State-run gambling companies in the European Union may find it harder to defend their monopolies after Europe’s highest court lifted a barrier Italy used to keep out foreign competitors.
The European Court of Justice in Luxembourg today ruled Italy can’t use criminal law to stop gaming companies licensed in other EU nations, including the U.K.’s Stanley Leisure Plc, from taking bets in the country. A law barring publicly traded companies from obtaining licenses restricts “the freedom to provide services.”
State monopolies in France, Germany and other countries have been criticized by companies such as Ladbrokes Plc for blocking their cross-border online gaming business. Shares of providers such as Austrian Web bookmaker Bwin Interactive Entertainment AG surged after today’s court decision, which may remove some restrictions on the EU’s 50 billion-euro ($66 billion) industry.
“This is a step further toward a liberalization of the European gambling markets,” said Lode Van Den Hende, a lawyer in the Brussels office of Herbert Smith. “Overall this is very good now for the gaming operators. If this had gone against them they could have closed shop.”
A spokesman for Italy’s state monopoly, which oversees gaming in Italy, wasn’t immediately available to comment.
Liverpool Bets
Massimiliano Placanica and two other people who operated shops in Italy where people could place online bets with Stanley’s office in Liverpool, England, faced criminal charges under Italian law because Stanley didn’t have a local gaming license. Stanley argued its U.K. license should be recognized by all EU countries.
The court prohibited the use of criminal law in particular in cases where foreign betting companies were refused the required license by the country, as was the case for Stanley.
“The Italian criminal penalties for the collecting of bets by intermediaries acting on behalf of foreign companies are contrary,” to EU rules, an 11-judge panel of the court said.
The tribunal today left it to the national courts to decide whether by restricting the number of operators in the gaming and betting industry in the country, Italy was “genuinely” contributing to the goal of preventing crime.
`Landmark’ Decision
Stanley said it was a “landmark” decision that will put pressure on governments and the European Commission, the EU’s executive arm in Brussels, to end national protectionism.
“We think it’s time that the commission and national lawmakers act now to end this protectionism,” said Adrian Morris, deputy director-general of Stanley.
“This judgment is another step along the road to fairer competition in Europe,” Christopher Bell, chief executive of Ladbrokes, said in an e-mailed statement. “We have already seen Italy and Spain move to open up their betting markets and this judgment supports our view that the policies of many EU governments are inappropriate and disproportionate in restricting free and fair competition.”
Bwin said the decision was a “milestone toward the opening of the European gambling market.”
The commission last year started probing 10 EU countries including Italy, Germany, the Netherlands and France for discrimination by barring rivals from offering the same services as their state lotteries. They face being taken to the EU court depending on the outcome of the investigation.
Share Gains
Stock in Bwin, whose co-chief executive officers were detained for three days in September by French authorities, rose as much as 5.20 euros, or 21 percent, to 29.60 euros, heading for its biggest one-day gain in almost seven years. They traded at 28.49 euros as of 3:54 p.m. in Vienna.
Unibet advanced as much as 15.50 kronor, or 9.2 percent, to 183.5 kronor in Stockholm, the biggest jump since December 2005. The company sponsors a professional cycling team whose members were barred last month by the organizers of a French race from wearing uniforms that displayed Unibet’s Web site address.
Ladbrokes shares gained as much as 3.1 percent to 408.75 pence in London trading.
Sportingbet Plc, the online bookmaker that owns Paradise Poker, advanced as much as 4.25 pence, or 8.7 percent, to 53.25 pence in London. Gaming VC Holdings SA, a Web casino company that gets most of its sales from Germany and Austria, rose as much as 8 pence, or 7.8 percent, to 111 pence.
Questionable Effects
Still, lawyers including Quirino Mancini at Sinisi Ceschini Mancini and Partners in Rome said today’s decision may be limited to the circumstances in this case. The court focused on Stanley’s business, which “isn’t pure online betting,” he said.
“Those who will now claim this is a big ruling for the whole online betting industry may be wrong,” he said. Other bookmakers, including Bwin have a different model and may not directly benefit until another round of court proceedings.
The decision won’t have any effect on Germany’s state monopoly, said Friedhelm Repnik, spokesman for the association of the Lotto corporations, Germany’s lottery.
“The situation in Italy is a completely different,” he said. “They have a partially open market, here in Germany we have a clear state monopoly, whose central goal it is to prevent gambling addiction.”
The court has previously backed gaming monopolies if they’re designed to prevent gambling addiction, he said.
Italy had already opened up its gaming market by introducing new rules in July 2006, said Mancini. Three months later it offered 16,000 licenses, which “caused a major change in the whole gaming distribution network in Italy,” he said.
British operators Ladbrokes and William Hill Plc are just two non-Italian companies that got a license to set up betting shops in Italy, he said.
The case numbers are C-338/04, C-359/04, C-360/04 Procuratore della Repubblica v Massimiliano Placanica, Christian Palazzese and Angelo Sorrichio Placanica.
Source: Bloomsberg

Gary Kaplan used to throw lavish parties in Costa Rica and plaster the name of
his thriving online-gambling company on buses in New York. Now, the founder of
BetOnSports PLC and the multibillion-dollar industry he helped spawn are in
much-reduced circumstances — the man on the run, the industry in disarray.
