20th Annual Sport and Recreation Law 20th Annual Sport and Recreation Law Association Conference Association Conference

Chapel Hill, North Carolina – February 28 - Chapel Hill, North Carolina – February 28 -

March 3, 2007March 3, 2007 Dr. Anastasios KaburakisDr. Anastasios Kaburakis

Southern Illinois University Southern Illinois University

EdwardsvilleEdwardsville

Dr. Heather LawrenceDr. Heather Lawrence

Ohio UniversityOhio University

International Comparative Sport Law

US and EU sports gambling and betting regulations, policies, and

case law

Changing role of legal scholarshipChanging role of legal scholarship

““In the beginning there was only In the beginning there was only law. Then came law and society, law law. Then came law and society, law and history, law and economics and and history, law and economics and so on. These developments have so on. These developments have transformed the vocation of the transformed the vocation of the legal scholar from that of a priest to legal scholar from that of a priest to that of a theologian.”that of a theologian.” Kathleen Sullivan - Kathleen Sullivan - Dean of Stanford Law SchoolDean of Stanford Law School

The battlefieldThe battlefield

National GovernmentsNational Governments National CourtsNational Courts European Union (EU)European Union (EU)

European Commission European Commission (EC), Parliament (EP) (EC), Parliament (EP) and Counciland Council

European Court of European Court of Justice (ECJ)Justice (ECJ)

CommunicationCommunication Conferences, PressConferences, Press

State GovernmentsState Governments State Courts State Courts U.S. CongressU.S. Congress U.S. Supreme CourtU.S. Supreme Court MediaMedia

ESPNESPN WSOPWSOP Sportsbook.com Sportsbook.com

Veenstra (2005)

The Legislative Process:The Legislative Process:Consultation ProcedureConsultation Procedure

Commission

Proposal

European Parliament

Committee of the Regions Economic and Social Committee

Opinion

Adoption of decision by the Council after consultation with Coreper

Verhulst (2003)

The Legislative Process:The Legislative Process:Co-Decision ProcedureCo-Decision Procedure

Commission

Proposal

Parliament (1st reading)

Opinion

Council

No amendments by Parliament or approval of all amendments by CouncilInstrument adopted

or

COR ESC

COMMON POSITION

Parliament (2nd reading)

Amendment by absolute majority

Commission

Council

Amendments rejected

Conciliation Committee convened by Council and Parliament

Rejection by absolute majorityapproval/no action

Council End of legislative process

Adoption of common position by qualified majority

Parliament’s amendments accepted

Adoption by qualified majority

agreement

(3rd reading)

Parliament’s amendments not accepted

Adoption only by unanimity

No agreement

Instrument rejected

Verhulst (2003)

SubsidiaritySubsidiarityThe EC must act where the The EC must act where the

objectives to be pursued can be objectives to be pursued can be better attained at Community better attained at Community level, enhancing its powers level, enhancing its powers

The EC must not act where objectives can be satisfactorily attained by the Member States acting individually,

constraining its powersEdinburgh European Council 1992: due to the subsidiarity principle, gambling is unsuitable for Community legislation

and is better dealt with at a national level

Veenstra (2005)

EU LawEU Law EC TreatyEC Treaty [The Treaty establishing the [The Treaty establishing the

European Community (as amended by the European Community (as amended by the Treaty of Amsterdam)] Treaty of Amsterdam)] C 325/35, 12/24/02C 325/35, 12/24/02

EC Treaty promotes competitive market EC Treaty promotes competitive market economy and prevents barriers to economy and prevents barriers to integration of the single European marketintegration of the single European market

Article 3Article 3 (c, g): Abolition of obstacles for (c, g): Abolition of obstacles for free flow of services, no competition free flow of services, no competition distortiondistortion

Article 49Article 49: “…restrictions on freedom to : “…restrictions on freedom to provide services within the Community shall provide services within the Community shall be prohibited…”be prohibited…”

EC Art. 49 exemptionsEC Art. 49 exemptions

Veenstra (2005)

Discretionary power of Member States to decide Discretionary power of Member States to decide about the number and type of operators & type about the number and type of operators & type and volume of gamesand volume of games

