Net Bet Blog

How many years will it take for governments to realise that regulation just doesn't work.

GamingLawEU do a good job of summarising the economic disaster that is the last 4 years of regulation in Germany. What is interesting are the economic losses you might not first expect - those to the actual monopoly that the regulations were intended to protect.

With Germany facing GVC up over 7% today I wonder if the publication of this article was partially to blame (for this good news for GVC holders). BWIN holders and other EU betting sites such as SBT and PRTY will find this summary of interest.

The writing style is odd to say the least and as always with posts on this site make little sense on first reading. I suspect law is something that does not translate well.

Germany: A turbulent regulatory framework [GamingLawEU]

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Less than four months later, a report on the State Treaty on Gambling in the newspaper Kieler Nachrichten was fittingly titled “Gambling: Is the State the loser?”. This is because even now a massive reduction in gambling turnover for the first quarter of 2008 must be recorded for the state-run providers. The news met with a divided response among the members of the parliamentary parties in government. “What we feared would happen is now actually happening”, declared the member of parliament for the CDU, Hans-Jörn Arp, who had been fighting vehemently against the State Treaty. For the Chairman of the State’s FDP parliamentary party, Wolfgang Kubicki, it is a “financial catastrophe”.

On the figures:

Gross earnings of the gambling houses are down 10 per cent, Oddset’s turnover collapsed by up to 50 per cent. For the KENO-bet, the reduction amounted to 30 per cent, Lotto on Wednesday and on Saturday each had to record losses of approx. 11 per cent of their turnover. Thus, altogether about 8 million Euro of turnover have been lost since January”, said Mr. Kubicki after inspecting the parliamentary query (Drucksache 16/2007) at the end of April 2008.

The insanity of having to block internet access to local products because of addiction problems is laughable as Germany are continuing to play happily on Maltese and other sites meaning the state lotteries are losing even more. Sheer stupidity.

As the internet offers up until recently were blocked in Bavaria and most of the other Federal States in 2007, the lottery administration calculates that turnover will be down by approx. 50 million Euro for the last year. According to the Court of Auditor’s estimate, this alone would lead to reduced income (net proceeds and lottery tax) for the State of Bavaria amounting to 20 million Euro. A few days ago, Lotto Bayern resumed its offers through the internet. The justification provided in this context of the alleged fight against addiction will not be very credible against this background.

The article concludes:

Conclusion

The first 100 days of the State Treaty on Gambling have been disillusioning for the advocates of the gambling monopoly. This is because in reality we are rather seeing the beginning of the end of this short-lived law. We may even see BWin banners in the Allianz Arena during the next Bundesliga season, instead of lottery “information” provided by the state.

This eventuality was entirely predictable. Where were the economists when this law was passed?

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Sportingbet.com(SBT) released a trading statement yesterday.

Sportingbet is one of the best known European online betting companies and is quoted on AIM. It is one of the sites that this blog supports and uses (see side banners). Sportingbet.com pride themselves on giving punters the best odds and a wide selection of bets which they certainly do.

It is no surprise therefore they they have issued an upbeat trading statement. What is more impressive however is the managements desire and ability to cut jobs to improve profitability. Internet gaming is scalable and after a company is well positioned it is probably correct to cut some of the high salaries but usually difficult to implement. Sportingbet.com are to be congratulated.

Q3 Trading Update [ADVFN]

Sportingbet Plc will, on 4 June 2008, announce its third quarter results for the
three months ending on 30 April 2008. The results for the period will report an
operating profit (before exceptional items, fair value adjustment and
amortisation) of not less than #7.0m (2007: #3.0m). This equates to an operating
profit for the nine months year to date of #18.7m (2007: #6.4m from continuing
operations). The Board is pleased with the trading results of the business
through both the third quarter and year to date, in particular, with the Group's
core sports betting business.

Following a successful period of "bedding-in" of the Group's operational moves
to Guernsey and Dublin, the Board has now entered the last phase of its proposed
strategic downsizing exercise, concentrating on its PLC head office function in
London.

As such, it is currently proposed that a number of redundancies may occur in the
head office function. This proposal will be the subject of consultation with
potentially affected staff over the coming weeks.

As part of a senior management review connected to this exercise, it has been
decided that there is no longer a requirement for a Chief Operating Officer
within the senior executive structure, and that the role will therefore become
redundant. The duties associated with the role will be absorbed by the remaining
senior executives of the Company and the role will not be replaced.
Consequently, it has been agreed that Dave Hobday, Chief Operating Officer, will
leave Sportingbet Plc shortly on a date to be agreed, and at the Company's
request, Dave Hobday has resigned from the Board with immediate effect.

