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ECJ finds Hungarian iGaming legislation incompatible with EU law

The European Court of Justice has issued a ruling today on Hungary's online gaming legislation, concluding that it is discriminatory to businesses in other member states and incompatible with European Union law.

The ruling is in response to a referral for a preliminary ruling from the Administrative and Labour Court, Budapest, Hungary, concerning a case brought by Sporting Odds against the Hungarian Tax Authority.

The case was brought after Sporting Odds was fined HF3.5m (€11,260) by the authority in 2016 for offering online games of chance in Hungary without a license.

Under Hungarian law, online casino licenses are only available to operators of domestic land-based casinos with at least a ten-year track record.

In its ruling published Wednesday (February 28th), the European Court of Justice (ECJ) said the fact that Hungarian legislation reserves the right to online casino licenses exclusively to national casino operators constitutes a "discriminatory restriction".

"In that connection, the Court considers that such a radical restriction of the principle of freedom to provide services cannot be justified by the objectives of public order and public health relied on by the Hungarian Government because those objectives may be attained by less restrictive measures," the court stated.

The court also found that although the legislation includes the possibility to organise calls for tender for licenses, such calls for tender have not yet been organised in Hungary.

A second possibility under the legislation to conclude concession agreements without a call for tender, based on the ten-year domestic operating requirement, was also found invalid. The court concluded that such a requirement places operators of games of chance established in other member states at a disadvantage as compared with national operators which can fulfil that condition more easily.

"In those circumstances, the Court rules that neither the Hungarian legislation on granting concession to operate traditional casinos nor that relating to the organisation of online casino games are compatible with the principle of freedom to provide services," the ECJ stated.

On the question of the compatibility of Hungary's dual system of licensing private operators for certain types of games while operating a public monopoly on others, the court said that the system appears to be aimed at achieving the legitimate objectives of preventing gambling addiction, controlling gambling expansion, and generating budgetary revenue.

"Therefore, subject to verification by the Hungarian court with regard to those objectives, the Court of Justice rules that the dual system of organisation of the market for games of chance in Hungary is compatible with EU law," the court concluded.

This is the second blow against Hungary's iGaming legislation by the ECJ, after it delivered a similar judgement in favour of Kindred Group's Unibet brand in June 2017.

These two verdicts are also likely to derail the Hungarian government's plans to block payments to unlicensed operators. This proposal was submitted to the European Commission in December last year and is subject to a standstill period ending March 16th.


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