Legal regulation of sports betting in Spain and its history.
Anyone who knows about the messy and confusing regulation in force in Spain regarding sports betting could think that this is not the best moment for drawing up an introductory article regarding the legal regime for sports betting in Spain. And this is logical considering the fact that we are currently in a period of transition, in which an out of date, messy and dysfunctional legal regime is still in force although we can reasonably expect the introduction of a new set of regulations that we hope will face the real legal problems that arise these days with regard to sports betting (1).
However, from an European perspective, perhaps it is a good moment to face it if we take into account the fact that this regulatory provisional status also applies to the European framework as a consequence of the recent and continuous pre-legislative work within the European Community (not yet moulded into a specific Directive or into a European Regulation regarding this aspect of European Law), in part due to the important and conclusive case law of the Court of Justice of the European Communities (hereinafter "ECJ") in this area (in particular, the Decisions regarding the cases of "Gambelli (2)" and "Placanica (3)". This Case Law results from a long series of decisions regarding the regulation of gambling, in which the ECJ adopted its current doctrine with a view to achieving better harmonisation of national law with European regulations.
It is true that the European High Court has restricted the application of the initial doctrine which, for example in the case of sports betting, we can find in case C-67/98 (Questore di Verona/Diego Zenatti). In the decision that resolved this matter, the ECJ declared that the provisions of the EU Treaty regarding the free provision of services did not conflict with national legislation (Italian in this case) allowing certain bodies to reserve the right to collect bets on sporting events, when this legislation is properly justified by social policy objectives designed to limit the negative effects of these activities and as long as the restrictions imposed are not disproportionate with regard to these objectives.
However, this doctrine was modified soon afterwards by the ECJ in the aforementioned Gambelli Decision, according to which the moral, religious or cultural characteristics of states as well as the negative consequences for individuals and society that, from a moral and financial point of view, could result from gambling and betting, may justify the retention by the national authorities of the power to restrict this type of activities (4), but that in all cases these restrictions must be fully justified and must be proportionate.
Therefore, regarding the frequent monopolistic regulation of gambling by European states (which, it should not be forgotten, is due to both historic and social policy causes), the ECJ has declared that, as in other areas of Law, the gambling rights of each State (and consequently, rights related to sports betting) must respect the principles of free circulation of people and services that the EC Treaty proclaims in its articles 43 and 49 and that any restriction of these principles must be fully justified.
This is why perhaps, lege ferenda, it is the best time to analyse the legal regime for sports betting in Spain in order to look at where we have come from, where we are and where we are going.
II.- History of Sports Betting in Spain
Apart from games of chance, the history of sports betting in Spain is linked to the appearance of a game known as "La Quiniela" (The Pools), which has been played in this country since the second decade of the 20th Century and which can be defined (currently) as a mutual bet in which the betters make predictions about the results of 15 football games that appear in competitions authorised by the Royal Spanish Football Federation or other national or international institutions (normally 10 teams from the 1st Division and 5 from the 2nd Division), these 15 predictions forming a single bet (combinations of bets can also be made).
Although La Quiniela started officially on 22nd September 1946 (soon after, as described later, the "Patronato de Apuestas Mutuas Deportivas Beneficas" - Charitable Sports Pari-Mutuel Betting Board - was created), the truth is that Spaniards had been playing La Quiniela since long before then. According to an article written by the journalist Tomas Gonzalez-Martin entitled "La Quiniela is sixty years old, but it was born at the age of fifteen," which was published in the newspaper ABC on 28th September 2006, people have been playing La Quiniela since 1929 and there is documentary evidence dating from the League championship in 1931-1932 (5).
According to the records kept, on this first day of La Quiniela in 1946 a total of 38,530 tickets were purchased generating an income of 77,060 pesetas, of which 34,677 pesetas were used for prizes (45% of the income, as shall be explained later) distributed amongst the holders of 62 winning tickets.
Those that have studied the history of La Quiniela agree that the game was invented by Manuel Gonzalez Lavin, who had the idea in 1929 following the launch of the Spanish Football League. In fact, the first place in which his invention was exploited or marketed was "Bar la Callealtera, Casa Sota" that he managed, at number 22 in Calle Alta in the city of Santander.
La Quiniela was so successful that it crossed borders, expanding to cover not only the rest of Spain but also America, through the sailors that left the port of Santander for the American continent. The game also now had a printed set of rules that determined the distribution of prize money and even envisaged incidents such as, for example, what happened in the event of suspension of a League game.
Initially, 95% of the income was used for prizes and the Tax Department only taxed the remaining 5%, which was used for the administration of La Quiniela. Later, this percentage was increased to 10%, as can be seen on a ticket from 1931 that still exists today and that has the seal of the Spanish Tax Department showing the application of this rate of tax. This shows, undoubtedly, the normality with which the game was played then, even before the existence of specific regulation regarding sports betting, obviously apart from the general regulations applicable to gambling, which the Civil Code regulates in articles 1,789 to 1,801. Similarly, it is clear that the State immediately saw sports betting as an easy way to gain a large amount of income for state coffers.
Success always has a lot of parents whilst failure is an orphan and so, soon, lots of parties wanted part of the loot. The first was the Town Council of the city of Santander, which in 1932 managed to gain 3% of the revenue, thereby reducing the prize money to 82%. Soon afterwards, it was agreed to give another 2% to charity. This led, almost by surprise, to the creation of an efficient and highly advanced private gambling organisation, which was a pioneer in Spain and Europe but that, like so many other things, was interrupted by the outbreak of the Spanish Civil War on 17th July 1936.
Following the war (6), in the league's 1939-1940 season the management of La Quiniela (which was renamed "Bolsa del Futbol") was handed over to the religious order San Juan de Dios and it was decided that 50% of the revenue would be used for prize money, 5% for administration and the remaining 45% would go to the religious order in order for it to carry out its own purposes. Finally, and after certain scandals that took place during these years, the State decided to take over its management (thereby appropriating the invention), for which it promulgated the Decree-Law dated 12th April 1946, creating the Patronato de Apuestas Deportivas Beneficas (hereinafter, the "Patronato"). It was at this time that what was initially a strictly private business became property of the State, which monopolised its management and exploitation and forbade private organisations from carrying out this type of activity, under penalty of being accused of committing a smuggling offence. It is curious that what was initially designed as a private business ended up becoming a state monopoly that, notwithstanding certain changes, has survived right up to the present day.
As explained in the preamble of the aforementioned Decree-Law, "The extraordinary level of interest that currently exists in sport (and football in particular), along with the enormous popularity of this game with regard to football, has given rise to the appearance of numerous bets in which the State is not involved at all in terms of regulation or financial exploitation, as all of these bets are made and exploited by private citizens or entities." It can therefore be seen that the aim of this rule was not so much to regulate but rather to give the State a monopoly over sports betting, even though the money was given to charity.
This is the intention of the legislator, for whom "State intervention would provide an appropriate guarantee to betters and would give the considerable financial product of these bets to public charity. These are the circumstances that advise the creation of an independent state Body to centralise the placing of these bets, which shall be established exclusively in order to provide considerable new revenue to charity."
And this is how the state monopoly of sports betting in Spain began which, as can be seen, was initially limited to the world of football. In this sense, the first Article of the aforementioned Decree-Law stated that "With the guarantee and intervention of the State, the Patronato de Apuestas Mutuas Deportivas Beneficas shall be established in Spain, which initially shall only cover football, without prejudice to the fact that in the future, if it is considered appropriate, it may also be applied to other sports."
