Monday, June 24, 2024

Regulating Europe: The similarities and differences between countries

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Across Europe there are many cultural and social differences, all of which are unique to each individual country – yet, together, each forms a part of a continent that has strong bonds of familial and cultural ties that comprise the whole. This all serves as a delicate part of the vast economic balance that produces billions per year in continental gross domestic product (GDP). The same can be said of gambling in many ways. While almost no two countries in Europe regulate the practice in the same way, and while attitudes towards it vary, the way each country chooses to approach regulating gambling does have similarities.

As each nation has opened up and regulated gambling across Europe, they have looked to those that have come before for inspiration to follow, taking parts from the other markets to form one that suits each country’s own culture. Below, Gambling Insider looks across the European betting market to explore the similarities and differences in the approach to regulation, asking the experts to see if there is a place that has struck the right balance between free play and restrictions that help keep players safe.

Paf, Finland

Before we make a possible decision to go into a new market, we carefully analyse the coming competition situation

Sverker Skoberg

The Finnish market, known for being one of the most carefully and heavily regulated in Europe, has spent significant amounts of time crafting laws that match with the vision of the country to allow gambling – however, some argue that the current system is making life difficult for all but the larger operators. Sverker Skogberg, SVP of Paf, spoke exclusively to Gambling Insider about the issue of regulation in Finland and further abroad.

When asked if there are markets in Europe that Paf avoids due to over-regulation, Skogberg told Gambling Insider: “Paf prefers to be in tough regulated markets, creating a level playing field. Before we make a possible decision to go into a new market, we carefully analyse the coming competition situation. For instance, concerning the UK some years ago we did all the required compliance work to get a licence, but decided to leave it unused, because of the very tough competition situation in the country.”

He then spoke about over-regulation, and if whether believes it has killed some markets and driven channelisation towards black market operators: “No, we don’t think so, but the balance between a tough regulation and maintaining a good channelisation level will always be a challenge for the authorities to solve.”

Furthermore, Skogberg then explained that ‘cultural differences’ and ‘attitudes towards gaming tax levels’ play a big part in Europe’s varying regulations, stating the reasons were: “Mainly because of cultural differences, regulator attitudes to gaming tax levels and its purpose, attitudes to marketing, the ability of building functioning responsible gaming tools, B2B regulation etc.”

Lastly, Skogberg spoke of Finland’s goal of achieving the perfect balance of regulation and free market policy, telling Gambling Insider: “That is what we all want to strive for, and Finland will with its upcoming regulation have a unique chance to achieve and build this balance.”

Dr Joerg Hofmann

Dr Joerg Hofmann also spoke exclusively to Gambling Insider about regulations in the European market. When asked why he believes regulation and oversight differs so much in Europe, Hofmann explained: “There are many different reasons why European regulation differs from country to country.I think it’s important to take a closer look at these reasons, as they all stem from various historical and cultural contexts.

“For example, the regulation of gambling and the offering of licensing regimes originated from a need to protect state monopolies on gambling, sports betting and lotteries. The transition to a licensing market was a gradual process and while some jurisdictions have liberalised the lottery system and allowed private operators to offer lottery products, others like Germany still maintain a state monopoly on lotteries. In some cases, it took politicians a long time to realise that opening the market to private industry was not a threat against the monopoly.

“There are also different cultural approaches to regulation, and some countries have a centralised government authority, while others have multiple authorities with different attitudes towards online gaming regulation. This makes the process of finding compromises and developing regulations a long and complex one. Additionally, there are always stakeholders who want to have an impact on the regulation to protect players and improve the industry, which further complicates the process.

“In my experience with drafting the first interstate treaties in Germany, which offered licences to sports betting operators, it was a year-long struggle to even grant 20 licences due to various challenges and setbacks. So, there is no one-size-fits-all answer to why European regulation differs from country to country; each jurisdiction must be examined individually to understand how its regulatory structure is shaped.”

In understanding different European markets, the role that regulatory maturity has played in European regulation can’t be discounted. In the case of more mature markets, such as the UK, some European countries have looked at what works well and cherry-picked the regulations lawmakers believe will work for a different jurisdiction – while looking at other markets for inspiration too.