An impressive statement all round. I still think that Sportingbet.com is a potential takeover target from BWIN meaning that SBT is cheap on fundamentals and should include a possible bid premium.

These are examples are sportingbet brands. The poker brand was one of the big boys before the US regulations that slaughtered SBT's share price. There is a slow and steady recovery underway.







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BWIN - the large EU based - online gaming company recently released an impressive set of results turning a loss of Euro 539.6 million in 2006 into a Euro 50 million profit.

BWIN REPORTS NET PROFITS OF OVER EURO 50 MILL [Online Casinos]

Bwin, the Vienna-listed group that is a major force in the European online gambling sector has released 2007 results that show a turnaround for the business year, with net profits of Euro 50.4 million, a major improvement on the losses of Euro 539.6 million euros in the previous (2006) year.

Adjusted operating profits were Euro 72.8 million in 2007, after losses of Euro 585.8 million in 2006, and gross gaming revenues surged 21.4 percent to Euro 350.3 million.

The company statement said Bwin had experienced the strongest organic growth across the European industry over the 12-month period to the end of December 2007 and had enjoyed record gross and net gaming revenues during the fourth quarter of 2007, as well as achieving revenues higher than those achieved before the company’s voluntary exit from the US and Turkish markets due to legislative developments in those countries.

Fourth-quarter profits were up to Euro 51.2 million, after a loss of Euro 489.8 million in the same period in 2006.

The turnaround was mainly due to a reversal in impairment charges in connection with the company's acquisition of Ongame Group, an online gaming company, Bwin said.

Earnings before interest, taxes, amortization and depreciation (EBITDA) was Euro 13.2 million, compared with a negative EBITDA of Euro 2.6 million in the fourth quarter of 2006.

An excellent article over on GamingLaw.EU concerning the current state of regulation in Germany and BWIN's current position.

BWIN are one of Europe's most aggressive online companies who are taking the fight to the courts seemingly at every opportunity.

I highlight just a couple of the more interesting paragraphs. There are clearly implications for other companies "big in Germany" such as Casino Club and Poker Kings (GVC).

It is possible to read this article as either positive or negative and the whole German regulatory framework remains complex. I am no nearer fully understanding how the inter-state treaty impacts on companies operating under licences from, for example, Malta or Gibraltar.

BWIN are sticking it out and so, apparently, are GVC. This is good news for shareholders in the short term but as BWIN acknowledge there may be future fines to contend with.

Bwin Bullish Despite Westlotto Court Setback [GamingLaw.EU]

The Federal Court of Justice ruled on Friday that Bwin could not delay enforcement of the action brought by state-owned lottery operator Westlotto in 2004. In September 2007 a court in Cologne upheld Westlotto’s unfair competition action against the Bwin.com website, effectively authorizing Westlotto to claim compensation from Bwin if it continued to “illegally’’ operate and advertise its Gibraltar-licensed online gambling services in Germany.

Bwin has chosen to appeal the decision to Germany’s highest civil court (the Federal Court of Justice), but that same court on Friday decided that Westlotto was entitled to enforce the earlier judgments ahead of the Federal Court reaching a final verdict on the case’s merits.

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The question now is whether Westlotto will indeed seek to enforce the anti-competition suit before it is upheld in the federal court. Under German competition law, it may be possible for Bwin to claim compensation from Westlotto if the lottery operator seeks enforcement of a court decision which is later overturned by the Federal Court of Justice, said Claus Hambach, founding partner of Munich-based law firm Hambach and Hambach.

“The ball is now in Westlotto’s court,” Bwin spokesman Kevin O’Neal told GamblingCompliance. “These enforcement orders would have to be sent by Westlotto to the company’s offices in Gibraltar and this is not something we expect to happen overnight.”

O’Neal said that the Westlotto proceedings relate only to the Bwin.com domain name operated under the Gibraltar licence. Bwin’s German subsidiary – www.bwin.de – which has an old East German sport betting licence is not affected.

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Furthermore, the company claims that the treaty violates the principles of EU law and believes that its Gibraltar licence should entitle the company to offer online gambling services throughout the European Union.

According to O’Neal, the company therefore has no intention of closing either of the two websites for German customers – regardless of the previous decisions of the Cologne court.