This regulation of paramount importance later on, as it defined the legal framework for betting during the years of the dictatorial regime of General Franco (a state monopoly), and which, as explained below, was inherited by democratic Spain through the creation of the Organizacion Nacional de Loterias y Apuestas del Estado (National State Lottery and Betting Organisation).
As a consequence of this monopolistic purpose, the Decree-Law prohibits other sports betting in its article 7, stating that "As the entire net product of these bets is meant for charity, any bets related to football that are established or may be established in the future are forbidden whenever, when making the bets, it is necessary to risk any amount of money." And this is accompanied by a warning (7) that "Anyone that breaches this provision shall be punished in accordance with the current Smuggling and Fraud Law."
This regulation established the distribution of the income from sports betting as follows:
a) 45% would be used for prize money payable to betters.
b) Another 45% would be used for charity and social projects.
c) The remaining 10% would be reserved to cover the expenses of the service provided by the Patronato.
Regarding the form in which the activity should be carried out, the regulation stated that "The issuance of tickets and the payment of the corresponding prizes shall be carried out by Lottery Offices, Subordinate Offices of Tabacalera S.L. and Tobacconists, which shall receive a commission or "issue premium" for these services."
The importance of this regulation is based on the fact that, as we shall study further below, it established the following premises in the Spanish legal and political system, which the legislation regulating gambling and betting has respected (with the corresponding variations) up to the present day:
1. Gambling and betting is a state monopoly (which is now shared with the Autonomous Communities). There is no doubt in this regard. So much so that the subsequent Decree dated 23rd March 1956, approving the Lottery Directive, declared in article 1 that "The National Lottery is an ordinary resource of the income budget and a State monopoly, which guarantees the payment of prizes." Therefore, there can be no doubt as to whether or not gambling and betting in Spain has been a state monopoly.
2. Anyone that carries out these activities without the authorisation of the public authorities is considered to have committed a smuggling offence.
3. Part of the income from games of chance and sports betting must be used for public interest purposes (for charity in 1949 and today for the promotion of sport and other social purposes).
4. The distribution of tickets and the payment of prizes are carried out exclusively through Lottery Offices and Tobacconists. Because of this, Spaniards have historically made their bets at Lottery Offices and Tobacconists.
The Patronato continued to operate as an independent body reporting to the Tax Department until the restoration of democracy in Spain, and its activity has always focussed on sports betting. In this sense, for example, its most recent regulations (in particular, the Resolution of the Patronato's Board of Directors, approving the regulations governing betting competitions from 1st September 1979 onwards), state that the purpose of this body is not only to organise betting competitions (defined as competitions that "are organised based on the results of a game or various games of football that appear in competitions authorised by the Royal Spanish Football Federation or that have an international nature"), but rather to subject these to an administrative Law regime in order to better guarantee "the important public interests affected by these competitions." That is to say, in 1979 betting continued to be based on football and it continued to be an authentic state monopoly.
As stated previously, within the entry into force of the Spanish Constitution on 29th December 1978, the rigid state monopoly on gambling gave way to a new (but not necessarily any less rigid) legal regime in which the monopoly was shared between the State (when the bets or games are on a state-wide level) and the different Autonomous Communities recognised in the Constitution (8). This was when the government, in order to unify the state bodies that managed gambling and sports betting, in 1984 and by means of the 1985 General State Budget Law (Law 50/1984, dated 30th December), created the Organizacion Nacional de Loterias y Apuestas del Estado - National State Lottery and Betting Organisation - (hereinafter ONLAE), which included and unified the institutions that had managed state-wide gambling up until this time, i.e. the Patronato de Apuestas Mutuas Deportivas Beneficas and the Servicio Nacional de Loteria (9) (National Lottery Service) created after the Patronato.
This organisation brought together the state's jurisdiction in terms of gambling and betting, whilst respecting the jurisdiction corresponding to each of the Autonomous Communities recognised by the Constitution. The ONLAE was thereby given
"responsibility for the organisation and management of lotteries, betting and gambling that are within the State's jurisdiction, assuming the jurisdiction currently granted to the Servicio Nacional de Loterias regarding the holding and authorisation of draws, lotteries, raffles, random combinations, gambling and betting that covers all of the national territory and that is currently the jurisdiction of the Patronato de Apuestas Mutuas Deportivas Beneficas with regard to the exclusive organisation and distribution of football pools and any other betting competitions that take place based on the results of sporting events."
The structure, composition and functions of the ONLAE was initially established by means of Royal Decree 904/1985, dated 11th June, that was subsequently amended by Royal Decree 1651/1995, dated 13th October, which shall not be explained here for obvious reasons. However it is worthwhile to briefly describe the current regime of ONLAE (currently named LAE, "Loterias y Apuestas del Estado"), which is defined by Royal Decree 2069/1999, dated 30th December, approving the Articles of Association of the public owned company Loterias y Apuestas del Estado (LAE), and modified by Royal Decree 1029/2007.
The objective of this new regulation is to modernise ONLAE, modifying its structure and adapting it to its current functions in order to achieve efficient management that is able to achieve the goals set. Essentially, the main novelties in this new regulation were:
1. ONLAE was converted into a public owned company called Loterias y Apuestas del Estado (LAE), assigned to the Ministry of Finance and Taxation (10).
2. LAE would be governed by Private Law, apart from matters relating to the regulation of games within the state's jurisdiction and with regard to the authorisation regime granted by the state, which would be governed by administrative law.
3. Regarding the subject in hand, one of the functions entrusted to LAE (article 41.b of its articles of association) was the "management, exploitation and marketing of charitable sports pari-mutuel betting, in any of its forms, as well as any other betting competitions that are held based on the results of sporting events."
4. Furthermore, one of the most important functions attributed to LAE was the granting of authorisations for the organisation of betting (and other games) that exceeded the limits of an Autonomous Community (such as, for example, sports betting related to the Spanish League Championship). In this sense, article 5 of its articles of association states that "The public owned company Loterias y Apuestas del Estado is exclusively responsible for the authorisation of the organisation and holding of draws, lotteries, raffles, random combinations and, in general any bet whose area of development or application exceeds the territorial limits of a specific Autonomous Community and sports betting, regardless of their territorial scope, as well as payment of the corresponding fees." This is one of the controversial powers of LAE as it makes it, apart from a provider of these services, both a judge and party of the sports betting sector.
The truth is that, according to the most recent data published by LAE, the eighty year-old La Quiniela is still in very good health, as in the business year 2008 sales of La Quiniela amounted to 557 million Euros, with an average of approximately two and a half million bets made per week.
III.- Sport and Sports Betting
As has already been explained (remember that the income obtained from the activities of the Patronato was almost entirely given to charity), as in many other neighbouring countries, the State has always intended to use part (if not all) of the income it receives from gambling (and, in particular, regarding the matter in hand, from sports betting), for social purposes and public work (although it is fair to say that this percentage is increasingly small) and, namely, the promotion of Sport (which is an obligation that the Constitution imposes on the public authorities in its article 43, which proclaims that "The public authorities shall promote health education, physical education and sport (11)").
In that sense, even the ECJ, in the aforementioned Schindler (12) case, stated that "it is worth highlighting that lotteries can make a significant contribution to the financing of philanthropic or general interest activities such as social work, charity work, sport or culture." Precisely because of this, it is justifiable (as long as it is not discriminatory) for national authorities to not only restrict this activity but also to determine the allocation of the profits made.