Hoffman wholeheartedly agrees with this point, saying that every new market should look around to see what works and what doesn’t. He said: “I think it’s a good start because the worst model, in my opinion, is when a jurisdiction tries to reinvent the wheel within a microcosmic environment like Germany. I think it’s a good step forward to reach out to regulators and colleagues from other European jurisdictions. This could also include some regulators from the US, although I believe we are more mature in our experiences across the European Union.

“Today, you can say that outside Europe as well. I think catching some ideas is a good way to know what the tools of successful regulation are and to find out about the do’s and don’ts of proper regulation.

“The first thing to do is to define the goal of regulation, which is always player protection and fighting fraud, combating illegal markets or generating tax revenues. However, the most important goal of regulation is to channel traffic into the licensed market to protect players there. If the channelisation rate is high, then something must be right. If it’s not high, then something must be wrong. A good example of this is the current situation in the Netherlands. There is a discussion, and more than a discussion, to completely interdict non-targeted advertising. Advertising is one of the hot topics across all gambling-related jurisdictions, and if you look at Italy or Belgium, you can see a very aggressive approach to advertising.”  

Richard Williams

It seems to be the case that a large financial penalty leads to a focus on compliance, but standards appear to slip over time due to the conflict between profit and compliance

Richard Williams

In the UK, Richard Williams, Partner at Keystone Law, also commented on the state of the market across Europe and why regulations are causing some companies to leave the UK. Williams said: “There is certainly some evidence that mid/small tier operators are leaving the British online gambling market due to the costs of doing business here and the very thin margins involved. On top of licensing costs and taxation/duty, financial penalties imposed for AML/social responsibility breaches often far outweigh profits for smaller operators and, given the regulator’s stance, many businesses cannot risk operating in Great Britain, when returns are higher in other regulated and unregulated gambling markets.”

Turning the conversation to over-regulation and whether it has killed some markets across Europe, Williams agrees, saying: “Yes without doubt, the continual compliance assessment regime and financial penalties for non-compliance has driven some operators out of the British market. Some may argue that this activity is preventing crime and protecting the vulnerable, but we are still seeing the same operators being penalised again and again for the same type of breaches (AML/SR). It seems to be the case that a large financial penalty leads to a focus on compliance, but standards appear to slip over time due to the conflict between profit and compliance.”

Discussing European regulations further, Williams highlights the differences found in attitudes to regulation across Europe: “There is just no consistency across Europe and different countries have approached regulation differently, from outright bans other than for state operators (now thankfully rare), to bans on certain activity (such as online casino gaming), to favouring online over land-based gambling.

“Allowing EU countries to regulate gambling to protect residents, rather than allowing freedom of trade across borders, meant that EU-wide regulation of gambling never got off the ground. Most EU countries now have some form of regulated gambling, but technical standards, certification, rules and regulations differ in these different markets and it’s very difficult for operators to have a grasp of all of the rules that apply in each state.”

Finally, Williams touches upon the topic of achieving the perfect balance between the free market and regulation, stating: “There will always be a conflict between protecting consumers and gambling businesses making greater profits. As we are seeing in the US, in the rush to build an online gambling market, the vulnerable can often get forgotten in the rush for revenue. As markets mature, it becomes apparent that free markets can cause harm to consumers and then measures are put in place to protect the vulnerable. It might be more sensible to learn from mature gambling markets such as Great Britain and rein in excesses at the outset.”

Regulating and relaxation

In creating regulations that allow the gambling industry to thrive while protecting players and keeping black markets at bay, those that design the regulatory boundaries are faced with hundreds of choices that can lead a market to ruin. Too much regulation can strangle legal operators and push players to unregulated markets that prey on those who will spend and spend, regardless of whether a person has a problem or not. But too little regulation can contribute to problem gambling that can have a corrosive effect on families and the health of individuals in the long term.

Some are so obsessed with protecting players that the market can only grow to a certain point before being unable to grow further, points that Williams and Hofmann both highlight in their comments to Gambling Insider. When new markets open in Europe now, each has a wealth of options to look at for inspiration, to choose what it wants to emulate.

In such a mature market, the decisions made by regulators are key to having a healthy and safe space for citizens. The only problem is, nobody agrees that there is a universal way to do just that. Political and cultural divisions make it an impossibility to have blanket regulations across the European family – meaning that, much like many of the countries themselves, while there are similarities, no two gambling markets will ever be exactly the same. 

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