National restrictions are compatible with EC National restrictions are compatible with EC Treaty if Treaty if ((GambelliGambelli, paragraph 67; EC Art. 54), paragraph 67; EC Art. 54)::

Non discriminatory and proportionate;Non discriminatory and proportionate; Justifiable by imperative requirements: Consumer Justifiable by imperative requirements: Consumer

protection, prevention of fraud and crime, protection, prevention of fraud and crime, maintenance of order in society (Public Order); maintenance of order in society (Public Order);

Restrictions must reflect a concern to bring about a Restrictions must reflect a concern to bring about a genuine diminution of gambling opportunities; genuine diminution of gambling opportunities;

Financing of good cause/state is no imperative Financing of good cause/state is no imperative requirement.requirement.

European Court of JusticeEuropean Court of Justice

Case Law (on EC Treaty Articles 49; 81 and 82 – Case Law (on EC Treaty Articles 49; 81 and 82 – Restrictions on provision of services; Restrictions on provision of services; Competition rules, restraint of trade and abuse Competition rules, restraint of trade and abuse of dominant position)of dominant position) C-275/92; C-275/92; SchindlerSchindler (Import of lottery ads; Netherlands-UK) (Import of lottery ads; Netherlands-UK) C-368/95; C-368/95; FamiliapressFamiliapress (Distribution of pub+prize; Austria-BRD) (Distribution of pub+prize; Austria-BRD) C-124/97; C-124/97; LääräLäärä (Exclusive right to operate slot machines; FIN) (Exclusive right to operate slot machines; FIN) C-67/98; C-67/98; ZenattiZenatti (Operation of sports betting agency/book; ITA) (Operation of sports betting agency/book; ITA) C-6/01; C-6/01; AnomarAnomar (Operation of gaming machines; POR) (Operation of gaming machines; POR) C-243/01; C-243/01; GambelliGambelli (Monopoly of collecting bets; ITA-UK) (Monopoly of collecting bets; ITA-UK) C-42/02; C-42/02; LindmanLindman (Taxation of winnings; FIN-SWE) (Taxation of winnings; FIN-SWE)

ECJ developmentsECJ developments Advocate General R. J. Colomer on Advocate General R. J. Colomer on C-338/04; C-338/04;

PlacanicaPlacanica: : Prohibit national restrictions that criminally Prohibit national restrictions that criminally

prosecute sports betting orgs w/o a national prosecute sports betting orgs w/o a national license, but authorized by another Member license, but authorized by another Member State (MS)State (MS)(as contrary to EC Treaty Art. 49)(as contrary to EC Treaty Art. 49)

In In GambelliGambelli the ECJ the ECJ ““sinned in showing an excess of sinned in showing an excess of prudence”, prudence”, referring matters to national courts; referring matters to national courts; time to take the next step and refine the Gambelli time to take the next step and refine the Gambelli answer, in order to eradicate uncertaintiesanswer, in order to eradicate uncertainties

Country-of-origin principle: License by one MS Country-of-origin principle: License by one MS should suffice (triggering competition b/t MS should suffice (triggering competition b/t MS regulating gambling orgs.) regulating gambling orgs.)

The databases’ protection directive (96/9/EC) twist; use by The databases’ protection directive (96/9/EC) twist; use by national sports betting monopolies (national sports betting monopolies (Fixtures – ‘Fixtures – ‘02 ECJ cases)02 ECJ cases)

The European Ombudsman The European Ombudsman Investigates complaints about maladministration in Investigates complaints about maladministration in

EU institutionsEU institutions Since 1995 only 14 special reportsSince 1995 only 14 special reports Special report #13 to EP after recommendation to Special report #13 to EP after recommendation to

ECEC Subject: BDR sports betting provider preempted by Subject: BDR sports betting provider preempted by

German authorities; infringement complaint (Art. 49)German authorities; infringement complaint (Art. 49) Rec: Important issue of principle = EC indefinite Rec: Important issue of principle = EC indefinite

delay due to lack of political consensus; delay due to lack of political consensus; “deal with “deal with it… diligently and w/o undue delay”it… diligently and w/o undue delay”

Remarkable EC opinion…; Remarkable EC opinion…; “…due to procedural “…due to procedural deadlines… a position can probably not be expected deadlines… a position can probably not be expected in the near future…”in the near future…”

