4233, paragraphs 10 and 11). 70 It appears that persons such as the defendants in the main proceedings, in their capacity as DTC operators linked to a company organising bets which is quoted on the regulated markets and which is established in another Member State, had no way of being able to obtain the licences or police authorisation required under Italian legislation because, contrary to Community law, Italy 238



Appendix

makes the grant of police authorisations subject to possession of a licence and, at the time of the last tender procedure in the case which is the subject of the main proceedings, had refused to award licences to companies quoted on the regulated markets. In consequence, Italy cannot apply criminal penalties to persons such as the defendants in the main proceedings for pursuing the organised activity of collecting bets without a licence or a police authorisation. 71 Articles 43 EC and 49 EC must therefore be interpreted as precluding national legislation, such as that at issue in the main proceedings, which imposes a criminal penalty on persons such as the defendants in the main proceedings for pursuing the organised activity of collecting bets without a licence or a police authorisation as required under the national legislation where those persons were unable to obtain licences or authorisations because that Member State, in breach of Community law, refused to grant licences or authorisations to such persons. 72 In the light of the foregoing, it is appropriate to state in answer to the questions referred for a preliminary ruling that: 1. National legislation which prohibits the pursuit of the activities of collecting, taking, booking and forwarding offers of bets, in particular bets on sporting events, without a licence or a police authorisation issued by the Member State concerned, constitutes a restriction on the freedom of establishment and the freedom to provide services provided for in Articles 43 EC and 49 EC respectively. 2. It is for the national courts to determine whether, in so far as national legislation limits the number of operators active in the betting and gaming sector, it genuinely contributes to the objective of preventing the exploitation of activities in that sector for criminal or fraudulent purposes. 3. Articles 43 EC and 49 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which excludes – and, moreover, continues to exclude – from the betting and gaming sector operators in the form of companies whose shares are quoted on the regulated markets. 4. Articles 43 EC and 49 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which imposes a criminal penalty on persons such as the defendants in the main proceedings for pursuing the organised activity of collecting bets without a licence or a police authorisation as required under the national legislation, where those persons were unable to obtain licences or authorisations because that Member State, in breach of Community law, refused to grant licences or authorisations to such persons. 239

Crime, Addiction and the Regulation of Gambling

Costs 73 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national courts, the decision on costs is a matter for those courts. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules: 1. National legislation which prohibits the pursuit of the activities of collecting, taking, booking and forwarding offers of bets, in particular bets on sporting events, without a licence or a police authorisation issued by the Member State concerned, constitutes a restriction on the freedom of establishment and the freedom to provide services, provided for in Articles 43 EC and 49 EC respectively. 2. It is for the national courts to determine whether, in so far as national legislation limits the number of operators active in the betting and gaming sector, it genuinely contributes to the objective of preventing the exploitation of activities in that sector for criminal or fraudulent purposes. 3. Articles 43 EC and 49 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which excludes – and, moreover, continues to exclude – from the betting and gaming sector operators in the form of companies whose shares are quoted on the regulated markets. 4. Articles 43 EC and 49 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which imposes a criminal penalty on persons such as the defendants in the main proceedings for pursuing the organised activity of collecting bets without a licence or a police authorisation as required under the national legislation, where those persons were unable to obtain licences or authorisations because that Member State, in breach of Community law, refused to grant licences or authorisations to such persons.

[Signatures]

240

About the Authors

Tilman Becker Tilman Becker is professor at the University of Hohenheim. His main interest is in consumer behaviour. He is the director of the gambling research center at the University of Hohenheim. The gambling research center is a multidiscipinary research center including lawyers, psychologist, economists, mathematicians and all other disciplines interested in gambling from their perspective. More than 20 professors are a member of this research center.

Dick de Bruin Dick de Bruin is a Senior Researcher at CVO Addiction Research Centre in Utrecht, the Netherlands. Trained as a developmental psychologist, he joined CVO in 1991. At CVO he is currently director of quantitative research and management council’s secretary. His expertise is the development of quantitative measurement instruments and statistical analysis. He is a leading specialist with regard to gambling problems and gambling policy in the Netherlands. His main fields of interest are: the development of people course of life in an ecological perspective; the influence of the use of medicine, narcotic plants and substances on people’s health, well-being and development and harm reduction strategies for the use of substances and addiction problems.

