European and global practices Philipp Vlamminck
- 1. Introduction: European and global practices which can be applied in Ukraine “Gambling in Ukraine: learning from the international experiences”, January 2020, Kyiv, Ukraine. presented by Philippe Vlaemminck, partner at pharumlegal
- 3. Different types of games: The product features and the way the products are experienced by players, is different for lotteries and other types of gambling The player profile of players playing lottery games is typically different from the player profile of players playing casino games or also sports betting Lotteries Betting - horse betting - sports betting - event betting Gambling - casino games - slot machines - arcades
- 4. A hierarchy of games can be made in terms of their risk profile Sports betting can also be very engaging for players as there is often the idea that the player’s knowledge of the competition/teams can help bring about positive results when betting on them Certain forms of betting (e.g. live- betting) are more dangerous and have a short time span between take and result Online casino gambling is considered as more dangerous than land-based sports betting The lowest risk level (addiction, problematic gambling, societal risks etc.) lies with lotteries
- 5. A hierarchy of games can be made in terms of their risk profile (2) The Court of Justice of the European Union and the EFTA Court have recognized that different games lead to different risks of addiction In Carmen Media, the Court recognized that the “short odds games” (e.g. (online) casino games, card games, slot machines), where the potential gratification takes place instantly, generate a higher risk of addiction than “long odds games” (e.g. lottery games) Different risk level requires different approach
- 6. is regulation on lotteries, betting & gambling market needed? why 2
- 7. Lotteries, betting & gambling is sensitive activity which may involve: Organized criminal activities Money-laundering practices Funding of other illicit and criminal activities Defrauding the government of tax revenue Compromising sports integrity by criminals who use gambling to obtain financial advantage through their fraudulent activity
- 8. Lotteries, betting & gambling activities require measures which: Protect consumers & vulnerable groups form being harmed or exploited by gambling Combat illegal gambling activities, betting-related corruption & match-fixing Ensure integrity and fairness of the games Protect integrity & ethics of sports betting Protect society from adverse effects of gambling
- 9. to create a modern framework to regulate lotteries, betting & gambling market? how 3
- 10. WHAT IS NOT PERMITTED IS FORBIDDEN Have a clear definition of what is permitted in your jurisdiction. There should be general prohibition unless explicit permission is given Be aware that new forms of illegal lotteries, betting & gambling activities have emerged (so-called parasite, secondary lottery products) 1
- 11. EFFECTIVE ENFORCEMENT 2 The need to effectively regulate lotteries, betting & gambling activities requires supervision through a regulatory public authority The Regulatory Authority should be subject to parliamentary control to ensure supervision & to be held accountable
- 12. Poland: General supervisory authority for gambling rests with the minister competent for public finance (currently the Minister of Finance). MINISTER AS A REGULATOR Czech Republic: The Ministry of Finance is the gambling supervising authority. Some gambling aspects are also supervised by the Czech Customs Administration (Customs) and by the relevant local municipalities. Finland: The Ministry of the Interior affirms the rules governing gambling via a decree. The National Police Board supervises the implementation of gambling games at national level.
- 13. INDEPENDENT AUTHORITY MIXED SUPERVISION France: the French Autorité de régulation des jeux en ligne, usually referred to as ARJEL Belgium: the Belgian Gaming Commission The UK: the Gambling Commission The Netherlands: The Netherlands Gambling Authority (Ksa)
- 14. • control the operators in all circumstances • act against illegals & exercise its power • impose licence conditions • ensure that licencees comply with the law and with the licence conditions & codes of practice • give specific advice or guidance to licence holders • take remedial or preventive action • review financial information • ... REGULATORY AUTHORITY SHOULD HAVE THE POWER TO: CHARACTERISTICS
- 15. ENABLING CLAUSE SHOULD ALLOW REGULATORY AUTHORITY TO: • act on a short term notice • exercise effective law enforcement tools • impose fines/sanctions against: - bluntly illegal gambling - parasite (secondary) lottery / betting products - lotteries, betting and gambling operations without a license - ...
- 16. LOTTERIES, BETTING & GAMBLING ACTIVITIES SHOULD BE MONITORED State needs to have permanent right to control lotteries, betting and gambling activities including through online systems e.g. to identify players (KYC) All gaming terminals in a jurisdiction have to be connected to monitoring system that enables the regulator to monitor all gaming activities The operator has equally the obligation to monitor player (KYC and responsible gaming)
- 17. CLEAR LICENSING CONDITIONS 3 LICENSEES MUST COMPLY WITH THE FOLLOWING RULES: Financial solvability: can they finance their activity? Will they be able to pay? Integrity: are they reliable? Do they follow the rules and can they be checked? Transparency: is draw taking place in clear and transparent manner?
- 18. • Games • Marketing • Corporate Social Responsibility (CSR) • Retail network • Mobile network • ... Licensing process should not be based only upon financial bid but also:
- 19. Price for a license should at least cover administrative costs of your operations, e.g. maintaining your premises, personnel etc. It varies from country to country depending on conditions for operations, level of taxation, advertising restrictions etc. License should be distinguished from a concession. Concession is a compensation for a right to operate a service. It involves a contractual obligations and transparent bidding process.