2/2004 – 7/2005 saga2/2004 – 7/2005 saga

Recent EC initiativesRecent EC initiatives

Denmark, Finland, Germany, Hungary, Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden EC Italy, the Netherlands and Sweden EC Treaty Art. 49 infringement procedures Treaty Art. 49 infringement procedures (Spring-Summer 2006)(Spring-Summer 2006)

“…“…not seeking to liberalise the market not seeking to liberalise the market in any way…”in any way…”

EP and Council excluding gambling EP and Council excluding gambling from services directive (2/2006) + from services directive (2/2006) + ControversyControversy

EU Law in sumEU Law in sum No uniformity in national courts’ case lawNo uniformity in national courts’ case law

Uncertainty as to the extent of national restrictions Uncertainty as to the extent of national restrictions on sports gambling tolerated by the courtson sports gambling tolerated by the courts

When and how is a MS stimulating gambling in its When and how is a MS stimulating gambling in its territory? territory? Excellent example in Excellent example in De Lotto vs. LadbrokesDe Lotto vs. Ladbrokes

(perverse conclusion: “(perverse conclusion: “insufficiently restrictive”insufficiently restrictive” Dutch policy v. Dutch policy v. “drastic consequences” for the Dutch “drastic consequences” for the Dutch gaming market; last decision 10/2006: Dutch gaming market; last decision 10/2006: Dutch Gaming Act is valid, Gaming Act is valid, regardless of amount of regardless of amount of advertisingadvertising promoting state-licensed De Lotto) promoting state-licensed De Lotto)

Veenstra (2005)

Pressure on EU Lottery ModelPressure on EU Lottery Model POLITICAL UNCERTAINTYPOLITICAL UNCERTAINTY

EC focus = Economic approach of gambling servicesEC focus = Economic approach of gambling services

LEGAL UNCERTAINTYLEGAL UNCERTAINTY National Court CasesNational Court Cases ECJ Jurisprudence – Uncertainty and confusionECJ Jurisprudence – Uncertainty and confusion EC commencing infringement procedures against EC commencing infringement procedures against

MSMS

COMPETITORS COMPETITORS Better organization via collective lobbying effortsBetter organization via collective lobbying efforts

NATIONAL DEVELOPMENTSNATIONAL DEVELOPMENTS UK (Gambling Act 2005), Malta (UK (Gambling Act 2005), Malta (Remote Gaming Remote Gaming

Regulations 2004)Regulations 2004) EU EnlargementEU Enlargement

STATE LOTTERIES STATE LOTTERIES Normal economic operatorsNormal economic operators

Veenstra (2005)

Policy guidelines Policy guidelines

Gambling not a normal economic activityGambling not a normal economic activity Social responsibility (protecting Social responsibility (protecting

vulnerable population)vulnerable population) Economic impact analysis (fundraising, Economic impact analysis (fundraising,

sports infrastructure, government relief)sports infrastructure, government relief) Balance in lottery managementBalance in lottery management Cooperation and coordination on global Cooperation and coordination on global

level (Public order, bone fide operators level (Public order, bone fide operators using geo-location software)using geo-location software)

Balance in Lottery Balance in Lottery ManagementManagement

A. Governmental policyA. Governmental policyLiberalization

Canalization

Repression

B. Identification

Aggressive private enterprise

Administrative organization

C. Profit Orientation

Sole object Pure Accessory

D. Competition

Aggressive Denial

SAFE

CORRIDOR

Veenstra (2005)

State lotteries stand for “we State lotteries stand for “we care society”care society”

We care about public orderWe care about public order

We care about the consumerWe care about the consumer

We care about GovernmentWe care about Government

We care about good causesWe care about good causes

Pirates: “We don’t care Pirates: “We don’t care society”society”

Infringement of i.e. data Infringement of i.e. data protection rules etc.protection rules etc.

