Online Gambling Opens Up in France

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

In France, ever since the 19th century, for reasons of security and protection of the public, gambling has been strictly regulated by statutes and decrees which essentially granted a monopoly to two public organizations: “Française des jeux” (FDJ) and the “Pari Mutuel Urbain” (PMU) (1).

Under pressure from the European Commission, the French government tabled a bill in March 2009 which moves towards a limited opening of the online gaming market only. The stated objectives of the bill are to prevent addiction, protect minors, ensure the integrity and transparency of gaming operations and fight fraud and money laundering.

This salient features of the bill, as initially presented, are as follows:

Authorised categories of betting: on-line games where the skill, talent and experience of the players could have an impact on the final results (2), namely bets on sports events and certain so-called "circle" games (for all intents and purposes limited to poker). Only bets on real life events (as opposed to virtual events) will be allowed. As far as horse racing bets are concerned, in accordance with French tradition, pari-mutuel (or totalisator) bets would be the only ones allowed; as regards other sports, fixed-odds betting will be allowed where authorised by the relevant sports federation. Spread betting (where the punter does not know the amount that he may potentially lose) is to be expressly forbidden; live or "in-running" betting, on the other hand, is to be permitted.

Licence: only government-licensed operators are to be allowed to offer on-line betting services. Such licences are to be non-transferable and granted for a renewable duration of five years. There is to be no limit on the number of licences that may be issued.

Eligible candidates are operators from EU-Member States or operators from other countries with tax treaties with France intended to fight against fraud. While operators already having an EU licence outside France will not benefit from automatic mutual recognition their foreign licence will be “taken into account” when examining the application of the operator for a French licence (3).

The operators’ websites will also have to contain the “.fr” country code top level domain name and the relevant IT infrastructure (server) must be located in France and duly approved by the regulatory body.

They also are to submit a report every year to the ARJEL regarding their efforts and results in combating addiction.

Fees: the application fee will be between 2,000 and 15,000 euros. The licence fee will be between 10,000 and 40,000 euros, payable on the first of January following the issue or renewal of the licence. The fee related to the application for renewal of the licence will be between 1,000 and 10,000 euros.

ARJEL: a new independent administrative regulatory body called ARJEL (Autorité de Régulation des Jeux en Ligne - Authority for the Regulation of On-Line Gaming) is to be responsible for issuing the licences. It will also be responsible for monitoring the licensed operators’ continued compliance with the terms of their licence. It will have the power to apply both monetary penalties as well as non-monetary ones (e.g., suspension or revocation of the licence).

A specific licence is required for each category of bets: poker, sporting bets other than horse racing bets, and horse racing bets. Approximately one hundred operators are expected to apply for a licence.

Tax applied on stakes: 7.5 % for sporting bets, 15.5 % for horse racing bets (which includes 8% which is returned to horseracing) and 2.0 % for poker.

Cap on the payout: the bill provides that the payout ratio is to be capped at 80-85% (to minimise risk of addiction) (4).

Rights of the organizers of underlying sports events: organisers of sports events have enjoyed a sui generis intellectual property right over the exploitation of their events since 1992. However, it was not clear whether betting on those events was included in the scope of the monopoly. The bill expressly provides that this is indeed the case. Consequently, operators will have to enter into contractual agreements with the organisers (5). The financial consideration to be paid by the operator will be freely negotiated but is to take into account the additional cost to be borne by the organiser in ensuring the integrity of the result and fighting fraud. Such agreements will also specify the precise elements within the sporting event that may properly be the subject-matter of a bet. Such agreements will be sent to ARJEL which will ensure that no such agreement is exclusive and that there is no discrimination against an operator.

After debate in the National Assembly, an amended version of the bill was adopted on October 13, 2009. The principal amendments are as follows:

Reinforced protection of minors and prevention against addiction and money laundering:

As regards the fight against fraud and money laundering, the operators must require that all their players disclose their personal contact information (name, age, address, etc.).

The operators will have to help combat online gaming addiction, for instance to make sure that none of their players are minors and display a warning (on the home page) about the prohibition of minors before the players can access the website (the date of birth of each player is required for each visit). They will also have to set a money deposit limit, and they will have to constantly display the player's balance. No credit may be extended to players. A State-approved hotline service for addicted players should always be available.

Operators having their head office, subsidiary or equipment located in a State or territory classified as a tax haven will not be eligible for a licence.

Advertisement: advertising for duly licensed online gambling sites is allowed, as long as the public is warned against gaming addiction and that minors are not targeted in the ads (6).

Level playing field: In order to ensure that current illegal operators (7) do not gain an unfair competitive advantage, the ARJEL will require that they close their players’ accounts. Moreover, automatic transfers from existing unlawful sites to new sites under licence will not be possible; in other words, a player who was formerly registered with an illegal site must actively seek re-registration with the new site.

Fight against unlawful sites:

The bill states that any illegal operator soliciting players may be jailed for up to three years and liable to pay a 90,000 euros fine (or 200,000 for organized groups). These amounts are twice the existing penalties under French law. Anyone advertising such websites may also be fined up to 30,000 euros.

While the initial bill as tabled gave the ARJEL the power to block illegal websites, the amended bill provides that such blocking may only be ordered by a judge.

The bill now moves to the Senate where it is to be debated in January 2010. The government’s aim is to have the law in force in the spring of 2010 such that there will be licensed operators ready with up and running sites in time for the June 2010 FIFA World Cup.

Asim Singh and Thomas Debiesse

Alérion (www.alerionavocats.com)

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1 FDJ enjoys a monopoly over lotteries and sports betting ; PMU enjoys a monopoly over horse race betting where bets are placed outside of the race track (the PMH controls on-track betting).

2 The bill maintained the monopoly of “Française des jeux” and “PMU” for retail outlets (i.e. bricks & mortar) gambling and betting, as well as for on-line games relying solely on chance (lotteries and scratch card games).

3 This was a result of specific criticism by the European Commission in its June 2009 Detailed Opinion.

4 The precise cap will be determined by decree at a later stage. This point was criticized by the European Commission in its June 2009 Detailed Opinion (for lack of evidence between the measure and its effectiveness in limiting addiction) but nevertheless maintained in the bill.

5 Such agreements are, of course, independent of sponsorship contracts which the organisers are free to enter into (on an exclusive or non-exclusive basis).

6 The professional advertising watchdog (Authority for Regulation in Advertising - Autorité de Régulation Professionnelle de la Publicité, ARPP) issued in July 2009 a recommendation designed to foster “responsible advertising” when it comes to gambling (both online and offline).

7 i.e., all operators currently present in the French market other than FDJ and PMU