Cyrille Fijnaut Cyrille Fijnaut is professor of international and comparative criminal law at the Law School of Tilburg University. In the past he was professor of criminology and criminal law at the Erasmus University Rotterdam and the K.U. Leuven, Belgium. His main research interests are related to organised crime and terrorism, international police and judicial cooperation, comparative criminal procedure and

Crime, Addiction and the Regulation of Gambling

police law, the history of European criminology and of policing in Europe, police and police cooperation in the Benelux. In these fields he wrote and edited some 75 books and published hundreds of articles in learned and professional journals and edited books. In 2004 he edited together with L. Paoli the book ‘Organised Crime in Europe; concepts, patterns and control policies in the European Union and beyond’ (Springer), and together with J. Wouters and F. Naert the book ‘Legal instruments in the fight against international terrorism; a transatlantic dialogue’ (Martinus Nijhoff). His comprehensive history of the Dutch police in the 19th and 20th century was in 2007 published in Amsterdam (Boom). In addition he has worked in the last 15 years as an expert for a number of governmental and parliamentary committees of inquiry in Belgium and the Netherlands with regard to organised and professional crime problems and in relation to security issues. He was a.o. the rapporteur of the committee that investigated the safety and security problems of Pim Fortuin, the Dutch politician who was killed in May 2002. Since 2005 he has a special chair, sponsored by the Dutch State Lottery, on the regulatory aspects of gambling in the European Union.

Stephen Griffiths Stephen Griffiths is currently working at Swansea Metropolitan University. After a period working in industry, primarily British Steel and Sony, Stephen Griffiths worked for a labour union, a municipal authority and then began teaching. He has taught at University of Wales, Swansea and the new Swansea Metropolitan University for 15 years. His teaching interests include Managerial Economics, Marketing and Business Ethics. His research interests include Internet ethics, application of competition models and Internet marketing. Steve leads a number of research projects as Head of the Centre for Post Graduate Studies, at Swansea Business School. For the central University of Wales Validation Unit, Steve travels extensively, counselling and supporting a number of independent universities world wide who offer UW awards.

Nele Hoekx Nele Hoekx obtained a law degree at the K.U. Leuven (2004). She studied at the Université de Montpellier I (2002–2003) and participated in the European Law Moot Court Competition (semi-finalist All European Final 2003–2004). Nele started her career as a full-time researcher at the Contract and Property Research Alliance (K.U. Leuven) in 2004 and worked on a research project on the legal definition of gambling, commissioned by the Ministry of Justice. She also collaborated on a study for the European Commission on alternative means

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About the Authors

of consumer redress. She is currently preparing a doctoral thesis in the field of online gambling.

Caroline Jawad Caroline Jawad has a first degree and an MBA from the University of Wales and is presently a lecturer, PhD student and researcher at Swansea Metropolitan University. Her key research interest is evaluating the effectiveness of responsible gambling features in cyberspace. Her current academic interests reflect the impact of corporate social responsibility models on the gambling industry, the changes in perception of gambling as a leisure-entertainment opportunity and in the political climate, including the impact of pressure/interest groups. Caroline is currently working with several medical practices in order to analyse problem gambling, which is becoming a focus within the NHS in the UK. She is also a counsellor with Gamblers Anonymous, the gambling support charity.

Alan Littler Alan Littler graduated from the University of Dundee (UK) in 2002 in Law (LL.B Hons) and the University of Leiden (the Netherlands) in 2003 in European Community Law (LL.M cum laude) after which he completed an internship with Directorate General Internal Market and Services of the European Commission. After returning briefly to the University of Leiden he is now a researcher at the Tilburg Law and Economics Center (Tilburg University) looking at the regulation of gambling in the European Union.