An example of the foregoing is the historic concession that the Organizacion Nacional de Ciegos Espanoles - National Organisation for the Blind - (hereinafter "ONCE (13)"), has with regard to the "prociegos" coupon. As explained by case law at court (14), "the justification for the concession that has historically been maintained regarding the exploitation of the prociegos coupon as a source of financial resources for the entity resides in the need to provide it with sufficient financial resources for it to fulfil the relevant public interests that it has assumed since its creation and continues to assume; these funds are allocated by the State through the authorisation of this draw rather than by assigning an amount charged to the State budget and it therefore constitutes a source of income for the ONCE that is essential for the performance of the activities that it carries out in the public interest."
In this sense, regarding sports betting and Sport, when the National Professional Football League (hereinafter "LFP") was created in 1983 during a period of serious financial crisis at Spanish football clubs (15), the government (through the National Sports Council), intending to heal the football clubs' accounts, signed an agreement with the LFP that determined the debt of Spanish football clubs and established the way in which it should be financed: namely, with 2.5% of the revenue for La Quiniela. Therefore, the form envisaged to solve the financial problems of Spanish football was partially based on the revenue obtained from sports betting through "La Quiniela" (The Pools).
Unfortunately, this first attempt at solving the financial problems of Spanish football was unsuccessful and therefore, at the end of the 80s, the government took further measures to deal with the problem by promulgating Law 10/1990, dated 15th October, regarding Sport (hereinafter, the "Sport Law"). It should be taken into account that when this Law was published, the football clubs' accounts had accumulated a debt of 35,000 million pesetas.
For this purpose the Sport Law envisaged the implementation of the so-called Second Corrective Plan (16), which would take place in two specific areas. On the one hand, in order to eliminate the debt accu mulated by football clubs, it was agreed that these debts (part of which were due to the expenses resulting from the renovation of stadiums for the World Cup held in Spain in 1982) would be made the responsibility of the LFP. Furthermore, in order to guarantee the sport's economic success and recapitalise the football clubs, all of the football clubs were forced to become limited sporting companies (sociedades anonimas deportivas, SAD (17)).
Whilst on one hand the LFP took responsibility for the payment of this debt, on the other hand it centralised the charging of television transmission rights and the percentage received from La Quiniela (18), which would be used for the payment of the debts that it had taken over from its affiliated clubs. Furthermore, during the business years 1991 and 1992, 7 % of ONLAE's total annual revenue was used to fund the "Barcelona 92" Olympic Games (19).
And this is how things worked in Spain until finally, in 1997 the LFP early cancelled the Corrective Plan that was still in force by funding the debt remaining as a result of this Plan with its own financing resources (specifically, by means of a loan of 20,000 million pesetas granted by a Savings Bank), gaining in return a better assignation of the distribution of money from La Quiniela (which was increased to 10% (20), which is maintained today) whilst guaranteeing the fulfilment of the objectives of the previous Corrective Plan.
And this is the current legal regime regarding the distribution of the profits from sports betting, which is regulated by Royal Decree 419/1991, dated 27thMarch, regulating the distribution of the revenue and prize money from sports betting controlled by the State and other games managed by the ONLAE (in the version resulting from the modification made by the subsequent Royal Decree 258/1998, dated 20th February). According to article 1 of this Royal Decree:
"The total weekly revenue obtained by the National State Lottery and Betting Organisation from Charitable Sports Betting shall be distributed as follows:
a) 55 percent for prizes.
b) 10.98 percent for Provincial Councils, through the respective Autonomous Communities or for these, if they only contain one province.
c) 10 percent for the National Professional Football League.
d) 1 percent for the National Sports Council, to be used for nonprofessional football.
e) Whatever is left over after each business year, having deducted the Administration expenses and the Commissions payable to Receivers, shall be given to the Public Treasury."
Therefore, as can be seen above, the revenue from sports betting is still used today to finance the promotion and stability of sport in Spain.
IV.- Present Situation: Appearance of New Forms of Exploitation
Nobody today doubts about the importance of the game (in all of its forms) to the Spanish economy. Together with traditional games such as La Quiniela and the Lottery, new times have brought with them several variants that have enabled those that exploit this business (up to this day and officially, the State through the LAE and the ONCE, along with various private companies, that have been granted administrative authorisation by the Autonomous Communities, in the different leisure locations concerned such as casinos, bingo halls, gambling rooms, etc), to exponentially increase their profits and results. In this sense, a look at the latest data published by the Interior Ministry shows the financial importance of the sector. In its last Annual Report on Gambling in Spain (21) (2007), the Ministry states that the total amount played in 2007 amounts to 30,989.59 million Euro, which indicates the importance of the gambling sector to the Spanish economy. Furthermore, the report states that the average amount played per inhabitant amounted to 685.61 Euro, which is no small figure.
However, despite the success of games of chance, the fact is that Spanish legislation has left out certain formats or types of games (particularly with regard to online sports betting), causing a situation of legal uncertainty which leaves the various operators and users in a sort of legal limbo that they can only get out of in two ways: either by giving up the exploitation of these formats (because, it could be said that these are actually illegal types of games because they do not have the corresponding administrative authorisation) or by waiting for the State and the Autonomous Communities to define a new legal framework in which these new activities can be carried out. Of course, there is also the option of operating illegally from another location.
By way of example, in its Report, the Ministry divides the existing (and, of course, legal) games into three main groups, depending on the way they are organised:
1. Games organised by private companies that have administrative authorisation, which are carried out at establishments that are appropriate for this purpose such as casinos, bingo halls, gambling rooms (slot machines), etc.
2. Games managed by the State, entrusted to the public owned company Loterias y Apuestas del Estado (LAE) including Lotteries, Primitivas (Primary Lotteries) and La Quiniela (in its various current versions).
3. Games managed under special administrative authorisation by ONCE, including the various games involving the popular "cupon" (coupon).
As can be seen, apart from certain online versions of the games exploited by the LAE (which shall be referred to later), the Report does not contemplate the games and sports betting that have been developed over the last few years through web platforms, i.e. what is now known worldwide as Online Gambling or Online Betting, depending on the type of game.
Put simply, this is because the current legislation (notwithstanding what it will be explained later) does not contemplate the exploitation of games of chance or sports betting that is carried out online, and therefore these cannot be authorised. And it, is because it is not possible "to grant authorisation for a type of gambling or betting in the absence of the technical regulations necessary for its conduction and practice (22)," an essential requirement that, with the current regulations, prevents the granting of this type of authorisations.
At the same time, gambling activities that do not have the corresponding administrative authorisation are considered illicit and are punished according to Spanish Law as a smuggling offence. This results in private operators that want to carry out this type of activities in Spain having to choose between doing it by clandestine means from tax paradises such as Antigua and Barbuda, Turks & Caicos, Gibraltar, or from nearby countries in which this activity is legal, such as the United Kingdom, Malta, etc; or give up the idea of carrying out this activity in Spain (which obviously does not happen very often).
As shall be analysed in the corresponding chapter, before beginning their activities some of the sports betting establishments that currently operate in Spain requested administrative authorisation to carry out their activities, being it always refused for the reasons that we will study later.
Obviously, like any other activity that is carried out outside the Law, this situation does not benefit anyone, as it not only generates insecurity (relative, because in fact the activity without authorisation is simply illegal) and lack of the appropriate legal guarantees, but it also means (from a financial point of view) that the Tax Department loses the taxes corresponding to this economic activity.
However, as always, reality moves faster than Law and therefore, despite the obstacles presented by Spanish legislation, the business of sports betting over the Internet already moves millions of Euros in Spain. According to the latest data published by the Telecommunications Market Commission (an independent public body that regulates the Spanish electronics and communications markets, which reports to the Ministry of Science and Technology) in its Annual Report on Electronic Commerce in Spain though form of payment entities in 2008 (23), in the fourth quarter of this year it can be seen that:
1. The total turnover in 2008 amounted to 5,183,816,091 Euro.
2. Games of chance and betting represent 7.1% of this total turnover, occupying the 4th position (24) by sector, after air transport (1st), direct marketing (2nd) and travel agencies and tour operators (3rd).