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O’Neal cites a number of legal doubts surrounding the new gambling treaty. The European Commission has already launched infringement proceedings against the Interstate Gambling Treaty and a number of German sports betting cases are also pending before the European Court of Justice. Recent court cases in Germany have also found in favour of private betting operators, he said

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The more I research BWIN the more I am convinced that it is going to be a major player in European consolidation. The management and competent and aggressive with an eye for a marketing opportunity.

Clearly Sportingbet (SBT) are in their sites but I would imagine smaller players such as GVC (Spain/Germany/Italy) and LNG (Italy) would be possible targets that could be snapped up for loose change.

SOLID Q4 AND FULL YEAR RESULTS FROM BWIN [Online Casinos]

Record gross gaming revenues were up 24.9 percent to Euro 102.3 million (Q4 2006: Euro 81.9 million) and sports betting gross gaming revenue soared 30.2 percent to Euro 59.5 million (Q4 2006: Euro 45.7 million) with a sports betting margin of 9.6 percent.

Poker revenue was also well up by 26.7 percent to Euro 21.8 million (Q4 2006: Euro 17.2 million) and record net gaming revenues were recorded - up 28.3 percent to Euro 89.4 million (Q4 2006: Euro 69.7 million)

The company reported that its European growth in members was a record for the industry, with 894 000 active and 234 000 new active real-money customers in fiscal 2007.

Full year numbers showed a similar success story, with gross gaming revenues of Euro 350.5 million: up 21.4 percent (FY 2006: Euro 288.6 million) and record sports betting gross gaming revenue: up 19.0 percent to Euro 191.9 million (FY 2006: Euro 161.2 million) with sports betting margins of 8.7 percent.

Full year Poker revenue rose 38.6 percent to Euro 82.3 million (FY 2006: Euro 59.4 million) and Net gaming revenues were 25.9 percent to Euro 309.7 million (FY 2006: Euro 246.0 million) Over the full year membership figures were 1,6 million active and 798 000 new active real-money customers.

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As a blog that follows EU regulation in relation to quoted companies.

One of the main issues with EU regulation concerns the implementation of the inter-state treaty in Germany and its effect on the online gaming market. Paddy Power for example have closed down their German facing site. BWIN have some German licences and are forever in the courts. GVC Holdings on the other hand shifted all their servers to their Maltese licence and migrated all players.

It is therefore of interest to see that a record price of a ".de" website name has just been paid for Casino.de. This, as the buyers states, could end up being a real bargain. I bet there are many others that wish they could have got in on this act.

The site at present looks rather amateurish and needs an overhaul unless sites of this quality are still able to earn back their costs relatively quickly.

NOTE: the buyer of this site is the owner of online-casinos who wrote the article. Online-casinos is good for news but again needs a major overhaul. It is hard to believe the make much money from their affiliate links but perhaps I am wrong especially if allows them to afford the German site. Clearly it is not possible to know the viewing figures for online-casinos or the number of employers - unless they would care to comment on this site.

RECORD PRICE PAID FOR GERMAN ONLINE GAMBLING DOMAIN [Online-casinos]

The Danish internet company Balslev Media paid what is believed to be a record price for a German online gambling Internet domain this week when it acquired Casino.de for Euro 400 000 (US $591 000).

According to the new owner of Casino.de, the domain name acquisition was a bargain: ”The value of this particular domain consists of several things," said Balslev Media chief Jan Balslev.

"First, it’s the perfect brand name - it’s short and it describes exactly what we do. Furthermore, many people will find our website even if they don’t know anything about us through direct traffic, which is acquired when people type in a keyword domain name in their browser and find a service provider without searching for it first. Finally, the high price indicates the popularity of online casino and poker gambling on the Web.”

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Sportingbet.com today released their Q2 results.

These were a good set of results and Sportingbet.com are one of the companies we track closely. Their affilate scheme is well run and efficient. Paradise Poker appears to be doing very well as does its Sportingbet Casino business. Sportingbet.com are now well set for continued growth and its Bulgarian purchase seems to be good value - a model that they look set to successfully follow across other EU states.

Click here for Q2 results.

