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Welcome to the first 'Legal Gaming in Europe Industry Update'. Bullet Business will be bringing you regular updates on changes to the European gaming and gambling legal landscape. The news, views and opinions will be delivered by respected industry experts and will give you the very latest information on an ever changing market place.

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With confusion rife in the gaming and gambling industry regarding the legalities of operating in European markets - and with the dark cloud of the US looming overhead - there appear to be more questions than answers! Bullet Business and PKF want to open the debate up and encourage the industry to have its say.

The following report focusses on various European markets and the opportunities and threats they pose.

In the coming weeks, more reports will become available to you if you subscribe to the reports by clicking here.

We would like to encourage you to share your thoughts and experiences with the rest of the gaming and gambling industry stakeholders community. Please send any thoughts relating to this report or otherwise, to debate@bulletbusiness.com. Your writings will be posted in a discussion section on the report archive page of this website (you will receive the link when you subcribe to the reports). Please check back regularly to read the latest and submit your own replies.

So whether you want to have a moan about the US situation or make everyone aware of any recent changes or loop holes you have spotted you can get involved and help bring the industry even closer together.

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Malta

Malta has amassed more on-line and gaming companies than any other Western European jurisdiction. Having votedto join the EU, it now stands tall among the new members to expand its brand name as a well regulated betting and gaming industry. Duty & license fees in 2005 collected by LGA from this sector amounted to Lm11,186813. More revenue has been generated this year: in only 9 months over Lm10 million has been collected. The 2007 budget saw a handsome projection that over Lm18.5million in tax revenue will be collected from the gaming sector. On its own this amount almost matches the direct revenue registered from the tourism sector.

Unofficial reports show that over 120 companies are licensed or are about to comply with the legislation. There is a backlog of another 50 applications to be processed. All this has resulted in spite of a low budget funding and a compact team working its fingers to the bone at the Lotteries and Gaming Authority. Even though the local industry is in its infancy it already generates upwards of €2 billion in turnover exclusively generated by non-resident punters. Last year it contributed Lm2million in taxes and generated 500 new high paid jobs. The fly in the ointment is that there are no large banks in Malta who can handle the credit card processing tasks. So it is unavoidably all sourced overseas. If banks are encouraged to operate in Malta then the taxes collected and turnover generated from normal banking commissions will exceed the entire revenue from the tourist industry.

Italy

The Italian government has finally seen the light and stopped its blockage of all foreign betting sites which were so far declared illegal. Starting from next year, any Italian citizen will be able to enter the European market provided the site is fully licensed and regulated by AAMS. Applications for tenders were issued this month for a range of betting licences .These cater for a wide spectrum of games, horse betting, poker and other games of chance incorporating remote skill games. The deadline for submission of applications closed but it has been renewed for a further period next year. Thus at a stroke AAMS, the State monopoly will stand to gain a 3% tax on any foreign operators entering the market . At a recent industry conference it was announced that over 300 applications have been submitted each carrying a bid bond of euro 300,000. Which is not cheap; but it only goes to show how lucrative the Italy market can be when it is liberalised.

This "u-turn" of the Prodi government contrasts starkly with the prohibitionist attitude taken by the outgoing Berlusconi regime which permitted AAMS monopoly to dictate the internal market. Prodi aims towards cutting Italy's deficit by 11.2 billion euros and naturally gaming is a sure bet for hastily filling the deficit hole. In Malta registered bet sites have lost their shirt over this prohibition particularly after they were lured to apply for a licensed to tap the lucrative Italian market. This was exacerbated by the losses suffered when one considered only AAMS and its concessionaires were permitted to participate in the once very four years World Cup bonanza.

Now it seems that the penny has dropped and the Italians are set to start liberalising their internal market. Will Italy fill the gap posed by the sudden US prohibition? One can certainly hope so. This is welcome news and it shows how Italy has reflected seriously on its folly of imposing a total ban on cross-border provision of betting services.

EU Commission

At the same time, Brussels offered more bright hopes for the future of the industry when it threatened legal action against France, Italy and Austria for restricting sports betting and gambling, including foreign online gaming and casino operators. Charlie McCreevy, the internal market commissioner, said he had received a large number of complaints from operators on cross-border restrictions. Further dark clouds have amassed over the recent months when we saw the arrest of Bwin's co-chief executives in France. This came as a bolt from the blue and as the horrible news filtered down the media waves one could only speculate as to what could happen next. It is reliably understood that the arrests were carried out following a joint complaint last year by the French gaming and betting monopolies, the Francaise des Jeux and Pari Mutuel Urbain. As a main sponsor of AS Monaco football club Bwin was labelled by the French gaming police as acting illegally and - by surprise - arrested two Bwin leading executives while they were attending a press conference announcing such a sponsorship . This contrasts with the statement issued by Francaise des Jeux and Pari Mutuel Urbain that they would challenge any other operator apart from Bwin who 'attempt to break its monopoly'. Should Bwin take its case to the European Court of Justice many lawyers and experts in this field expect it to win the case as it beyond any doubt goes against treaty rule governing the freedom of establishment and provision of services as evidenced by the Gambelli case.

Knock on impact of the US in the UK

To cap it all we are also seeing the tribulations that the industry is facing from the latest crackdown in the US. Congress earlier last month added to an unrelated bill a provision making it illegal for banks and credit-card companies to settle payments for online gambling sites. The snap decision by President Bush blocked the most lucrative region in a market worth $15.5 billion. U.S. Congress action caught the gambling industry by surprise but already the British government thinks that the crackdown on online gambling is akin to the failed ban on alcohol during Prohibition. It won't last long. The UK Gaming Commission warned that the U.S. ban on Internet gambling would make unregulated offshore sites the "modern equivalent of speakeasies,". The general feeling is that regulated sites work better than outright prohibition.

Naturally all over the world online gaming firms are under extreme pressure. The sudden disappearance of a large number of players makes online gaming less attractive to customers both because there are fewer people to play against and the companies are not able to offer the same kinds of jackpots. Just to mention one of the imposing financial casualties one can mention PartyGaming. The poker company cancelled its dividend when surrealistically one notes how only last year its peak value surpassed the £7bn mark .Fear by executives arising from incarceration when visiting US is further exacerbated by the ease that UK domiciled operators can be extradited back.

The potential risk of extradition is seen as an underlying deterrent for new UK licences coming on stream next year. An air of despondency has hit offshore sportsbook and poker operators previously targeting the lucrative US market. Naturally once the US market is blocked opportunities for new applications for Malta licensed sites targeting Europe will continue to gather speed.

There appear to be more questions than answers at the moment, as a result PKF / GMM (Malta) has teamed up with premier Gaming and Gambling Conference organiser - Bullet Business to run an in-depth two day conference 'Legal Gaming in Europe' in London on January 22 - 23, 2007. Delegates at the conference are being offered a highly participative programme focusing on viable solutions on how to tackle the real issues. Early Registrations qualify for significant discounts. Visit www.bulletbusiness.com/legaleurope today for full details including a fantastic speaker line-up with the EU Commission, leading operators and expert legal advisors taking to the podium.

Any comments you'd liek to share with the community on any of this? Email debate@bulletbusiness.com

For details please call Bullet Business on +44 (0) 207 375 7575 or visit www.bulletbusiness.com/legaleurope

This article was written by George Mangion (PKF Malta)