3. Regarding the total number of financial transactions, games of chance and betting took 2nd place, with 8.3% of the total.
4. It is also significant that, if we analyse the data regarding the distribution of the turnover of electronic commerce involving money sent abroad from Spain, games of chance and betting are in 1st place, with 12.3 % of the total. This is also the case for the number of transactions involving money sent abroad from Spain, of which gambling and betting also occupy first place, with 13.3 % of the total.
5. On the other hand, analysing data in the opposite direction with regard to the turnover sent from abroad to Spain, games of chance and betting are in last place, together with health services, representing just 0.2% of the total.
In short, almost all of the turnover from games of chance (gambling) and online betting in Spain is sent abroad from Spain, with Spaniards using web pages located outside of Spain.
V. Legislative Framework: Jurisdiction of the State and Autonomous Communities
A. State Legislation
A.1. Initial regulation: the transposition of Directive 2003/31/CE, of the European Parliament and Council, dated 8th June, into Spanish Law.
Spain incorporated European Directive 2000/31/CE, regarding certain legal aspects of information society services, in particular electronic commerce in the domestic market (hereinafter "the Directive on electronic commerce"), by means of Law 34/2002, dated 11th July, regarding Information Society Services and Electronic Commerce (hereinafter, "LSSI").
Strangely, although article 1.5.d) of the Directive on electronic commerce excluded from its scope of application "games of chance that involve bets of monetary value including lotteries and betting," the Spanish legislators decided to include these services within the scope of application of the Spanish law. In this sense, in article 5.2 of the LSSI ("Services excluded from the scope of application of the Law"), it is stated that "The provisions of this Law, with the exception of the provisions of article 7.1, shall apply to information society services related to games of chance that involve bets of a financial value, without prejudice to the provisions of specific State or Autonomous Community legislation."
However, although the LSSI is based on the principle of the free provision of services without the need for prior authorisation, a full analysis of the Law reveals that it does in fact permit the restriction of this type of services through several of the regulation's articles. I.e. although article 7 of the LSSI declares that "the provision of information society services by a provider established in a member State of the European Union or the European Economic Area shall be carried out under the regime of free provision of services, and no restrictions may be established due to reasons deriving from the coordinated regulatory framework", this general principle, with regard to sports betting, is contradicted as these services may be interrupted when they go against or may go against the following principles (among others):
* The safeguarding of public order.
* The protection of individuals that are considered consumers.
* The protection of young people.
These are all principles that are closely related to gambling and betting, which can be used to prevent the provision of online services related to gambling. But the most important part is the final part of article 5.2 ("without prejudice to the provisions of specific legislation"), as this is what prevents the provision of online sports betting services in Spain on a national level, as the corresponding service providers do not have the administrative authorisation required to do so. This leads us to think that the inclusion of betting in the scope of this Law, but with all of the options for restrictions described, was only done (at least temporarily) so that the LAE could, as described later, carry out its activities over the Internet.
A.2. Authorisation of the LAE for the online exploitation of games of chance and betting.
Given the unstoppable growth of the business of online sports betting, in 2005 the Spanish government adapted the regulations for Loterias y Apuestas del Estado (which, as we have seen, manages and exploits gambling within the State's jurisdiction) to the Internet, so that this organisation could exploit its business by means of this medium. For this purpose, it issued order EHA/2566/2005, dated 20th July, of the Ministry of Finance and Taxation, authorising Loterias y Apuestas del Estado to market and exploit its products via the Internet or other interactive systems.
As stated by the regulation in its preamble, "the rise of information technology, particularly the Internet, has resulted in the appearance of a series of environments whose main characteristic is the provision of goods and services remotely" and therefore Loterias y Apuestas del Estado "must not ignore the evolution of technologies and the needs and demands of the public, but rather, as most countries in the European Union have done, it must adapt the marketing of its products to these new criteria."
By doing so, the Ministry intended to fulfil two objectives: on the one hand, authorise the exploitation via the Internet of government controlled gambling and betting on a national level and, on the other hand, eliminate or reduce the number of illegal games or bets that take place via the Internet ("the existence of this new form of participation, based on the aforementioned requirements in terms of guarantees and security, shall result in the reduction and even the disappearance of a high number of illegal games or bets that take place via the Internet" is the literal text of this rule). That is to say, the ministerial
order is declaring that the only legal bets that can be made in Spain on a national level are those that are made through the LAE or by any other organisation that it authorises.
It is worth highlighting that the Order expressly prohibits the LAE from marketing these betting services on a cross-border basis, which must be guaranteed by means of technological devices that prevent bets from being made from abroad. In this sense, point 3 of its article 3 states that "In order to avoid cross-border betting, the operation for validation by Internet or other interactive means must establish the system necessary to ensure that participation is only possible within national territory."
However, although the different forms of gambling and betting were marketed over the Internet, the rights and obligations deriving from participation "are those established in the corresponding regula tions," which means that there were no changes to the legal regime for each type of gambling and betting.
Subsequently, the LAE developed this ministerial order (approving the conditions for the marketing of the service, mainly in order to avoid the participation of minors and to restrict participation to Spanish territory) by means of a resolution passed on 23rd August of the same year. Recently, this resolution was derogated by virtue of the latest step taken by LAE regarding this matter, through its Resolution passed on 18th June 2008, regulating the validation over the Internet of the different types of betting competitions.
This recent resolution regulates the procedural requirements that online betting and gambling must fulfil in order to comply with Spanish legislation (it may, in the future, serve as a model for future general regulations). In this sense, the main regulatory provisions state that:
* This type of bets must be made via the web page of LAE (www.loteriasyapuestas. es) and may be of any of the types envisaged and classified on this web page: La Quiniela (football pools), El quinigol (football betting), Lototurf (horse racing), Quintuple Plus (horseracing), La primitiva (primary lottery), and other lottery games (Euromillon and El Gordo).
* In order to participate, players must be registered in LAE's web page. This rule states that this record of players must comply with legislation applicable to the personal data protection (Organic Law 15/1999, dated 13th December, regarding Personal Data Protection).
* In order to guarantee that bets are made by adults and in order to avoid international bets, the regulations state that money for betting can only be placed by means of a credit or debit card linked to a Spanish bank account, and that this bank account must correspond to a Spanish natural person that has its main residence in Spanish territory.
* Participants shall manage their money through an "e-wallet" (the so called "loto-bolsa"), which shall be used not only to place bets but also for the payment of the winnings. This e-wallet should have a maximum balance of [euro]200.
* The maximum bet should be [EURO]200.
* If, as a consequence of the payment of prize money, the e-wallet's balance exceeds [EURO]200, the system shall automatically make a deposit in the bank account designated by the participant.
* Prizes of less than [EURO]600 are paid directly to the e-wallet (unless the existing balance plus the prizes won exceed [EURO]200), in which case this amount shall be deposited into the designated bank account. If the prizes obtained exceed [EURO]600, the participant must make a collection request by means of the procedure established for this purpose.
According to LAE (25), in 2008 sports bets placed via the Computerised Betting system grew by 31.32%.
A.3. Subsequent repressive measures against online betting: the Law for the repression of smuggling.