Highlights:

Financial Highlights

* Amounts wagered up 29.5% to £364.7m (2007: £281.6m)

* Group operating profit* up 275% to £7.5m (2007: £2.0m) in the quarter -
£11.7m year to date (2007: £4.0m)

* Operating profit* at 18.2% of net gaming revenue (2007: 5.8%) versus
stated target of 13%

* Cash on the balance sheet, net of customer liabilities, of £32.0m (2007:
£35.5m)

* Statutory Group operating profit of £3.6m (2007: loss of £0.1m)

* Diluted earnings per share* of 1.4p (2007: 0.5p)

(* stated before charging exceptional items, fair value restatements and
amortisation)

Business Highlights

* Strong growth in net gaming revenue across the portfolio
o Sports up 29.6% year on year
o Casino up 29.1% year on year
o Poker up 34.1% quarter on quarter

* Growth delivered through both incremental betting volumes (amounts
wagered on sports in Europe up 35.3% year on year) and yields per player

* Restructuring benefits demonstrated by significantly enhanced operating
profit margins

* Acquisition of Bulgarian marketing partner for an initial consideration
of £4.0m and deferred consideration of up to £7.2m

* Management team strengthened - all key positions now filled

Commenting on the results, Andrew McIver, Chief Executive, said:

"We are pleased with the performance and continued development of the business
in the second quarter of this financial year. With six months of the year
completed we have achieved an operating profit of £11.7m versus £4.0m last year.
This has not been achieved by especially favourable outcomes to sports events -
the margin percentage is actually slightly lower than last year - but rather
from strong growth in turnover from our core sports offering and careful cost
control.

Whilst these results are ahead of where we expected to be at this stage, with a
fourth quarter dominated by one major event this year, Euro 2008, we are happy
to bank the strong performance in these results against the second half and
remain confident for the full year's out-turn."

Sportingbet remains a stock to keep an eye on. Interestingly there was no mention of takeover speculation and I suspect any attention from BWIN is unwanted. SBT want to grow organically and through strategic purchases. However, SBT remain a tasty albeit expensive purchase for BWIN and would give them considerable European presence. If I were BWIN I would encourage them to act sooner rather than later before they are snapped up by someone else. Such opportunities are rare.

Now the results are out of the way we may see some corporate action.

Paddy Power (PAP) released final results today. There were rumours of a William Hill, Paddy Power merger. This makes sense given PAPs excellent foray into the online sector. The PAP management have shown themselves to be excellent marketeers and were fleet of foot when it came to online gaming.

Of note: PAP have suspended their German language site pending regulatory uncertainty.

Here are the highlights:

Highlights:

- Operating profit growth of 59% to Euro72.1m;

- Online gross win growth of 41%, including gaming gross win growth of 44%;

- Continued trading profitability in our UK Retail business compared to
a loss of Euro6.0m in 2006;

- Operating profit growth of 57% in our Irish Retail business;

- Operating profit growth of 36% and 7% in our online and telephone
businesses respectively;

- Expanding UK Retail estate into Manchester and Glasgow with an expectation
to at least double the size of our estate over the next three years;

- Continued investment to drive future growth including:
o the introduction of online financial spread betting, online Spanish
language betting and sports risk management businesses;

o the addition of 18 shops in Ireland, 10 new openings and eight
acquisitions;

- Significantly increased cash returns to shareholders to Euro73m in 2007
from Euro11m in 2006 through both dividends and share buybacks;

- Last, but not least, a favourable run of sporting results.

Commenting on the results Patrick Kennedy, Chief Executive, Paddy Power plc said:

"We have grown our business very substantially in 2007. Pre-tax profits have
grown by 53% to Euro75.8 million, with strong growth in every division. Particular
highlights included the 57% profit growth in Irish Retail, 44% growth in online
gaming gross win and the turnaround of our UK Retail business. Furthermore, we
have conducted a detailed review of the UK retail market, and will open shops in
Glasgow and Manchester as well as in London this year.

The outlook for Paddy Power remains strong, underpinned by our momentum and our
strong market positions. We are confident in our prospects for 2008 and
beyond."

Here is what PAP have to say about German regulation (relevant to GVC, BWIN and others).

From a negative perspective, in December 2007 the German state legislatures voted through a new gaming treaty,effective 1 January 2008, extending the state monopolies and making internet betting and gaming activity illegal.

The market in Germany is consequently in a state of flux as the interaction of
European law and its new domestic law remains to be resolved. This creates a
series both of commercial and legal uncertainties in providing internet-based
services in the country. Having assessed these uncertainties (along with the
importance of Germany within our overall market for German speakers), we have
concluded that the balance of commercial risk and reward is not favourable in
the short term and have suspended our German language website. This decision
does not give rise to any material closure costs or impact on our expected
profits over the next number of years.