Gerda Reith Dr Gerda Reith is Senior Lecturer and Research Director of the Gambling Research Group at the University of Glasgow, UK. Her research interests centre on the social and cultural determinants of ‘problematic’ forms of consumption and risk-taking behaviour, such as gambling and the consumption of drugs and alcohol. She has written extensively on these areas, and her book, The Age of Chance: Gambling in Western Culture, won the British Sociological Association prize for 2000. Most recently, with colleagues from New Zealand and the US, she completed A Research Review of Aspects of Problem Gambling, which underpins the current UK gambling research strategy, and in 2006 conducted an analysis of the potential impact of legislative change in Scotland, The Social Impacts of Casinos, for the Scottish Executive. In addition, Dr Reith sits on the editorial boards of International Gambling Studies, Journal of Gambling Issues, and Journal 243

Crime, Addiction and the Regulation of Gambling

of Youth Studies, and has also provided specialist advice to the Department of Health and the Scottish Executive on gambling-related issues.

Toine Spapens Dr. Toine Spapens is a senior researcher at the Faculty of Law at Tilburg University. He is currently participating in the research programme ‘The Regulation of Gambling’, focusing on the topic of gambling and crime. He has recently finished a study of the project Joker, which was aimed at ceasing the activities of illegal casinos in the Netherlands, and successfully completed by the Dutch authorities in 2005. In the past years, studies of organised crime and transnational law enforcement cooperation comprised the main body of Spapens’ research activities. His Phd. thesis (2006) focused on the interaction between organised crime groups and law enforcement, with regard to the production and trafficking of ecstasy in the Netherlands.

François Trucy François Trucy is a member of the General Assembly, Secretary of the State Committee of Finances and Budget Control, Paris, France He has been the Senator for Var since 1989 and is Secretary of the Sénat’s Finance Commission. Trucy gained a degree in medicinal biology from the Faculty of Medicine of the University of Marseille. From 1976 to 1989 he was on the general council of Var, and was mayor of Toulon from 1985 until 1995. Trucy authored the parliamentary report ‘Les jeux de hasard et d’argent en France’ in 2002, and was nominated as the parliamentary member for the Commission Supérieure des Jeux in 2003. In 2006 he published a second parliamentary report on ‘L’évolution des jeux de hasard et d’argent: le modèle français à l’épreuve’’.

Erik Bertil Vagnhammar Erik Bertil Vagnhammar is working as a policy adviser at the Directorate-General Internal Market, European Commission.

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Index

Addictionâ•… 1-8, 11-12, 14, 16-17, 19, 20-22, 26, 32, 47, 49-55, 67, 70, 72, 81-82, 85-86, 89-90, 93-94, 98, 103-104, 109-115, 117-122, 124-127, 132-133, 139, 162-165, 170, 176, 192, 194-195, 204-205, 217-219 Advertisingâ•… 3, 5, 9, 13, 59, 60, 65-66, 74, 78, 81, 87-89, 95, 99, 107, 123, 138, 160, 166, 169, 175, 178, 182-183, 193, 205, 235. Alcoholâ•… 22, 51, 110-111, 162, 166, 169, 172, 175, 182-183, 198, 207, 212 Amusement arcades/Gambling arcadesâ•… 13, 17, 34, 38-39, 44, 87, 106, 119, 121-125, 144-145, 150, 156-157, 160-164, 173 Antigua and Barbudaâ•… 32, 84, 153, 201

35, 40-42, 44-45, 54, 56-57, 62, 66, 70, 75, 84, 88, 91-92, 97, 111, 116-117, 119, 122, 125, 134, 137, 141, 143, 145-156, 158-163, 166, 168-169, 172, 174-175, 188-189, 203, 218, 226 Betting and gaming sector/activities 4, 9-11, 13, 15-16, 19-20, 35, 38, 54, 66, 73, 76, 78, 80-81, 86-87, 92, 107, 222, 227-228, 232-240 Bingoâ•… 13, 17, 56, 61, 109, 111, 125, 145, 166, 169, 175, 186, 188, 189 Bookmaking/bookmakerâ•… 24-26, 28, 35-36, 41-42, 143, 147, 172, 188, 207, 208, 228 Budd, Alanâ•… 183 Bwinâ•… 138, 146-147, 149, 152153

Australiaâ•… 48, 50, 54, 166-167, 199, 212

Canadaâ•… 44, 118, 166-167

Austriaâ•… 29-30, 41, 43, 138, 152

Canalisation/Canaliseâ•… 1, 98, 109 Capone, Alâ•… 25

Belgiumâ•… 29, 41-42, 45, 70-71, 86-88, 90, 97, 103 Betfairâ•… 10, 88, 153-154 Betting (sports, horse racing, spread betting)â•… 3, 5, 7, 17, 20, 24-26,