Following the order EHA/2566/2005 described above, which authorised the LAE to operate online, given the increase in online sports betting and (we assume) given the amount of tax fraud that foreign betting establishments operating in Spain were committing (prohibited activities, of course, do not pay taxes), in order to try to prevent this situation (and perhaps inspired by the repressive actions of the governments of the United States, France, etc.), firstly in the General State Budget Law for the year 2006 (Law 30/2005) and, more decidedly, by means of Law 42/2006, dated 28th December, regarding the General State Budget for the year 2007 (hereinafter "Budget Law"), the government repeated the pre-existing prohibition of sports betting over the Internet, this time specifically mentioning those organised "by foreign entities" and adding that this prohibition also applies to entities that give publicity to these entities. This measure also reaffirmed LAE's monopoly of online gambling in Spain.
In particular, the Budget Law carries out this repression of online betting by means of its Final Provision 14, including these activities (whenever they are carried out without authorisation) within the scope of Organic Law 12/1995, dated 12th December, regarding The Repression of Smuggling. This Final Provision states that:
"One. For the purposes of the provisions of articles 1.7 and 2.1.d of Organic Law 12/1995, dated 12th December, regarding The Repression of Smuggling, it is considered forbidden to distribute, trade, hold or produce tickets, coupons, stamps, cards, receipts, machines or any other item, (including technical or computer equipment) that is used for the practice of games of chance, draws, lotteries, betting and football pools. It is forbidden, without authorisation of the competent administrative body, to hold raffles, tombolas, random combinations and, in general any competitions in which participation is not free and prizes are given by means of any random formula in which chance is a form of selection. The conduction of the activities envisaged in the preceding section b.1 without the corresponding administrative authorisation or in conditions that differ from those authorised, shall be subject to the penalty system established for smuggling infractions in Volume II of Organic Law 12/1995, dated 12th December, regarding The Repression of Smuggling, regardless of the total amount of goods, merchandise, bills or the medium used to carry out the activity. These infractions shall beprocessed in accordance with the procedure established in Royal Decree 1649/1998, dated 24th July, which develops Volume II of Organic Law 12/1995, dated 12th December, regarding The Repression of Smuggling, and in any case the legal authority to impose penalties shall correspond to the Director of the Department of Customs and Excise of the National Tax Administration Agency. The Ministry of Finance and Taxation is authorised to define and regulate the activities referred to in the first point of letter b of this section. Two. With effects from 1st January 2007 and with an unlimited period of validity, a modification is made to the additional provision 19 of Law 46/1985, dated 27th December, regarding the General State Budget for 1986, which shall read as follows: One. In accordance with Organic Law 12/1995, dated 12th December, regarding The Repression of Smuggling, it is prohibited in the whole national territory to sell, import, distribute and produce tickets, coupons, stamps or any other item used for lotteries, betting and other games organised or issued by foreign persons or Entities. Two. [...]
This criminalisation of the activity (and its advertising, which the Law prohibits in section 2.2 (26)), includes sports betting as one of the items prohibited by the Law of Repression of Smuggling. Basically, a crime is considered to have been committed by anyone that "Carries out operations involving the importation, exportation, production,, trading, possession, distribution or rehabilitation of restricted or prohibited items, without fulfilling the requirements established by Law" (article 2.1.d) of this regulation).
Or, as expressly stated in the new regulation, anyone that carries out this type of activities (in our case, online sports betting) "without the corresponding administrative authorisation, or in conditions that differ from those authorised" shall be subject to the "penalty system established for smuggling infractions."
As this activity requires authorisation and, apart from the exceptions that we will examine later in the Autonomous Communities of Madrid and Euskadi (Basque Country), this activity is not properly regulated and it is impossible to fulfil these legal requirements or be authorised to operate, which means that operators cannot avoid committing a smuggling offence.
On the other hand, despite the fact that the Spanish press has published that the Tax Authorities, in conjunction with the anticorruption prosecutor, has already opened an investigation to study a possible case of tax fraud by betting establishments (which could, according to this information, amount to 500 million Euros), the fact is that so far there is no evidence that penalties for smuggling offences have been applied to any of the foreign companies that offer sports betting in Spain over the Internet or anyone that advertises them (we shall be aware, for example, that even some of the most important football clubs in the League Championship advertise these betting establishments), which perhaps demonstrates the possible voluntary ingenuity of the Spanish legislator when regulating this activity.
A.4. The "mandate" to the Government contained in the Law on Measures to Promote the Information Society.
In these circumstances, taking advantage of a legislative reform to promote the so-called Information Society, the legislator stated that the government should formulate a Law to regulate gambling and betting activities in Spain, particularly those carried out over the Internet. Realistically, this is not exactly a mandate but rather a desideratum or a reminder by the legislator to the government to regulate and update the regulations regarding gambling and betting (because so far no Law has been promulgated regarding this matter and no project has been drawn up for this purpose).
In this sense, by means of the Additional Provision 20 (entitled "Regulation of gambling") of Law 56/2007, dated 28th December, regarding Measures for Promoting the Information Society, it is stated that:
"The Government should present a Project of Law to regulate gambling and betting activities, in particular those carried out by means of interactive systems based on electronic communications, which should be based on the following principles:
1. It should ensure the compatibility of the new regulations with the legislation applicable to other areas linked to the provision of this type of services, and, in particular, the regulations for the protection of minors, young people, groups of users that are particularly sensitive as well as consumers in general, apart from the area of personal data protection and services of the Information Society.
2. It should establish regulations regarding the exploitation of gambling activities by interactive systems in accordance with the principles of general European Union law.
3. It should create a system for the control of gambling and betting services via interactive systems that guarantees market conditions that are fully safe and fair for the operators of these systems and that provide an adequate level of protection to users. In particular, it should regulate the activities of those operators that already have authorisation for the provision of the aforementioned services granted by the authorities of any of the member States of the European Union.
4. It should establish a system for the taxing of gambling and betting services via interactive systems based on the origin of the operations subject to taxation. The regulation must also envisage a system for the distribution of taxes collected as a consequence of the exploitation of gambling and betting services by electronic means in Spain between the State Government and the Autonomous Communities, taking into account the special tax system in Special Autonomous Regions.
5. The activity of gambling and betting though interactive systems based on electronic communications may only be carried out by operators authorised to do so by the competent Public Authority, by means of the granting of an authorisation following fulfilment of the conditions and requirements established. Anyone that does not have this authorisation may not carry out any activity related to interactive gambling and betting. In particular, the necessary measures should be taken to prevent the conduction of advertising by any means and to prohibit the use of any method of payment existing in Spain. Furthermore, the penalties envisaged in legislation regarding the repression of smuggling should be applied to any gambling and betting activities carried out via interactive systems without the corresponding authorisation.
6. Jurisdiction for the regulation of gambling and betting activities carried out via interactive systems shall correspond to the General State Government when it covers the whole of the national territory or more than one Autonomous Community."
That is to say, the wish stated by the legislator is that the future Law regulating gambling and betting activities:
a) Tends to protect the rights of minors, young people and particularly sensitive groups such as consumers and users.
b) Incorporates the standards and principles of European Union Law regarding this matter.
c) Regulates the activity in Spain of operators that have authorisation from a State in the European Union.
d) Establishes a system of tax collection and distribution and sharing of these taxes between the State and the Autonomous Communities.
e) Respects the premise that only those authorised by the competent authority may operate and that anyone that operates without authorisation shall be punished in accordance with the regulations regarding the repression of smuggling (in accordance with the terms stated previously).
Finally (as stated in other previous regulations), this Provision defines the area of jurisdiction that corresponds to the State and the Autonomous Communities. I.e.: when an operator wishes to cover the territory of more than one Autonomous Community or the whole of the national territory, the jurisdiction to authorize this activity shall rest with the General State Government.