Finally, their online division:

Our online channel generates gaming revenues from casino, games, poker, bingo and financial spread betting. Revenue from these sources, representing the
operator's 'hold' or commission income, increased by 44% to Euro40.7m. This was
driven by a very strong performance in Casino and Games, aided by particularly
strong growth in Poker in the first quarter and all gaming in the summer with
the absence of the distractions for players in 2007 of the World Cup and
sunshine!

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As part of our new "rumour mill" series we report that Sportingbet.com (SBT) rose today on a possible bid approach. This is not the first time SBT has been in the takeover spotlight and it will not be the last.

There is no doubt that the word on the street is that consolidation in the sector is beginning to heat up with the big boys jockying for position. Cyptologic also announced today that they are looking to make aquisitions.

There will only be a small number of big winners. Sportingbet.com will soon be swallowed up but at what price. 70p should be enough unless it flushes out those with deeper pockets.

LONDON (Thomson Financial) - Shares in Sportingbet.com PLC pushed higher in midafternoon trade bolstered by rumours the online betting firm could be the recipient of a 70 pence a share bid as early as next week. At 3.00 pm, Sportinbet shares were 4-14 pence higher at 45-3/4, while the FTSE Small Cap index was down 1.6 points at 3,227.4. Traders said no names had been mentioned regarding a potential bidder for the UK firm but suggested that Austrian gaming firm Bwin Interactive Entertainmnet AG could be looking to revive its takeover interest. Last July, Sportingbet said discussions with Bwin Interactive regarding a possible acquisition of the UK group had been "mutually and amicably discontinued".

Konrad Sveceny, head of Investor Relations at BWIN said at the time: "As a result of regulatory and legal changes in a number of markets in which both BWIN and Sportingbet operate, and not just ones with European Union borders, we have not been able to agree on terms".

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Hambach & Hambach today released news regarding EU legislation in Germany.

This effects companies such as BWIN and GVC (Aim quoted) - see Poker banner below.

This article is still not entirely clear and may require reading two times BUT I suspect this is good news and may explain recent rises in the share price of GVC.

Commentary - Hambach & Hambach: New Decision by the BGH (German Federal Court of Justice) on Betting Law: Legal History or U-Turn?

Munich 14 Feb. 2008: Today, the I. Zivilsenat (first division for civil matters) at the Bundesgerichtshof (German Federal Court of Justice) dismissed in four cases action filed by state-run gambling providers (among others Westlotto) against private sports betting providers holding GDR and EU licences (among others bwin). In its press release, the BGH headlined: “Old cases of offering and operating sports bets do not constitute a violation of competition”. Initial press reports state that “the flood of law suits against providers of sports bets was thrown out on Thursday by the Bundesgerichtshof (BGH)”.

In its 2004 decision, the previous instance, the OLG (Higher Regional Court) of Hamburg had made reference to the so-called “Schöner Wetten“ decision of the BGH and had stated in the headnote:

“The only basis for the evaluation of the question of a violation of competition is the lack of a domestic licence. The question as to whether the applicable provisions of the laws of the respective Federal State are unobjectionable under European law and/or whether the process of issuing licences is actually being conducted free of discrimination, is not decisive, at least from the point of view of competition law. (Court’s headnote).”

Now, in its most recent press release dated 14 Feb. 2008, the BGH states as follows:

“(…) the previous instances had held that the prohibition of illegal gambling, enforced by penalties, does not violate European Community law nor German Constitutional Law. (...) The Bundesgerichtshof has not assented to this evaluation. The landmark decision by the Bundesverfassungsgericht (Federal Constitutional Court) dated 28 March 2006 (1 BvR 1054/01) is said to mean that the state betting monopoly in Germany, in the legal and actual form it had taken during the decisive period of time before 28 March 2006, represented a disproportionate interference with the freedom of profession of persons interested in professional activities of this kind, this therefore being inconsistent with Art. 12 paragraph 1 GG (Grundgesetz – German Constitution). At the same time, it represented an unjustified restriction of the freedom of establishment and the free movement of services guaranteed under Art. 43 and 49 EC. Due to the state betting monopoly’s inconsistency with the Constitution and with Community law during the period of time before the judgment of the Bundesverfassungsgericht on 28 March 2006, Section 284 StGB (Strafgesetzbuch – German Criminal Code) could not be applied to the offering of sports bets in the cases to be decided here, where acts carried out in the years 2003 to 2005 are to be considered (so-called “old cases”).”

