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The online gambling scene in France is on the verge of changing irrevocably with the imminent enactment of a new legislation inspired in part from the successful example of the UK and other European countries. It remains a vastly untapped potential for online gambling operators. The liberalisation of the market, which up until now has been controlled by the monopoly of the state-owned Française des Jeux, is under intense scrutiny from the European Commission while at the same time preparing itself for the fast-paced environment of the online gambling world in which operators are already active offering an ever-growing choice of games of chance to the willing French consumer.

In this article I will attempt to cover the key points of the emerging French Gaming Law (which remains to be finalised) by looking at its viability with regards to tax and licensing regimes and how it will affect foreign entrants to the market.

In the interest of the consumers, an essential element of this legislation aims to prevent addiction by fixing limits on wagers and winnings that may be placed or received by punters. With this in mind, operators will be obliged to include warnings about underage playing and the potential risks of excessive gambling.

The opening of the market will encompass horse race and sports betting and shared games of skill, involving the ability of the player to improve his or her chances by adopting a certain strategy in relation to their opponents – such as online poker. Hence, lotteries, online slot machines, betting exchanges and casino games involving playing the bank (blackjack and roulette for example) will be excluded from the opening as they are considered too addictive.

A new independent public authority, ARJEL (Games Regulations Authority) will be set up specifically to regulate the remote gambling market, responsible for:

· Ensuring compliance with policy objectives regarding internet accessible games.

· Suggesting to government specific requirements for different types of licences available.

· Preparing and attributing online gambling operator licence requests.

· Monitoring online operations and clamping down on illegal gambling sites and fraud.

ARJEL will be empowered to block access to such websites through a direct injunction to Internet Service Providers and block such financial transactions.

· Enacting auditing rules concerning technical and financial data for each transaction.

· Making suggestions to Government on legislative and regulatory issues.

· All operators shall be required to provide information and guarantees as to their identification, gambling experience, shareholding, measures taken to prevent fraud and money laundering, secure online payment and protection of data and minors.

· Licences will be granted to operators within Member States of the EU or ECC. Any of these whose headquarters or shareholders are based in so called non co-operative tax havens shall be refused licences to offer their services in France.

· Online gambling internet websites must be accessible through a first level domain name ending in “.fr”.

· A mirror server, based in France, shall contain all data relative to gambling activities and exchanges between players and operators.

· Licences shall be granted for five-year renewable periods and shall be non-transferable.

· The tax rate will be based on amounts wagered by players, according to the following:

8.5% – Sports betting

15.5% – Horse race betting

2% – Online poker

Such taxation based purely on wagers rather than gaming gross revenue is less well suited in the case of poker operators for example, for whom 2% tax on wagers would equate to taxing approximately 60% of gross revenue. This could put operators off entering the market, as well as go against EU regulations of freedom to provide services. However on the whole, France should remain attractive despite the proposed tax regime that might be an obstacle to foreign online gambling operators seeking to enter the French market.

With the implementation of the Draft French Gaming Law, the ARJEL will need a further few months to be efficient and begin granting licenses. According to Senior Government Officials, France will not start granting online betting licenses at the beginning of 2010 as initially thought. Partly as a result of the detailed opinion of the Commission rendered on June 8th, 2009, the Draft French Gaming Law will most likely not be implemented as from January 1st, 2010. In any event, it should be in place for the kick-off of the World Football Cup in South Africa at the latest.

In an unprecedented legal move, Kentucky state Governor Steve Beshear recently declared that 141 named poker and casino gambling domain names will be seized, since their corresponding websites are catering to the residents of Kentucky. Governor Beshear claimed that these domains are considered to be gaming devices, and thus, are subject to the local Kentucky laws permitting their confiscation. Beshear also claimed that use of these gambling sites by Kentucky residents, is directly cutting into Kentucky’s local industries, namely its state-sanctioned horse-racing and lottery industries.

Although all of the named gambling websites are physically located outside of the United States (and are regulated by their local jurisdictions), the domain names themselves are registered with a U.S.-based registrar (GoDaddy.com). Thus, Beshear claimed that this makes them subject to local Kentucky law, which specifically outlaws “gaming devices”. Beshear claimed that the domain names themselves are considered to be gaming devices. As such, Beshear filed a lawsuit that requires all of these 141 gaming site domain names to be confiscated and forfeited from GoDaddy.com.

In a bizarre decision, Kentucky Franklin County Circuit Court Judge Wingate ruled in favor of the the state of Kentucky, and set a compliance date of December 3rd, 2008, for all of these websites to block access to Kentucky residents or be faced with the forfeiture of their domain names. Equally puzzling, was GoDaddy.com’s decision to abide by Judge Wingate’s legal decision.

Those fighting this decision, lawyers on behalf of the Internet Gaming Counsel and the Interactive Media Entertainment & Gaming Association (IMEGA), plan on fighting the constitutionality of this decision, and plan on appealing at both the state and federal levels. This could easily wind up going to the Supreme Court for ruling. They contend that the law being applied does not belong in the Cirtuit Court, since the global Internet does not apply to local law.

Currently, there has not been a general consensus from the effected gaming sites, as to whether or not they plan on abiding by the court’s decision. From early indications, it appears that there has been general “ignoring” of the decision on the part of these gambling websites, but the final decision that they make remains to be seen.

The ramifications of this decision are enormous. If the gambling websites decide to comply and block access of their sites to Kentucky residents, then what is to stop other states from seeking the same sanctions ? More importantly, if this decision stands, what will prevent any local jurisidiction from stating that a non-local website is causing economic and industry infringement on a local business ? What if Johnny’s bookstore in Idaho, claims that Amazon.com is siphoning away business from its local store ? Will a local judge rule on the confiscation of the Amazom.com domain name, or rule that Amazon.com should block access to all Idaho residents ?

Unquestionably, Internet freedom is at stake here. The global nature of the Internet is certainly at risk given this decision, and it begs the question as to whether local law can govern or restrict global law. The future of the Internet as we know it today, may very well hinge on the final outcome and results of the appeal process.