Synthetic Lottery Operators Plan Legal Challenge to Looming UK Ban

Synthetic lottery operators are planning a legal fight against impending new rules banning such games to UK-based players.

Four of the largest international operators of synthetic lotteries have joined forces, calling themselves the Lotto Betting Group, which in turn has filed a “letter before claim” with the UK’s Department for Digital, Culture, Media and Sport (DCMS).

The four operators are WorldLottery Club, Lottoland, Jackpot.com and Multilotto. They’re among a handful of firms that have carved out a gambling-industry niche by allowing players to bet on the outcome of a lottery, rather than buying tickets in the actual draw.

This has drawn the ire of traditional lotto operators, which are often closely associated with their host governments.

That’s all set to change in the UK in a few months. Last March, the DCMS, in association with the UK’s Gambling Commission, began a large-scale review of such third-party lotto operators, which are often derisively referred to as “fake lottery” companies.

That review resulted in the planned ban on synthetic-lottery offerings to UK gamblers from regulated firms, as announced last November. The new ban on such lotto-draw sales is set to take effect on 6 April.

‘Sales drain’ for good causes

Synthetic-lottery operators have taken advantage of legal loopholes to survive and thrive. It’s natural enough for a given country to ban third-party and unauthorized sales of its own government-controlled lotto offerings.

However, it’s not really been a priority to worry about sales of products offered elsewhere, such as mainland Europe’s popular EuroMillions draws.

Those particular sales by the Lotto Betting Group are at the heart of the group’s planned legal protest. The DCMS, spurred on by National Lottery operator Camelot, decreed that the third-party lottery offerings may be draining some sales from authorized EuroMillions sellers.

As the Times newspaper put it, the companies were “taking money from the good causes supported by the EuroMillions draw” and “causing confusion among players”.

That also serves as a shot across the bow aimed at any firms that might want to sell synthetic lotto offerings based on the UK’s own National Lottery draws.

Lottery slip

Companies such as Lottoland, Multilotto and others have little choice but to fight. The “letter before claim” sent to the DCMS’s culture secretary, Matt Hancock, states its legal basis in Article 56 on the Treaty on the Functioning of the European Union (TFEU), which governs cross-border free trade between EU nations.

The group says the DCMS’s November move was irrational, it being “unreasonable for the Secretary of State to impose a licence condition prohibiting betting on EuroMillions draws”.

The letter added: “The Lotto Betting Group believes that the decision to prohibit betting on non-UK EuroMillions draws was unjustified and was based on inconclusive evidence.

“This belief has been supported by the recent publication of the National Audit Office report, which confirms that the fall in National Lottery income for good causes in 2016-17 was due to a move away from National Lottery draw-based games to Instant games and not as a result of lottery betting.”

The group’s letter also blamed the income decline on instant games, which it says have a “lower return to good causes”.

Gibraltar firms’ legal battle

Be that as it may, the Lotto Betting Group companies are likely to face a strong uphill battle.

The reliance of TFEU Article 56 has already come up a loser once before, when a collection of Gibraltar-based sports betting and online gambling firms tried to find a way to nullify the 2014 introduction of the UK’s remote-betting tax. Prior to this coming into force, gambling companies based in that territory had essentially operated tax-free online.

Those firms mounted a two-pronged challenge, fighting in both the European Court and the UK legal system, and they eventually lost in both.

Given the implications of Brexit, and the fact that the UK likely won’t be part of the EU at some near future date, means the UK will have the right to set the rules for its own gambling market. This is aside from the claim by the Lotto Betting Group that the DCMS’s ruling is “unreasonable”.

It’s also worth noting that it’s not the only such challenge these synthetic-lotto operators have faced. Lottoland Australia suffered a legal setback in that country last fall, when that country’s primary licensing jurisdiction, the Northern Territory, issued a similar ban on third-party lotto sales.

Synthetic lottery operators are facing continuing and increasing pressure in their efforts to continue their current business practices in an unfettered manner, with the likelihood that these firms might see their market share decreased temporarily until different opportunities develop.

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