This means that, while the BGH in the “Schöner Wetten” decision in 2004 expressly demanded a German betting licence in order to exclude the applicability of Section 284 StGB, it now abandons this principle and turns to Community law.

Thus, if the new state treaty on gambling also violated Community law, an EU licence would be sufficient to exclude the applicability of Section 284 StGB, and thus a violation of competition. And a lot speaks for this inconsistency with EU Community law:

In the letter to the German Federal Government initiating infringement proceedings against the German Federal Government, the EU Commission states among other points that Sections 284, 285 and 287 violate the free movement of services guaranteed under Art. 49 EC.

Furthermore, a violation of the German gambling monopoly against Art. 43, 49 EC is being examined by the European Court of Justice, after referral of this question to the ECJ by the VG (Administrative Court) of Schleswig in a decision achieved by the law firm Hambach & Hambach.

The new decision by the BGH has far-reaching significance beyond competition law and beyond the so-called “old cases“. The highest German court for civil matters unambiguously subjected the central provision of the entire gambling law to the priority of application of Community law. This also is of decisive importance for the legal situation under the new state treaty, a fact which has also been confirmed by the European Commission in its most recent letter.



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It appears that the EU has finally decided to act against the anti-gaming, monopoly protecting ant-gaming legislation in Germany and Sweden.

Whilst it is tempting to say "about time too" and I actually pleasantly surprised at the relative swiftness of thier action especially regarding Germany where the inter-state legislation was only passed at the start of this month.

Germany still has two months to respond to EU requests so this will still be a long and drawn out process. However, as long as the pressure continues to ratchet upwards share prices should follow.

GVC and BWIN stand to gain the most from German compliance with EU law. GVC has already rebounded 30-40% in recent weeks from a low of low 80's to its current price of around £1.26.

EU executive targets Germany, Sweden over gaming [Guardian]

BRUSSELS, Jan 31 (Reuters) - The European Commission opened legal action against Germany and Sweden on Thursday as part of wider efforts to crack down on hurdles to competition in the gambling sector.

EU Internal Market Commissioner Charlie McCreevy has asked Germany for information so that Brussels can assess whether a new treaty that came into force this month to ban online gambling in the country was in line with the bloc's rules on the free movement of services.

"Germany has two months in which to respond. The Commission hopes that the answers it receives will lead to an early and satisfactory resolution of the matter," the Commission said in a statement. In particular, the Commission is looking at the treaty's total prohibition of games of chance on the Internet, especially sports betting, at advertising restrictions on television, on the Internet or on jerseys or billboards, and the ban on financial institutions processing bet payments.
Germany's lottery group, Deutscher Lotto- und Totoblock, said it was confident of the outcome of the inquiry.

"The European Court of Justice expressly allows gambling monopolies because of player protection. We are therefore confident that Germany's legal situation will withstand inquiry," said Friedhelm Repnik, head of the Baden-Wuerttemberg state lottery which coordinates the national lottery.

The European State Lotteries and Toto Association said the German treaty followed guidelines given by the country's constitutional court and fully in line with ECJ rulings.

"I am therefore confident that the ECJ -- should the Commission eventually decide to go to court -- will confirm the compatibility of the treaty with European law," the association's president, Winfried Wortmann said.

The Commission took legal action against Sweden to verify whether all national measures relating to poker games and tournaments are compatible with EU laws on the free movement of services.

Brussels also gave Stockholm two months to respond.

Sweden's finance ministry said the government had no immediate comment on the move and that it was already in the middle of a major review of its gaming policies and would present the results in December.

"Really we're taking a grip of the whole gaming area," ministry spokesman Markus Sjoqvist said.

The actions are part of a three-stage process that ends up in the European Court of Justice, which has powers to fine EU states and force them to change their laws.

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The German Interstate Treaty fight continues with BWIN winning the most recent round.

The outcome of BWIN's actions have important repercussions for all EU based online gaming companies such as GVC, PRTY, 888 and others.

The result of the recent BWIN victory is that, although Baden-Wuerttemberg will appeal, is that it opens the way for a full scale assult on the German Interstate Ban.

This is good news although GVC shares were down 5% in early trading.

WAY OPEN FOR BWIN FOLLOWING GERMAN COURT DECISION[Online Casinos]

The way appears to be open for a resumption of online gambling activities in the German state of Baden-Wuerttemberg by Vienna listed gambling group Bwin, following a favourable judicial ruling this week, reports the Stuttgarter Nachrichten publication.

