EU countries urged to improve online gambling player protections

Out-Law News | 16 Jul 2014 | 12:47 pm | 3 min. read

Online gambling operators should not be allowed to retain customers' money in the same accounts as their own company funds, the European Commission has said.

The Commission made the call in a non-binding recommendation it has published that is aimed at strengthening protections for EU consumers when gambling online (13-page / 221KB PDF).

"Member States should have rules in place: to ensure that the players’ funds are protected and can only be paid out to the player, and are kept separate from the operator’s own funds; [and] to avoid collusion by players and money transfers between them including rules regarding annulment of transfers or recovery of funds from player accounts where collusion or fraud is detected," the Commission said.

The Commission said that some EU countries are currently in the process of reviewing their regulation of online gambling and that the recommendations it made could be used as guidance by countries that decide to update their regulatory regime. The regulation of online gambling services in Great Britain is currently in the process of being amended, although a legal challenge has been lodged by a group representing some foreign-based gambling operators.

Gambling law expert Susan Biddle of Pinsent Masons, the law firm behind Out-Law.com, said that online gambling operators wishing to provide services to customers in Great Britain will soon have to adhere to licensing conditions that require the separation of player and operator funds.

"The Gambling Commission consulted in autumn 2013 about protection of player funds and its revised licence conditions and codes of practice reflecting that consultation will come into effect on 4 August," Biddle said. "These include a requirement for operators to maintain customer funds in a separate bank account – the Gambling Commission decided not to go further and has not required operators to hold customer funds in trust accounts or to take out insurance or to maintain a reserve with the regulator."

"The Gambling Commission’s new licence conditions and codes of practice will however require operators to make clear to customers whether customer funds are protected in the event of insolvency, the level of that protection and the method by which it is achieved. This information is to be provided by reference to a rating system to be specified by the Gambling Commission; we are currently awaiting further details of this system," she said.

In its recommendation, the Commission said that consumers based anywhere in the EU should not be able to gamble online without first having to register as a player on an online gambling service. The Commission also called for the identity of those players to be verified by the operators before the consumers' accounts are created.

The Commission said that EU countries should require online gambling operators to allow players to "set monetary deposit limits, as well as temporal limits" during registration. While players should be allowed to reduce the limits set immediately at any stage, online gambling operators should not allow customers to increase the deposit limit without at least a 24 hour delay being applied, it said.

In addition, the Commission called for gambling operators to be forced to display regular alerts on their sites to inform gamblers about their winnings or losses as well as for how long they have been playing for. The operators should also be obliged to provide options for consumers to take a "time out" from their gambling websites or "self-exclude" themselves from gambling on those sites for at least six months, it said.

"Operators licensed by the Gambling Commission are already required to have procedures for self-exclusion," Biddle said. "The Remote Gambling Association has said that it intends to introduce an industry-wide scheme for online operators to operate a 'one-stop shop' for self-exclusion by the end of 2014; this is to be run by the Gambling Commission."

The Commission made a number of further recommendations on the rules EU countries should set around the advertising of online gambling services as well as on the promotion of education and awareness of problem gambling.

"Gambling becomes a problem when it ceases to be purely enjoyable and turns into dependence," the Commission said in a statement. "Children and adolescents are also increasingly at risk, due to the fact that they use the internet more and more for information or entertainment, and can easily come into contact with gambling advertising and gambling websites. Therefore, preventive measures are necessary to minimise potential harm and to guarantee that online gambling services are offered and promoted in a responsible manner."