Inadequate consumer Inadequate consumer protectionprotection

No respect of territoriality and No respect of territoriality and national rulesnational rules

Profit stays in the pocket of Profit stays in the pocket of the private industrythe private industry

Complaisance licenses & tax Complaisance licenses & tax evasionevasion

Veenstra (2005)

US Law and Policy

• DE, MT, NV, OR allowing sports betting (effective in NV & OR) – NJ would be the 5th…

• … after the Professional and Amateur Sports Protection Act (1992) aka “Bradley Act” (28 U.S.C. § 3701, et seq.)… to no avail

• CA, LA, NV prohibit (+online) betting beyond state borders

• Wire Wager Act (18 U.S.C. § 1084) + Internet• Unlawful Internet Gambling Enforcement Act

(Title VII of SAFE Port Act 31 U.S.C. § 5361)• Interstate Horse Racing Act (15 U.S.C. § 3001)

+ Internet horse race bets in CA, NV, OR, SD• Other applicable statutes: RICO Act, Travel Act,

Illegal Gambling Business Act, Interstate transportation of wagering paraphernalia Act…

US Law and Policy

• In re MasterCard Int'l, et al., 132 F. Supp. 2d 468, (E.D. La. 2001), No. 01-30389 (5th Cir. 2002):Gambling losses are enforceable because "the Wire Act does not prohibit non-sports Internet gambling." (DOJ disagreed)

• Federal gambling law does not address games of skill… (Poker, Fantasy Sports…?)

• IL, IN, LA, MI, NV, OR, SD, WA prohibiting unauthorized internet gambling

• HI, UT prohibiting any form of public gambling• ND legislative efforts to legalize and regulate

online poker operations• Student Athlete Protection Act (2000 bill) • Amateur Sports Integrity Act (2003 bill) • NCAA DI & DII Bylaw 10.3 + Pro leagues policy

Common themes• Subsidiarity//Federalism Subsidiarity//Federalism • Skill v. Chance argumentsSkill v. Chance arguments• Political influence and lobbying efforts Political influence and lobbying efforts

from industry//conservative cycles from industry//conservative cycles (excluding gambling from services (excluding gambling from services directive – IGPA)directive – IGPA)

• Challenges in state lotteries/sports Challenges in state lotteries/sports betting monopoliesbetting monopolies

• Attempts to funnel revenue from Attempts to funnel revenue from lotteries and betting toward education lotteries and betting toward education and infrastructureand infrastructure

Common themes• Attempts to curb gambling addiction Attempts to curb gambling addiction

(actually promoting it via state)(actually promoting it via state)• EC and DOJ may disagree with courts’ EC and DOJ may disagree with courts’

decisionsdecisions• Netherlands and other national regulations Netherlands and other national regulations

simulate CA, LA, NV beyond-borders (+ simulate CA, LA, NV beyond-borders (+ online) betting restrictionsonline) betting restrictions

• Sports bribery scandalsSports bribery scandals– U.S. v Burke et al., 700 F. 2d 70; U.S. v Mazzei, 700 F. 2d 85 U.S. v Burke et al., 700 F. 2d 70; U.S. v Mazzei, 700 F. 2d 85

(2(2ndnd Cir. 1983) Cir. 1983)– Arizona State, Maine, NorthwesternArizona State, Maine, Northwestern

• 2003 NCAA National Study on Collegiate Sports 2003 NCAA National Study on Collegiate Sports Wagering and Associated BehaviorsWagering and Associated Behaviors

– Anderlecht, Fiorentina, Juventus, Lazio, Marseilles, MilanAnderlecht, Fiorentina, Juventus, Lazio, Marseilles, Milan

Differentiation

• US Congress more active than EC• EC Treaty Art. 49 & Gambelli (balanced) v.

PASPA & UIGEA (strict in principle) + Safe harbor provision of Wire Act

• EU liberalization – Nascent competition for sport betting services (+new MS)

• EU in favor of regulating global sports gamblingEU in favor of regulating global sports gambling• Country-of-origin sufficient principle v. States Country-of-origin sufficient principle v. States

sovereignty selecting own rulessovereignty selecting own rulesIs this the pitfall of the EU? Compromising state?Is this the pitfall of the EU? Compromising state?

Your thoughts?Your thoughts?

Work in progress…Work in progress…

• … … so do jump in.so do jump in.• The foundation is established.The foundation is established.• A lot of work to be done on national A lot of work to be done on national

policy and state-level researchpolicy and state-level research• For the US audience, areas worth For the US audience, areas worth

investigating:investigating:– http://curia.europa.eu/http://curia.europa.eu/– http://www.sportandeu.com/http://www.sportandeu.com/