Betfair will be taking “all necessary steps to reduce the impact on profitability” of Cyprus’ online gaming ban, including legal action, it said this morning.
The parliament of the EU Member State on Friday passed a law to regulate sports betting but ban online poker and casino, as well as bets “designed to facilitate the receipt or acceptance of bets between players”, aimed at outlawing the offer of exchange betting.
Today, Betfair, which generated £9m of its revenue from the territory in 2011, said it was “taking all necessary steps to reduce the impact on profitability through both legal action and cost management.”
While Cyprus represented just 4% of the £92m revenues generated by Betfair last year, the share of the operator’s profit contributed by the 1.1 million-population country is understood to be higher, similar to that of the German market (population of 81.5 million) due to Betfair’s Cyprus’ business operating mainly within a shop environment, with customers depositing over the counter and and then betting using computer terminals within the shops.
David Jennings of Davy Stockbrokers said this morning: “We understand that betting on sports multiples is particularly popular in Cyprus while poker and casino combined also account for approximately 50% of Cypriot revenues, above the group-wide average of 22%.”
To mitigate the effect on profits of the ban, the operator seems likely to apply for licensing for its recently launched fixed-odds sports betting platform. Sports betting operators licensed by the EU Member State will be subject to a 10% levy on revenue, with a further 3% going to the Gambling Board to be established by the new law, to be distributed to Cypriot sports associations and to organisations dealing with the prevention and effects of problem gambling.
As for its prospective legal challenge, Betfair said it believed the legislation passed on Friday contained “serious flaws” and was “inconsistent” with EU law.
With the language purporting to ban betting exchanges unclear at best, legal arguments over how watertight this language actually is when it comes to defining the activity seem inevitable.
However, while operators’ rights offer online gambling into Member States from jurisdictions within the EEA are protected by the freedom to trade and freedom of establishment rights enshrined in Articles 56 and 49 of the EU Treaty, a series of decisions by the Court of Justice of the European Union (CJEU) in favour of monopolies and against private operators have in practice eroded these rights in recent years.
Betfair, along with Ladbrokes, was on the receiving end of one of these decisions in June 2010, when the CJEU ruled that international gambling companies’ exclusion from the Netherlands market could be justified on the basis that a monopoly was the most effective vehicle by which to address social responsibility issues, such as problem gambling and fraud. This ended a five-year battle between Dutch betting and gaming monopoly De Lotto and the UK operators.
This legal precedent, along with that in favour of Portuguese gambling monopoly Santa Casa de Misericordia against bwin, Carmen Media and the Portuguese football league in 2009, were cited by the Belgian Constitutional Court last year in support of its refusal to raise a preliminary question with the CJEU over the requirements for online applicants to hold a land-based licence and to locate servers within the country. This followed a claim by Betfair, Telebet and the Remote Gambling Association that these provisions breached Articles 49 and 56 of the Treaty.
Greek betting monopoly OPAP, that runs the lottery and other games of chance in Cyprus under an agreement with Greece, has also controversially been exempted from the newly approved ban. Cypriot police were this week forced to protect all 168 OPAP shops on the island after nine shops came under attack from arson and gunfire, believed to be connected to disquiet from other gambling operators over OPAP’s exemption. Competition concerns over this aspect of the law are also likely to be raised by Betfair.