B. Autonomous Community Regulations
As stated previously, article 149.1 of the Spanish Constitution (which specifies the exclusive powers of the State) does not grant the State exclusive jurisdiction over gambling. This being the case, how is it possible to justify that in Spain gambling is controlled by a State monopoly? As recognised by the Spanish Constitutional Court in its Decision dated 23rd July 1998:
"despite the lack of express mention of Gambling in articles 148.1 and 149.1 of the Spanish Constitution in the Statutes of Autonomy, the constitutional system of powers has attributed this area to the Autonomous Communities [...]. Therefore, in accordance with article 149.3 of the Spanish Constitution (27) and given that in article 149.1 the State does not expressly reserve this matter, it may be stated that "the Autonomous Government of Catalonia, in accordance with article 9.32 EAC, has exclusive jurisdiction over casinos, gambling and betting, except Charitable Sports Pari-Mutuel Betting (STC 52/1988, point 4 of the legal grounds) and this includes jurisdiction over the organisation and authorisation of gambling in the territory of the Autonomous Community" (SSTC 163/1994, point 3 of the legal grounds and 164/1994, point 4 of the legal grounds), in this territory but not, obviously, that of any game in the whole of the national territory given that article 25.1 of the Statute of Autonomy limits the area in which it may exercise its powers to the territory of the Autonomous Community. Furthermore, neither the silence of article 149.1 of the Spanish Constitution regarding gambling nor the fact that the Statutes of Autonomy, including that of Catalonia, state that they have exclusive jurisdiction over gambling and betting can be interpreted as a total revocation of the State's powers in this area, as certain activities that other provisions of article 149.1 of the Spanish Constitution attributes to the former (28) are closely linked to gambling in general, not just that reserved in article 149.1.14 of the Constitution regarding the management and exploitation of the National Lottery Monopoly in the whole of the national territory, [...] In order to determine, therefore, the jurisdiction regarding this matter, it is useful to remember that [...] "the tax monopoly [...] over the Lottery extends to all other games of chance that may be related to it and it assumes jurisdiction to authorise them." And as "an ordinary resource of the income budget and State Monopoly".. it falls within its jurisdiction by virtue of its control of the General Tax Authorities, [...] which includes the state monopoly as a historically defined institution, and therefore the State Government is responsible for the management and exploitation of the Lottery in the whole of the national territory. This determines, in turn, by virtue of the aforementioned monopoly system regarding this game of chance, the prohibition of lotteries, draws, raffles, betting and other similar games without the authorisation of the State Government [...] This is why we stated that, in accordance with article 149.1.14 of the Spanish Constitution, the State is responsible "due to its consideration as a source of state Tax Authority, for the management of the National Lottery Monopoly and the power to organise lotteries with a national scope," as well as "as far as they imply a derogation of the monopoly established in favour of the State, to grant concessions or administrative authorisations for the holding of draws, lotteries, raffles, betting and random combinations only when their scope covers the whole of the State's territory" (SSTC 163/1994, point 8 of the legal grounds); and 216/1994, point 2 of the legal grounds)."
The foregoing means that this jurisdiction regarding gambling is shared with each of the Spanish Autonomous Communities that, except Ceuta and Melilla, have exclusively assumed, in their Statutes of Autonomy, jurisdiction for gambling (29) in their territory. Further - more, the relationship between State regulations and Autonomous Community regulations, in this case, is based on the principle of regulatory jurisdiction rather than regulatory hierarchy, which means that the regulations of the State do not prevail over those of the Autonomous Communities and each are only valid within their area of application.
Therefore, the State has jurisdiction regarding gambling and betting when these exceed the territorial scope of an Autonomous Community or when these have a national scope, and the Autonomous Communities have exclusive jurisdiction regarding gambling and betting when its scope is limited to their territory (excluding charitable sports parimutuel betting, as they do not have jurisdiction on it).
Up to this date, of the 17 Autonomous Communities that make up Spain, only two of them (the Autonomous Community of Madrid and the Autonomous Community of the Basque Country) have expressly regulated the activity of the so-called "betting establishments." This regulation is that contained in Decree 106/2006, dated 30th November, approving the Regulation of Betting in the Community of Madrid and Decree 95/2005, dated 19th April, approving the Regulation of Betting in the Autonomous Community of Euskadi, respectively.
By way of summary:
B.1. The regulations of the Community of Madrid:
1. Regulate, within the territory of the Autonomous Community, "bets on sporting events, competitions or other previously determined events."
2. Grant the corresponding autonomous body the power to "authorise the organisation and marketing of betting, as well as betting establishments and areas."
3. Ban the participation of minors, the participations of those for whom a prohibition from accessing games has been applied for, as well as the participation of professional sportsmen and women and trainers (to avoid sport-related fraud), managers and staff of betting establishments, directors of the entities participating in the event that is the object of the bets, referees and judges involved in the competition, etc ...
4. Require that companies that wish to obtain authorisation to organise and market betting must fulfil the requirements of the Decree (among others, have Spanish nationality or that of any of the member states of the EU, have a tax address in the Community of Madrid, provide a deposit of 12 million Euro, etc ...
5. With regard to the remote provision of these services, it is stated that providers of this service must have a secure computer system for the organisation and marketing of bets that is capable of ensuring that the terms of this Decree are respected. I.e. among other things, they must guarantee that bets are not placed outside the territory of the Community of Madrid (30).
B.2. Regulations of the Autonomous Community of Euskadi:
1. Aim to regulate, within the territory of the Autonomous Community, bets on the events included in the catalogue attached to the regulations.
2. Include prohibitions on betting that are similar to those described in the preceding section a).
3. Prohibit bets that are made without authorisation or based on events that are not included in the catalogue attached to the regulations.
4. State that the adjudication of authorisations shall be carried out by public tender.
5. State that the awardees of the tender must have a share capital of at least 1 million Euros, be from a country that is a member of the EU, have their registered address in the Autonomous Community of the Basque Country, etc ... Furthermore, the awardees must provide a guarantee of 500,000 Euro.
6. The authorisations shall be granted for a period of 10 years.
It can be seen that both Decrees regulate the activity of betting in a very similar way. Perhaps the most noticeable difference is the fact that the Community of Madrid's regulations are based on the principle of free competition whilst the Basque Country's regulations are based on administrative concession with a limited number of licenses (during the first public tender, held on 2nd May 2007, only 3 licenses were granted).
According to the AEDAPI, so far in Madrid the first companies to open betting establishments have been Victoria (owned by Codere and William Hill), Sportium (Cirsa and Ladbrokes), Intralot Iberia and W1nners (an Alliance between Bwin and Betbull). For its part, in the Basque Country, the companies that have obtained a license have been Victoria (Codere, William Hill and Gabascar), Reta (made up of Basque gambling operators) and Kiroljokoa (also made up of Basque operators, linked to the Basque Ball game).
It seems fair to say that these disorganised Autonomous Community regulations will never be enough to regulate the betting sector in Spain and, in any event, they will limit the growth of the sector, preventing it from equally competing with foreign markets. Now that we live in a "Global Village", as famously expressed by McLuhan, it is absurd to consider regulation that divide the sector by Autonomous Communities, in which a single operator cannot operate in the whole of the country unless it obtains authorisations from each of the 17 Autonomous Communities. The truth is that this does not look like a very logical or efficient solution.