Casino/Casino gamingâ•… 6-7, 13, 15-17, 20, 28-30, 34-40, 43, 45-47, 52-54, 57, 60-62, 88-89, 93-94, 96-107, 109, 112, 116-117, 119, 121-122, 125-126, 129-133, 135-138, 146, 148-152, 154-156,

Crime, Addiction and the Regulation of Gambling

158-167, 169, 172-173, 175-178, 181-183, 185-187, 189, 191, 194, 197, 199-200, 203, 219, 228 Charities/Charityâ•… 4, 13, 57, 62, 129, 134, 168, 178, 197 Cheat/Cheatingâ•… 19, 22, 33, 40, 43-44 Chinaâ•… 42, 211 Compulsive gamblingâ•… 48, 181, 186, 196 Consistency (of national gambling policy)â•… 65, 74, 92 Consumer protectionâ•… 3-4, 8, 11-12, 59, 64, 72, 74, 80, 82-83, 85-87, 89-90, 121, 174, 177, 203, 205-206, 213, 227, 233-234 Council of state (Netherlands)â•… 1012, 88-90 Costa Ricaâ•… 32, 153, 190 Crimeâ•… 1-6, 8-9, 11-12, 14, 16-17, 19-22, 25, 28, 31, 34-35, 37-41, 43-44, 47-49, 51-54, 67, 70, 72, 77-79, 80-87, 89-95, 102, 127, 129, 135, 137, 170, 172-174, 213, 217-219 Cross-border gambling servicesâ•… 5758, 71, 229 Czech Republicâ•… 41

De Lotto (NL)â•… 3, 5-7 Denmarkâ•… 2 Deregulationâ•… 15, 57, 92, 165, 167-168, 183, 188

246

Donner, Piet Heinâ•… 4 Drugsâ•… 34, 51, 110-111, 136, 172

E-Commerceâ•… 55, 58, 183, 188, 201, 209 Electronic Gambling Machines (EGM)/gaming machinesâ•… 16-17, 31, 38-39, 44, 49, 57, 61, 97-98, 100, 106, 109, 111-113, 116-117, 119, 122-124, 126, 129, 135, 144, 149-150, 152, 154-157, 167, 172, 175, 178, 203, 219 Equivalence (principle of)â•… 237 European case-law C-120/78 Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon), [1979] ECR 00649â•… 70 C-76/90, Manfred Säger v. Dennemeyer & Co. Ltd.â•… 64 C-159/90, The Society for the Protection of Unborn Children Ireland Ltd v. Stephen Grogan and othersâ•… 85 C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jörg Schindlerâ•… 69, 72, 85, 233 C-38/93, H.J. Glawe Spiel- und Unterhaltungsgeräte Aufstellungsgesellschaft GmbH & Co. KG v. Finanzamt Hamburg-BarmbekUhlenhorstâ•… 155 Case C-55/94, Reinhard Gebhard v. Consiglio dell’Ordine degli Avvocati e Procuratori di Milanoâ•… 73 C-124/97, Markku Juhani Läärä, Cotswold Microsystems Ltd and Oy



Index

Transatlantic Software Ltd v. Kihlakunnansyyttäyä (Jyväskylä) and Suomen valtio (Finnish State)â•… 7, 71-73, 84, 233 C-67/98, Questore di Verona v. Diego Zenattiâ•… 3, 71-74, 84, 87, 224, 234-235 C-6/01, Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others v. Estado portuguêsâ•… 71-72, 84, 87 C-131/01, Commission of the European Communities v. Italian Republicâ•… 72 C-243/01, Criminal Proceedings against Piergiorio Gambelli and Othersâ•… 12, 64, 71-78, 80-81, 84, 86-89, 104, 224, 229, 232-235, 237 C-42/02, Diana Elisabeth Lindman v. Skatterättelsenämndeâ•… 64, 73-74, 81, 234 C-147/03, Commission v. Austria 64