- 20. GAME DESIGN 4 Use fair and random RNG systems Take appropriate steps to minimise the risk that a new game or its features will appeal to minors Apply (self)- exclusion systems THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES:
- 21. CERTIFICATION 5 Certification of gaming equipment must be carried out in accordance with international standards ISO (in particular ISO/IEC 27001:2013) is as international standard followed by Europe and the WLA Security Control Standard (WLA SCS) is the most strict lottery sector's internationally recognized security standard
- 22. SOME EXAMPLES: Certification of gaming equipment should be performed by reputed international certification bodies. • BMM Testlabs • Gaming Laboratories International (GLI®) National Accreditation Agency of Ukraine (NAAU) is a signatory of the EA Multilateral Agreement (EA MLA) and must respect the mutual recognition of certification bodies from other States according to “Accredited once, accepted everywhere” principle. They both are licensed worldwide, in different jurisdictions all around the world and provide hardware and software testing.
- 24. THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES: • Put clear contracts in place with regard to the responsibilities & liabilities of points of sale (POS) • Impose strict and transparent rules on how retailers collect money and pay out winnings • Ensure retail outlets do not manipulate with tickets e.g. by putting them aside & do not make payouts to minors • Provide compliance trainings for staff to ensure they comply with law & rules on responsibility
- 25. THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES (2): • Have age verification systems in place in line with a hierarchy of risks: - In arcades and casinos age verification should take place upon the entry - For betting and lotteries contract between a player and an operator should determine the minimum age of a player - For lottery retailers the verification of players’ age should take place via e.g. mistery shopping
- 27. THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES: • Ensure ID verification of customers • Ensure customers' right to privacy • Put strict e-wallet limitations / per day / week / month
- 28. THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES (2): • Have anti-money laundering & KYC procedures in place • Establish automatic re-transfer of substantial winnings from e-wallet to bank account to avoid continuity of playing • Have monitoring system in place to intervene when players play too long
- 29. ADDRESS TECHNOLOGICAL OPPORTUNITIES & CHALLENGES 8 Artificial Intelligence (AI) Virtual Reality (VR) Distributed Ledger Technology (DLT, blockchain) Virtual currencies Lootboxes
- 30. MORE THAN JUST A TREND Blockchain as an opportunity for lotteries, betting & gambling • Full decentralization of the platform makes it independent, autonomous, anonymous, secure and transparent • Tickets can be traced and these which are misused / stolen could be deactivated remotely • Blockchain creates a unique and certified ID to access to network of gaming ecosystem • Blockchain guarantees remote ID winners verification • ...
- 31. WHAT TO DO? • The digital challenges need to be further endorsed and implemented • Legal lottery, betting and gambling operators have a potential to be pioneers in those areas to set the rules & principles • The Regulatory Authority must have power to stop or regulate the negative effects of technological developments Task for a government: create a (legal) framework
- 33. THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES: • Comply with social responsibility standards • Protect players and integrity and fairness of the games • Apply policies and procedures to prevent underage gambling • Protect children and other vulnerable persons form being harmed or exploited by gambling (e.g. design social campaigns to prevent addiction)
- 34. THE LEGAL FRAMEWORK SHOULD ENSURE THAT THE LICENSEES (2): • Comply with responsible advertising standards • Provide training for staff on compliance & responsibility • Comply with sector's standards & certification schemes (e.g. World Lottery Association)
- 35. to avoid when creating a framework for lotteries, betting & gambling market? what 4
- 37. OFFSHORE LICENSES OFFSHORE JURISDICTION CUSTOMER'S JURISDICTION Some jurisdictions have set up a legislative scheme whereby online operators can obtain a license with an additional favourable taxation if they offer their games exclusively outside own jurisdiction to customers in any other jurisdiction
- 38. OFFSHORE LICENSES (2) This undermines the other states right to protect its citizens and their public order Games offered throughout the EU from offshore hubs are therefor blocked by almost all states in the world
- 39. • The Court of Justice of the European Union (“CJEU”) ruled that an offshore licenses of Gibraltar or Malta are illegal in other Member States • There is no mutual recognition of authorisations issued by the various Member States can exist in the current state of European Union law (CJEU case-law in Santa Casa, Stoß and Others) • Each Member State may wish to monitor an economic activity which is carried on in its territory OFFSHORE LICENSES (3)
- 40. OFFSHORE ACTIVITIES ARE NOT ACCEPTED in any other jurisdiction neither in the EU, nor anywhere else in the world, except for a few offshore minded islands
- 42. • Have a consistent and responsible gambling policy whereby the specific, less addictive, (lottery) products are given an appropriate place in the government policy A so-called "total ban" on lotteries, betting & gambling advertising can be counterproductive
- 43. ALLOW FOR MODERATE ADVERTISING OF LEGAL OPERATORS • Allow for advertising which would channel consumers to a responsible legal offer in order to take them away from illegal gambling offerings Regulate according to hierarchy of risks approach: different treatment when it comes to lottery games and other games of chance (i.e. casino or betting games).
- 44. THANK YOU! Philippe Vlaemminck partner, pharumlegal