Reprinted courtesy of
Forbes Magazine
Online Gambling In France: All Bets Are Off
Lionel Laurent
October 19, 2007
LONDON -
Online gambling is a source of much public consternation for governments worried about the welfare of their citizens, but it can also be a source of sought-after revenues for strained state coffers. France is one country that enjoys a creaky state monopoly of the industry, thanks to the government-owned lottery Francaise des Jeux and the PMU betting organization, but it may no longer be such a safe bet.
French Interior Minister Michele Alliot-Marie said Wednesday that she wanted to liberalize online gambling, in order to allow French casinos "to be present in these new markets without lowering the level of vigilance that operators and the state must maintain on the quality and offering of games."
Only the Francaise des Jeux and the PMU are currently allowed to operate online games of chance in France, which has led to pressure from European regulators concerned that international operators are being unfairly blocked from some markets. In July, European competition laws overturned a French ban on Maltese betting company Zeturf, a sign that frustrated foreign players were finally making themselves heard.
Francaise des Jeux and PMU have justified their stranglehold on the industry by claiming that gambling needs to be regulated and certified and that they are the bodies best able to do so. In practice, it has given the state carte blanche to stifle competition in France, resulting in the high-profile and shocking arrests of executives from Austrian betting firm BWin (other-otc: BWIFF - news - people ) last year.
France is not alone: the United States has also taken similar action against foreign gambling companies. British companies BetOnSports (other-otc: BSPTF - news - people ) and SportingBet (other-otc: SPBTF - news - people ) saw two of their top executives arrested while traveling in the United States last year. Congress fueled the crackdown in September 2006 when it prohibited transactions from bank accounts to gambling Web sites.
Ironically, it is the chaos in the United States that further prompted online gambling companies to seek solace in Europe. SportingBet sold all of its American operations last year to Jazette Enterprises for a symbolic $1, along with $13.2 million in debt, and spent 2007 buying up assets in Turkey and Italy.
"The negative developments of last year, such as the arrests of the Bwin co-Chief Executives, have not been repeated," said SportingBet on Wednesday, when gauging the improved situation in Europe. "Indeed, it is symptomatic of the change in prevailing member state attitude that the French authorities, who initiated the arrests, spent mid-September discussing the liberalization of its gambling regime with the European Commission."
But any change, even with European regulatory backing, is likely to happen at a snail's pace. And until then, online gambling companies will have to tread very carefully indeed, playing the cards that are dealt to them until luck finally comes their way.
--Thomson Financial contributed to this article.