European Councilâ•… 55, 58, 62, 218-220 European Gambling and Betting Association (EGBA)â•… 138, 195 European legislation (84/450/EEC) Misleading Advertisingâ•… 59 (89/552/EEC) Television without frontiers Directiveâ•… 60 (98/34/EC) Notification Directive 60 (2000/31/EC) E-Commerce Directiveâ•… 55, 57-58, 61 (2005/60/EC) Money Laundering Directiveâ•… 3, 60, 62-63 (2005/29/EC) Unfair Commercial Practices Directiveâ•… 56, 59, 62 (2006/123/EC) The Services Directiveâ•… 56, 58-59, 92, 138 (2007/65/EC) Audiovisual Media Services Directiveâ•… 56, 60, 62-63

C-260/04, Commission of the European Communities v. Italian Republicâ•… 66, 92

European Parliamentâ•… 55, 58-59, 62, 138, 218

C-338/04, C-359/04 and C-360/04 Placanicaâ•… 6, 8-10, 12, 15, 26, 54, 57, 64, 66, 69-70, 75-82, 86-92, 107, 219, 221, 229

Franceâ•… 2, 12, 14-16, 23, 26, 31, 71, 90, 96, 127-130, 132-134, 136-139, 218-219

C-195/06 Kommunikationsbehörde Austria (KommAustria) v. Österreichischer Rundfunk (ORF)â•… 62, 85 European Commissionâ•… 1-3, 5-10, 12, 14-16, 55-56, 58, 92, 130-132, 137-139, 218-220

Financial Action Task Force (FATF) 46 Finlandâ•… 2, 41, 74 Fraud/fraudulentâ•… 3-5, 8-9, 11, 13, 43, 48, 50, 53, 72, 79-80, 82-86, 89, 92, 134, 136, 173, 200, 201, 222, 233, 235-240 247

Crime, Addiction and the Regulation of Gambling

Games of skillâ•… 29, 31, 61, 99, 101, 112, 121, 142-143, 186, 226 Germanyâ•… 2, 14-17, 20, 29, 41, 97, 141, 143, 147, 149, 153-154, 156, 158, 161-164, 219 Gibraltarâ•… 32, 153, 178, 185, 191 Good causesâ•… 5, 98, 109, 168, 218 Greeceâ•… 31

Hirsch Ballin, Ernstâ•… 6-7, 10, 12 Holland Casinoâ•… 6, 13, 15, 43, 46, 89, 103-105, 109, 121-123, 126 Horse racingâ•… 11, 24-26, 56-57, 61, 130, 147-148, 150, 153, 156 Hoyzer, Robertâ•… 41 Hungaryâ•… 2

Illegal gamblingâ•… 4-7, 9, 12-16, 19, 22, 24-26, 29-31, 33, 36, 43-44, 54, 93-95, 99, 103, 106-107, 119, 125 Infringement procedureâ•… 8, 12, 55, 57, 59, 61, 63, 66-67, 92, 220, 238 Instant Lottery (Scratch cards)â•… 98, 111-112, 116-117, 119, 122, 156, 158 Internal Market (EU)â•… 1, 14-15, 55-59, 61, 92, 217-218 Internetâ•… 3, 10, 16-17, 24, 32-33, 40, 71, 81, 84, 88, 107, 114, 116, 119, 125-127, 130, 137-139, 143, 145, 147, 153, 169, 174, 178, 181-204, 207-215

248

Italyâ•… 2, 8, 21, 26-27, 31, 41, 66, 70, 75-76, 80, 82, 87, 219, 223, 226-229, 232-239

Ladbrokesâ•… 198, 200 Lansky, Meyerâ•… 30, 37 Leisure (industry)â•… 166, 168-169, 175-176, 182-183, 205, 207, 213, 228 Liberalisationâ•… 2, 92, 126, 182, 193 Licenceâ•… 5, 7-8, 10-13, 27, 29-30, 32, 35-36, 39-40, 65-66, 70-71, 75, 76-79, 81-84, 86-91, 153, 195, 206, 219, 221-222, 224-230, 232-240 Lottery/Lotteriesâ•… 2, 13, 16, 20, 27-28, 44-45, 54, 56-57, 62-63, 65, 71, 81, 86-90, 96-99, 109, 111112, 116-117, 119, 122, 129-130, 132-134, 144-145, 148-152, 154-156, 158-170, 174, 182, 186, 189, 196, 226 Lottoâ•… 13, 27-28, 45, 96-97, 109, 111, 119, 125, 158