The Karlsruhe court ruled that Bwin Interactive Entertainment AG is allowed to accept wagers from customers in the German state, overturning a previous judgment forcing the company to stop accepting wagers. The latest ruling instructs that the previous order is not to be executed as such a regionally limited ban is technically not enforceable.

The fight is likely to continue, however as a spokesman told reporters that Baden-Wuerttemberg will appeal the court decision at the administrative court in Mannheim, Germany.

Bwin has around 2 million customers in Germany, and several hundred thousand of them are in Baden-Wuerttemberg, the newspaper revealed. The company has won a series of legal clashes with German authorities.

Earlier this week the European Gaming and Betting Association laid a formal complaint with the European Commission against an accord banning online gambling in the 16 states that make up modern Germany. EGBA represents most of the large European betting groups and is determined to ensure that European Union principles are respected.

A Bwin release on Thompson Financial outlining the legal action that numerous betting companies are considering taking against the German state regulations.

In addition to BWIN and FLUXX it would be interesting to know the other 18 companies. One can assume that it includes the big boys such as PRTY, 888 and others as well as those with the most to lose such as GVC the people behind Casino Club and Poker Kings that have a large German following.



Betting companies to take legal action against German state monopoly on gambling [ABC money.co.uk]

FRANKFURT (Thomson Financial) - Online betting companies including BWIN Interactive Entertainment AG and Fluxx AG are gearing up to file a legal complaint against Germany's state monopoly on lotteries and most forms of betting, law firm Hambach & Hambach head Wulf Hambach told Die Welt newspaper.

Hambach said he represents about 20 of the world's biggest betting companies, according to the newspaper.

Germany's states earlier this month ratified an accord solidifying their monopoly on lotteries, online gambling and most forms of sports betting in Germany. The accord will effectively ban private betting companies from operating in the country from tomorrow.

'The accord breaches EU law because it excludes foreign betting companies with EU licenses from the German market,' Hambach said.

The newspaper also cited law firm Redeker's Michael Winkelmueller, who represents BWIN and Fluxx, as saying he expects to see legal action by all 3,000 betting companies active in Germany.

Germany's states have voted in favor of banning private sports betting companies until 2010, during which time they will develop a system by which private betting companies can obtain concessions.

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If the German regulatory system was not hard enough to work out as it is, today's news that BWIN have won a victory of sorts does not clarify things much.

It does however give us some clues.

Given this blog is primarily to study the impact of regulations on quoted betting companies I will use German facing GVC as an example to help illustrate.

QUALIFIED VICTORY FOR BWIN IN GERMAN ONLINE SPORTSBETTING CASE

Austrian-listed online betting group can operate in Germany

Gutsy Austrian betting group Bwin has achieved a qualified victory in its extensive litigation against German state protectionist moves, and can continue to offer sports betting in Germany with only minor restrictions after rulings by a German regional court were published this week, reports the Reuters news agency.

The company has been in legal conflict with several German state monopolies, and can now continue to operate in the former Communist East Germany under a licence issued days before German reunification in 1990, according to a court in the German state of Saxony.

The court ruled that this licence also covered arranging bets over the Internet, a decision which could undermine German plans to outlaw Internet gambling in new legislation planned to become effective next year.

"We welcome the decision because it confirms the license and makes clear that the planned [German] Gambling Law can't be realised," a spokesman for Bwin's German arm bwin e.K. said.

But the case didn't go entirely Bwin's way - disappointingly for the betting company, the court also said the license was not valid in the western part of the country - contradicting other courts in western German states which have deemed the license valid, and creating yet more confusion.

Bwin will have to request users to disclose where they are resident to make sure only East German users are allowed, according to the court's decision, which is final.

Bwin spokesmen said the company would obey the ruling but observed that western Germans could be diverted to Bwin's international web site bwin.com - which operates under a license issued by the British Overseas territory of Gibraltar.

Bwin.com's right to arrange sports bets with German-based users is also contested by German authorities but so far has not been definitively outlawed.

In a separate decision, the Saxon court endorsed a ban on Bwin.com in Saxony, where users can also alternatively use the German offering.

There are a number of important clues in the story above.