Kaplan, 48, is a fugitive from a racketeering-conspiracy and fraud indictment
filed last year in U.S. District Court in St. Louis charging him with heading a
criminal enterprise that illegally took in more than $3.5 billion in wagers
since 2001.
Several colleagues of Kaplan also have been charged, including BetOnSports’
former chief executive, David Carruthers, who was arrested at the Dallas-Fort
Worth airport in July during a stopover on a flight from London to the
company’s headquarters in San Jose, Costa Rica. Carruthers and several others
charged in the case have pleaded not guilty and are awaiting trial.
Kaplan’s whereabouts are unknown.
The Kaplan indictment is part of a broad federal crackdown in which executives
from other foreign online-gambling operations and credit-card processing
companies also have been indicted.
Last October, Congress passed a law banning almost all forms of online
gambling. Recently, the Justice Department served subpoenas for records on the
investment banks that helped BetOn­Sports and other online-gambling companies
raise money through public stock offerings.
Industry observers estimate that online wagering, which had hit about $12
billion a year, is down by as much as 50 percent. BetOnSports largely has
closed its operations. Federal authorities estimate that 98 percent of the
company’s business came from the United States.
The saga of BetOnSports and Gary Kaplan demonstrates how some online-gambling
sites rose fast and crashed hard by operating at, or beyond, the edge of the
law.
While Kaplan has a checkered background that includes run-ins with law
enforcement, he may have gotten as far as he did in part by surrounding himself
with executives like Carruthers, who came to BetOnSports with a mainstream
business background.
Before Kaplan became an international online gambling impresario, the native of
New York was a bookie and had been busted in 1993 by that state’s authorities
for running an illegal sports-betting operation, according to his indictment.
He moved to Florida, where he allegedly continued his bookmaking operation, and
then on to Aruba and Antigua before later finally settling in San Jose. The
Costa Rican capital, with light-handed gambling regulation and a ready work
force, began attracting other online betting operations.
Kaplan made a splash. He took over a nine-story office building in a
shopping-mall complex and outfitted it with a day-care center for workers’
children as well as luxurious suites and a rooftop pool for visiting high
rollers that BetOnSports sometimes flew in for huge galas.
Obsessed with security
BetOnSports’ headquarters also housed a shooting range — a reflection of
Kaplan’s fascination with guns and an obsession with personal security, say
people who know him. He, his wife and two children routinely traveled with
armed bodyguards.
The bodyguards were, at least in part, “an ego thing,” said Kenneth Weitzner,
founder of Eye on Gambling, a website that tracks Internet gambling.
Kaplan created the illusion that he thought went with a successful gambling
operation, said Weitzner, who visited Kaplan at his Costa Rican operation.
Another acquaintance called Kaplan “tough and intimidating.” In one tale, he
supposedly shot a computer monitor after BetOnSports lost big on a football
game.
As BetOnSports grew into one of the biggest online gambling companies, it tried
to move mainstream. Kaplan hired veteran gambling-industry executives, such as
Carruthers, who had worked for Ladbrokes PLC, a major British wagering company.
In 2004, BetOnSports had an initial public offering in London that raised about
$100 million and its stock was listed on a branch of the London Exchange.
Sites operated openly
While Internet gambling is legal in many countries, the U.S. long has contended
that it violated various federal statutes — even before the specific ban was
enacted last fall.
Federal officials made periodic efforts to attack online gambling, but the
companies often managed to operate relatively freely in the U.S. BetOnSports
was able to run U.S. marketing campaigns, including ads on 250 New York City
buses in 2003.
Even as the industry soared, federal agents were building criminal cases. Some
of BetOnSports’ “customers” in 2002 and 2003 turned out to be undercover
investigators gathering evidence for last year’s indictment.
BetOnSports’ name appeared in news reports in connection with a 2005 criminal
case filed by New York prosecutors against an allegedly mob-connected gambling
operation that was sending bets to an entity in BetOnSports’ headquarters in
San Jose.
In those reports, BetOnSports officials said the entity simply leased office
space and was evicted after the indictment. Bet­OnSports wasn’t charged in the
New York case.
Crackdown questioned
Some observers find the federal government’s crackdown on Internet gambling
curious, given the national explosion in casinos and lotteries in recent years.
These people wonder whether the initiative will backfire by pushing gamblers to
less-reputable operations.
The recent criminal cases and legislation are “an anti-consumer-protection
movement because they’re eliminating the most reputable publicly traded
companies,” said Nelson Rose, a law professor in California who is an expert on
gambling laws.
In recent years, BetOnSports and others, including some U.S. casino operators,
had lobbied Congress to legalize online gambling, arguing that it could then be
regulated and taxed.
As for Kaplan, he is being sought by U.S. and international law-enforcement
officials, including Interpol, whose website carries a “wanted” poster for him.
Although his home was in Costa Rica, some believe he has left that country. One
rumor has him and his family in Israel, there on an Israeli passport.
If Kaplan is apprehended or returns voluntarily to the U.S., he will have to
answer the indictment filed against him in St. Louis.
If convicted, he could face a lengthy prison sentence and large financial
penalties.
Source: St. Louis Today