Maltaâ•… 32, 84, 153, 185, 191 Market (gambling)â•… 1-2, 4, 7, 9-10, 14-17, 54, 67, 75, 80-81, 85, 8991, 93-96, 98-99, 105, 107, 121, 126, 129, 132-133, 135, 137-138, 141-143, 145-150, 152-154, 160161, 163-168, 174, 182, 188-191, 205, 208, 210-211, 213, 217, 218-220, 222, 228, 230, 236-240 Marketingâ•… 65, 67, 89-90, 106, 169, 186-188, 207



Index

McCreevy, Charlesâ•… 3-7, 16 Money Launderingâ•… 3, 19, 28, 3940, 44-46, 60, 62-63, 67, 82, 131, 134-137, 201 Monopoly/monopoliesâ•… 2, 11, 13, 24, 69, 71, 86, 89-91, 129-130, 133, 138, 143-144, 163-164, 167, 177, 218, 225 Moral/moralityâ•… 1, 13, 72, 85, 97, 110, 128, 177, 187, 206, 210, 234 Mutual recognitionâ•… 7, 10, 91-92

National Case Law Court of Appeal Arnhem, 23 November 2004, De Lotto/Betfair, LJN:AR7476 (NL)â•… 88 District Court Breda, 2 December 2005, Compagnie Financière Régionale/Ministers van Justitie en Economische Zaken, LJN: AU7389 (NL)â•… 88 Supreme Court, 18 February 2005 De Lotto/Ladbrokes, LJN:AR4841 (NL)â•… 88 District Court Arnhem, 31 August 2005, De Lotto/Ladbrokes, LJN:AU1924 (NL)â•… 88 Verwaltungsgericht Köln (Germany), 9 October 2006, Winner Wetten GmbH/Mayor of Bergheim, C-409/06, OJ C 326, 30 December 2006â•… 70 Rechtbank van Koophandel in Hasselt (Belgium), 22 December 2006, NV de Nationale Loterij v. BVBA CustomerService Agency,

C-525/06, OJ C 42, 24 February 2007â•… 70 Tribunal de Pequena Instância Criminal do Porto (Portugal), 2 February 2007, Liga Portuguesa de Futebol Profissional (CA/LPFP) and Baw International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, C-42/07, OJ C 69, 24 March 2007â•… 70 Cour de Cassation, Chambre commerciale, 10 July 2007, no. 06–13.986 (Zeturf Case)â•… 90 Verwaltungsgericht Giessen (Germany), 3 September 2007, Avalon Service-Online-Dienste GmbH v. Wetteraukreis, C-409/07 and Olaf Amadeus Wilhelm Happel v. Wetteraukreis, C-410/07, OJ C 283, 24 November 2007â•… 70 National Legislation Act no. 401 of 13 December 1989 on gaming, clandestine betting and ensuring the proper conduct of sporting contests (I) 75 Act of 7 May 1999 on games of chance, gaming establishments and the protection of players (B) 87 Act of 19 April 2002 rationalising the operation and management of the National Lottery (B)â•… 86 Algemene Plaatselijke Verordening (General Municipal Regulation, NL)â•… 102 Betting, Gaming and Lotteries Act of 1963 (UK)â•… 76, 166 249

Crime, Addiction and the Regulation of Gambling

Gaming Act 1968 (UK)â•… 165166

Netherlands Antilles / Dutch Antilles 32, 39-40, 46, 153

Gambling Act 2003 (NZ)â•… 177

New Zealandâ•… 166-167, 177, 212

Gambling Act 2005 (UK)â•… 17, 165-166, 168, 172, 174-175, 177-178, 182-184, 194-195, 200, 208