1. GVC does not take sports bets (except in Italy and that is under licence)

2. The story seems to suggest that any West German who goes to BWIN's German site will be redirected to BWIN's Gibraltar licensed sites. This is the most important point from GVC's perspective. It would suggest that there is no reason why GVC can not carry on exactly as usual even after the implementation of a German ban.

BUT Saxony appear to have banned bwin.com in which case the company say THEY can use the German site. Does this mean that Casionclub.com could be banned even though it is not sports betting?

3. Also important is the news that this win by BWIN "undermines" the proposed German legislation meaning it might not come in after all. Has this holed the legislation below the water line?

4. Does the fact that BWIN managed to get a pre-unification licence in fact mean that they are now in a very strong position in Germany and in fact GVC and any other gaming company wanting access to German players is now at a disadvantage?

There are clues but still no answers. On the whole this is positive for BWIN and positive for GVC.

GamingIntelligence report on BWIN's fine of 50,000 EURO for taking bets from German citizens.

The questions are:

1. How does Baden-Wurttemberg KNOW that its citizens are still playing on BWIN sites.

2. Where are the BWIN servers?

3. Can Germans still play on BWIN sites?

4. What do BWIN mean by "legal challenge" and "implementation of a ban will not be technically feasible". On this point how come they were fined? Something is being enforced somewhere.

bwin Fined €50,000 for Offering Sports Betting to Baden-Württemberg
[Gaming Intelligence - registration may be required]

bwin had been fined €50,000 after it was determined that the company failed to stop taking bets from citizens of Baden-Württemberg, Germany.

Baden-Württemberg’s Superior Administrative Court had ruled in November that bwin must not offer its online gaming products to the State’s citizens. The fine was imposed after the States residents were found to still be able to access and place bets on the site at the end of November.

bwin have said they are considering mounting a legal challenge to the fine. The company believe that implementation of the ban will not be technically feasible in the manner specified by the court.

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On December 5th BWIN was upgraded by analysts. Note that there is no mention of the regulatory situation in Germany which is something of a surprise.

Still good news for the online gaming sector.

BWIN Interactive Entertainment upgraded to "buy"[Yahoo finance]

Analysts at CAIB Research upgrade BWIN Interactive Entertainment (Vienna: BWIN.VI - news) (tickerBWIN) from "sell" to "buy," while raising their estimates for the company. The target price has been raised from E15 to E28.

In a research note published this morning, the analysts mention that although the company has reported its 3Q results short of the expectations, its sports betting customers grew 18% q/q. The increase in sports betting customers is likely to continue in 4Q and 1H08, resulting in improved earnings at BWIN Interactive Entertainment, the analysts add. The EPS estimates for FY07 and FY08 have been raised from -E0.35 to -E0.28 and from -E0.24 to E0.27, respectively.

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A good news signal for the gaming sector. This ruling should be rolled out across Germany.

Hessen court ruling lifts ban on BWIN's activities in German state[Hemscott]

VIENNA (Thomson Financial) - The Administrative Court of Appeal for the German state of Hessen today announced that it has lifted a ruling by a lower court that had denied BWIN Interactive Entertainment AG's German unit BWIN e.k. the right to offer its onling gaming services in the state.

The Hessen court said that it views a ban on internet-based gaming as technically unfeasible, and thus regards the ban as essentially null and void.

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BWIN announced yesterday that they are not talking to SBT "at this time". Does this mean that the deal is not beyond resurrection?

BWIN interested in lottery operator stake; says no current talks w Sportingbet

With regard to statements Sportingbet plc chief executive Andrew McIver made
in an interview with Thomson Financial News earlier this week, Sveceny confirmed
that BWIN has not restarted discussions with the British online gaming provider
at this time.

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Published: Wednesday, September 05, 2007 Online-Casinos.com

GERMAN FOOTBALL CLUB ADVERTISING BAN CHALLENGE SUCCESSFUL

VfB Stuttgart can carry advertisements from BWIN again

The football sponsorship and advertising row continued in Germany this week with a successful challenge by VfB Stuttgart football club against a previous ban on Bwin online gambling group advertising by the German state of Baden-Wuerttemberg.

Reuters reports that the administrative court in Stuttgart ruled in favour of the football team, opening the way for continued advertising agreements between VfB Stuttgart and BWIN Interactive Entertainment AG, particularly regarding team shirt branding.

VfB Stuttgart can 'tentatively' carry advertisements from BWIN again, the Stuttgart court said in a press release. A two week "window" remains open for challenges to the Stuttgart court's decision.

http://www.online-casinos.com/news/news5242.asp