VI.- Examples of Case Law
In contrast to the situation in other countries, it could be said that in Spain there have not been any large legal disputes regarding sports betting. Perhaps this is due to the regulatory situation described and the reduced flexibility of the Spanish system. However, pursuant to the content of this work, it might be useful to highlight the following cases (some are related to gambling in general rather than sports betting), which confirm the regulatory situation described above:
A. Regarding requests for authorisation to exploit sports betting made by some private operators in Spain.
A.1. Judicial Review number 1183/1997, filed by the company EUROBETS INTERNATIONAL SPORTS BETTING S.A. against the refusal of authorisation for the exercise of its activity.
Eurobets International Sports Betting S.A. (hereinafter, "the company"), filed a judicial review against the Resolution dated 9th May 1997, of the Sub-secretariat of the Ministry of Finance and Taxation, rejecting its previous appeal against ONLAE's Resolution dated 3rd January 1997, which denied authorisation "for the exercise of the activity of national and international betting brokerage on sporting competitions."
The basis for the case is that in 1996 the company filed 3 requests for authorisation to open 3 betting brokers dealing with all types of sporting competitions "through any of the existing forms of communication," including data transmission, with a nationwide scope (two of the requests related to the Autonomous Communities of Madrid and Aragon, but with nationwide scope). These 3 requests were rejected by the ONLAE. This decision was subsequently ratified by the Ministry of Finance and Taxation, as stated above.
The judicial review was resolved by the Madrid High Court of Justice (Section 8 of the Administrative Disputes Chamber) in Decision number 266/2000, dated 16th March of this year. In its resolution, the Court rejected the company's appeal, stating that:
* As a brokerage with nationwide scope was requested, "the public body with jurisdiction to decide whether to authorise the request is the ONLAE" and not the Interior Ministry or the Autonomous Communities of Aragon and Madrid.
* The resolutions that reject the request for authorisation to exploit the business of sports betting do not infringe the right of free enterprise proclaimed in article 38 of the Spanish Constitution, as "the Administration has ruled against the wishes of the applicant because this is permitted by the national legislation applicable to this area, which is the exclusive jurisdiction of the State."
A.2. Judicial Review number 579/1997, filed by the company EUROBETS INTERNATIONAL SPORTS BETTING, S.A. against the refusal of authorisation for the exercise of its activity.
In this case, the company filed a judicial review against the resolution of the Ministry of Finance and Taxation of the Balearic Government, dated 7th April 1997, which also rejected the request for an authorisation "to establish a national betting broker dealing with all types of sporting competitions through any of the existing forms of communication (fax, computer, telephone, post, etc.) either directly or through the different centres that offer the Data Transmission service throughout national territory." These bets were intended to be made between private individuals regarding the results of all types of sporting events, both within the country and in the rest of the world.
The judicial review was ruled by the Balearic Islands High Court of Justice (Administrative Disputes Chamber, Sole Section) by virtue of its Decision number 365/2000, dated 15th May of such year. In its resolution, the Court rejected the company's appeal, stating that:
* The request formulated by the company trespass the territorial limitation to the jurisdiction of the Autonomous Community of the Balearic Islands (and any other Autonomous Community, as it requests authorisation with nationwide scope).
* Furthermore, the Royal Decree that regulates the transfer of jurisdiction to the Autonomous Community of the Balearic Islands expressly declares that the following shall continue to fall within the jurisdiction of the State Government: (i) Charitable Sports Pari-Mutuel Betting, national lotteries and gambling on a statewide level and (ii) the authorisation and inscription of companies operating on a state-wide level; and therefore the Autonomous Community does not have jurisdiction in this area.
* The jurisdiction to resolve this request is held by the ONLAE.
* The resolution appealed against does not contravene the right of free enterprise because "the business activity of exploitation of gambling is subject to a legal framework involving limitations and a level of government intervention envisaged by law and therefore the prior requirement for licenses and authorisations does not eliminate or alter the principle of free enterprise, but rather adapts it to the particular characteristics of this activity." Furthermore, the Court "considers that there is no need to obtain the verdict of the Luxembourg Court of Justice
A.3. Judicial Review number 4593/1997, filed by the company EUROBETS INTERNATIONAL SPORTS BETTING, S.A. following refusal of authorisation for the exercise of its activity.
On this occasion the company filed a judicial review against the Resolution by the General Bureau for Home Affairs of the Department of Justice of the Government of Galicia, dated 8th January 1997, refusing its request for administrative authorisation (presented on 22nd November 1996) to carry out the activity of national and international brokerage, in the terms stated in the preceding sections A.1 and A.2.
The judicial review was ruled by the Galician High Court of Justice (Administrative Disputes Chamber, Section 2), by virtue of its Decision number 1368/2000, pronounced on 2nd November of this year. In its resolution, the Court rejected the company's appeal, stating that:
* In order to grant the corresponding administrative authorisation, Autonomous Community Law 14/1985, regulating gambling and betting in Galicia, demands that the type of bet or game is included in the Autonomous Community's catalogue of games (which is approved by Decree). This catalogue of games shall specify, for each game or bet, the names, types, items necessary, rules, conditions and prohibitions and the corresponding technical regulations.
* Therefore, taking into account the terms of the request formulated by the company, "it is not possible to grant authorisation for a type of gambling or betting in the absence of the technical regulations necessary for its conduction and practice," as is the case here.
B. Regarding the application of the aforementioned Organic Law 12/1995 dated 12th December, regarding The Repression of Smuggling. B.1. Decision number 81/1999, dated 29th September, of the Provincial Court of Cuenca (Sole Section)
The Resolution accepted the appeal filed by the ONCE against the Resolution of the Court of First Instance, which rejected a claim made by this organisation against the association called Organizacion Impulsora de discapacitados (OID), which carried out the production and sale of tickets to participate in a daily draw, giving prizes to holders of tickets that coincided with the results of the ONCE's draw.
The Provincial Court declared that there was sufficient evidence to believe that the events reported were illegal and therefore ordered continuation of criminal proceedings. This was based on the following:
* Article 2d) of the Law for the repression of smuggling applies penalties to anyone that operates with forbidden items (including unauthorised gambling).
* The Constitutional Court has declared on several occasions "that the modalities of lotteries with a nationwide scope, due to their status as a state monopoly, are an ordinary resource of the state budget which therefore makes them part of the General Tax Department and the exclusive jurisdiction of the Central Government."
* The State is responsible for the management and exploitation within the whole of the national territory of the National Lottery Monopoly, which includes any other games of chance related to it.
* This state monopoly is managed by ONLAE.
Therefore, without making a definitive judgement regarding the matter (due to the procedural phase during which the aforementioned resolution was issued), the Court considered that there was enough evidence to believe that the activity of the OID was not authorised and, this being the case, the tickets that OID marketed were a restricted item (that the Smuggling Repression Law defines as "articles, products or substances whose production, purchase, distribution or any other activity is allocated by Law to the State"), so it were forbidden.
B.2. Decision number 403/2005, dated 24th June, issued by the Provincial Court of Granada (Section 1).
This decision resolved an appeal filed by the Public Prosecutor and the accused parties against a decision issued by Granada Criminal Court number 5, by virtue of which certain representatives of the Andalusian Association for Disabled People (Federacion Andaluza de Minusvalidos, FAMA) were sentenced "as the authors of a smuggling offence relating to restricted items" and, together with other pronouncements, ordered to pay "a fine of 2,620,296,000 million pesetas (15,748,296.13 Euros) each.
Basically, the events judged (and proven) consisted in that, between the months of March 1992 and September 1993, the aforementioned association FAMA sold coupons of the so-called "cupon del minusvalido (31)" (disabled person's coupon), which consisted in handing over cash prizes to the holder of the winning ticket in combination with the draw of the ONCE's coupon.