Oddsâ•… 25-26, 45, 112, 119, 125, 169, 171, 200-201, 228

Internet Gambling Prohibition and Enforcement Act 2006 (US)â•… 189-190, 198 Law No. 200/2003 (I)â•… 66 Licensing Act 2003 (UK)â•… 182 Lotteries and Amusements Act 1976 (UK)â•… 166 Loterijwet 1905 (Lottery Act 1905, NL)â•… 97, 99 Rennwett- und Lotteriegesetz (Betting and Lottery Law, Ger)â•… 155 Rennwett- und Lotteriesteuergesetz (Betting and Lottery Tax Law, Ger)â•… 156 Wet op de Kansspelbelasting (Gambling Taxation Act, NL)â•… 101 Wet op de Kansspelen 1964 (Betting and Gaming Act 1964, NL)â•… 10, 12-13, 30, 97-98, 101-103, 122 National Lottery (UK)â•… 165, 167, 169, 174, 182 National Lottery (B)â•… 86, 87 Netherlandsâ•… 2-3, 5-12, 14-16, 20, 24, 26-30, 32, 34-35, 38-44, 48-51, 71, 88, 90, 93-94, 96, 98-100, 102103, 107, 109-110, 113, 115-121, 125-126, 218-219

250

ODDSETâ•… 146-147, 149, 151-154, 156 Online gamblingâ•… 6, 14, 16-17, 32-33, 58, 67, 71, 91, 146, 153, 172, 178, 186, 188-190, 195, 199, 206, 207, 214, 217-219 Owners/ownershipâ•… 33, 35, 39-40, 75, 77, 225, 227-228

Pari Mutuel Urbain (PMU, F)â•… 91, 129-130, 132-135, 137 Pari mutuel wageringâ•… 25, 97, 147 Pathological gamblingâ•… 17, 47-48, 51-53, 110-113, 115, 117-119, 122-124, 126, 161-163, 185 Pokerâ•… 17, 24, 30-32, 63, 67, 100, 107, 111, 125, 131, 137, 143, 145146, 151, 159, 178, 186, 188, 203 Polandâ•… 41 Policy/Gambling policyâ•… 2-17, 20, 32, 70, 74, 76, 78, 80-84, 86-93, 96, 98-99, 105, 107, 109-110, 113, 120, 123-124, 126-129, 131-134, 136, 139, 173-174, 177, 179, 181183, 204, 219-220, 227, 234-235 Portugalâ•… 41, 70 Prevention (of addiction problems) 3-4, 5, 7, 11-12, 13-14, 16, 64-65,



Index

67, 70, 72, 82, 89-90, 93, 110, 119-126, 139, 181, 184, 186, 202, 212, 219

Slot machinesâ•… 29, 32, 36, 46, 71, 106, 129, 131, 135-136, 144-145, 148-150, 154-155, 158-164, 173

Prevention (of crime/fraud/illegal gambling activities)â•… 3-6, 8-9, 11, 13, 53, 66-67, 72, 76, 80, 83, 8587, 89, 91, 93, 174, 222, 227, 233, 235-240

SMS gamesâ•… 98, 125

Problem gamblingâ•… 51, 55, 64, 67, 167, 170-173, 178, 181, 183-184, 191-197, 199- 200, 202-203, 205208, 212-213 Proportionate/proportionality/ disproportionateâ•… 2-4, 7-8, 10-11, 64, 70, 73-78, 81-84, 86-87, 89-90, 92, 234, 236

South Africaâ•… 167 South Oaks Gambling Screen (SOGS) 47-50, 54, 114-115, 117-118 Swedenâ•… 2, 118, 218

Tax/taxationâ•… 25-26, 36, 39, 4546, 67, 72, 74, 81, 100-102, 130, 132, 150, 154-157, 178, 182, 188, 191, 208, 213, 227, 235 Tourism/touristsâ•… 29, 37, 40, 52, 103, 132

Recreational gamblers/gambling 47, 115

Turkeyâ•… 41

Regulationâ•… 14-15, 54, 57, 75, 84, 87, 93-94, 105, 107, 128, 131, 139, 144, 154, 161, 163-164, 174, 176, 182, 185, 189-191, 195, 201, 203-204, 209, 211-214, 219

United Kingdom (UK)â•… 10, 14-15, 17, 76, 84, 111, 153-154, 173, 178, 184, 186, 199, 208, 213-214, 218, 228

Remote gamblingâ•… 107, 188, 193, 201

United States (US)â•… 19, 20, 22, 24-25, 27-28, 31-36, 37, 40-42, 47, 50, 52, 118, 146, 187, 189, 208

Romaniaâ•… 41 Video pokerâ•… 20, 31 Sapina, Anteâ•… 42 Siegel, Bugsyâ•… 35-36

Ye, Zheyunâ•… 42

251