European High Court Approves Internet Gambling Monopolies

In a mid-September ruling that left European Internet gambling companies scrambling, the European Court of Justice (ECJ) upheld Portugal's ability to preserve its Internet gambling market for a state-operated charity, the Direccao do Departamento de Jogos da Sana Casa de Misericordia de Lisboa. The court upheld fines imposed on both a Portuguese football league and Internet gaming operator Bwin for a sponsorship deal that threatened to infringe on the national betting monopoly.

As significant as the ruling itself, however, was the ECJ's stated rationale, which expressed a jaundiced view of the Internet gambling business. Noting that "games of chance involve a high risk of criminal activity or fraud, in view of the scale of the earnings and the potential winnings on offer to players," the court concluded that such risks are even greater in the online environment with its limited connection between player and gaming operator, creating a "different and more substantial risk of fraud."

The ruling in the Portuguese case will not be the last word on Internet gambling regulation, as at least six other cases are pending in European lawsuits. Yet the decision and its rationale, reinforce both state powers to control the Internet gambling market and the U.S. position in its long-running Internet gambling dispute with Antigua before the World Trade Organization.