By virtue of its Decision, the Court confirmed the Decision of the Court of First Instance, declaring (among other pronouncements) that:
* "The conduct attributed to the accused is the marketing of tickets for lottery draws without any authorisation and with full knowledge of the illegal nature of this activity."
* "These tickets are restricted items in accordance with the Organic Law regarding the Repression of Smuggling."
* "The issue and sale of lottery tickets, draws and all activities related to them are a state monopoly and, therefore, their marketing without legal authorisation constitutes the criminal offence examined."
* "The Lottery business is a state monopoly and the regulation that, consequentially, prohibits the activities carried out by the accused does not contravene the Treaty of Rome dated 25/03/1957 or the EU Treaty of 1992."
* In the Decision of the ECJ dated 24/03/1994 (the Schindler case) it is declared that "the establishment of prohibitions or restrictions to the free provision of this service is compatible with the aforementioned article 59 of the Treaty."
* "The exclusivity of the game in the hands of the Tax Department determines the prohibition of the sale of foreign lottery tickets."
For all these reasons the Court confirmed the previous decision issued by the Court of First Instance.
Many voices have been raised in favour of a state-wide legislative solution that regulates the gambling sector in its entirety, enabling those that are interested in exploiting this type of activity to compete equally (which means, among other things, ending LAE's monopoly) and carry out their activity in the whole of the State. Ultimately, from the government's point of view, we understand that the real problem is not so much the terms in which betting activity should be regulated on a national level but rather the form in which the taxes resulting from this activity would be distributed between each of the Autonomous Communities and the State.
Up to this date, none of these initiatives has resulted in a Law regulating the sector. In fact, despite the fact that in 1999 the Gambling Sector Conference (32) was created, whose functions include serving as a channel for co-operation and communication between the public authorities with jurisdiction over gambling and proposing the adoption of certain common criteria for action ... the fact is that since its creation ten years ago, the Gambling Sector Conference has only met once, on the day of its creation ... This exemplifies the regulatory situation that exists today in Spain regarding sports betting.
However, this situation looks like it is about to change given that, apart from the government mandate contained in the aforementioned Additional Provision 20 of Law 56/2007, various bodies with political power within the State have started to promote initiatives to achieve this regulation. In fact, on 23rd December 2008, the PP Parliamentary Group in Congress presented a Non-Legislative Motion (33) regarding interactive gambling for debate during the Session. According to this Non-Legislative Motion:
"1. Additional Provision 20 of Law 56/2007, dated 28th December, regarding Measures for Promoting the Information Society, mandated the government to prepare and present to Parliament a Project of Law regulating gambling and betting activities, in particular those carried out by means of interactive systems based on electronic communications.
2. The basic principles of this Project of Law were agreed by all of the parliamentary groups, which voted unanimously in favour of the transactional amendment to this Law.
3. Given the time that has passed since the approval of this Law (now almost a year) without the Government having fulfilled this mandate and the fact that it is not just useful, but rather absolutely urgent to have a new regulatory framework regarding gambling and betting activities carried out by means of interactive systems, it is necessary to insist that new legislation should be proposed establishing the basic principles for regulating a situation that exists without any type of administrative control, without any tax being paid on the earnings made and, even more seriously, without guarantees regarding the protection of users in general and those that most require protection in particular, such as minors.
Because of this, the PP Parliamentary Group in Congress presents the following Non-Legislative Motion for debate during the Session: The Congress of Deputies urges the Government, within a period of three months, to submit to the General Courts a Project of Law regarding interactive gambling, based on the provisions of Additional Provision 20 of Law 56/2007, dated 28th December, regarding Measures for Promoting the Information Society."
This is why it does not appear unreasonable to think that, within a reasonable period of time, the government shall begin the corresponding procedures for the promulgation of a Law that, in accordance with the reiterated Additional Provision 20 of Law 56/2007, regulates and establishes the regulatory framework for the conduction, on a national scale, of sports betting, either in its traditional form (at premises prepared for this purpose) or using new technologies via online betting establishments. We will see if time proves us right. Alea iacta est.
* Pinto Ruiz and Del Valle Law Firm, Madrid, Spain.
(1) It should be taken into account that, despite the obvious relevance to this subject, this work's scope does not include an analysis of the implications of sports betting with regard to (i) problems related to sport-related fraud, (ii) regulations regarding money laundering, (iii) Data Protection regulations, (iv) regulations for the protection of consumers and users, (v) regulations regarding intellectual property, image rights and competition law, etc ... Please note that this work is focussed exclusively on the analysis of administrative regulation of sports betting in Spain.
(2) Decision of the ECJ on 6th November 2003, resolving case C-243/01.
(3) Decision of the ECJ on 6th March 2007, resolving cases C-388/04 and C-360/04.
(4) As stated by the ECJ in section 60 of the Schindler decision, the ECJ stressed that these moral, cultural or religious considerations, together with the fact that these activities move large amounts of money that could be linked to crime and fraud, justify the national authorities having the power to determine the requirements that must be fulfilled by this activity.
(5) According to the data provided in this article, the first ticket kept dates from 22nd November 1931.
(6) With regard to any intellectual property rights that the creator of La Quiniela might have had, it is sufficient to say that Manuel Gonzalez Lavin ended his days at a concentration camp in Sant Cyprien (France).
(7) As discussed later, this is maintained in current regulations.
(8) Based on the powers that, respectively, the Spanish Constitution granted to each of them.
(9) In its article 87.5, the Law resolves to create "The Organizacion Nacional de Loterias y Apuestas del Estado, reporting to the Ministry of Finance and Taxation, which shall be made up of the former Patronato de Apuestas Mutuas Deportivas Beneficas and the current Servicio Nacional de Loterias, reporting to the Ministry of Finance and Taxation."
(10) As shall be analysed later, it is worth noting the close link that has always existed between the jurisdictions related to the Tax Department and this game, which corresponds to its status as a state monopoly.
(11) Which, on the other hand, in article 148.1.19 envisages that Autonomous Communities can assume jurisdiction in this area (The Autonomous Communities can assume jurisdiction related to the "promotion of sport and proper use of leisure facilities" as stated literally in this regulation).
(12) Decision of the Court of Justice passed on 24th March 1994, Schindler (C- 275/92, Rec. p. I-1039).
(13) The ONCE is a non-profit corporation whose aim is to improve the quality of life of blind people and people with visual disabilities in Spain. It is a type of social welfare institution. Some of its charitable activities are carried out through its Foundation, which is funded with 3% of the gross sales revenue from the gambling products that the Organisation exploits with the State's administrative authorisation. The gambling products are the ONCE's financial powerhouse and directly or indirectly support almost 110,000 people.
(14) Decision number 1162/2002, dated 24th October, of the Madrid High Court of Justice (Administrative Disputes Chamber, Section 9).
(15) Which, due to the World Cup held in Spain in 1982, were obliged to invest millions in their stadiums leading to a debt, by the middle of the 80s, of more than 20,000 million pesetas.
(16) In its Additional Provision 15, the Sport Law stated that "In order to rectify the financial situation of the professional football clubs, the National Sports Council shall formulate a Corrective Plan that shall include an agreement to be signed between this body and the National Professional Football League."
(17) With the only exception of the 4 football clubs that had a positive net balance at the time of approval of the Sport Law (Real Madrid FC, FC Barcelona, Athletic Club de Bilbao and Club Atletico Osasuna).
(18) In accordance with the Transitory Provision 3 of the Sport Law, "During the period of validity of the agreement and until the total extinction of the debt, the professional League shall receive and manage the following financial rights:
a. Those that, for any purpose, are generated by the television broadcasting of the competitions organised by the League (by itself or in conjunction with other club associations).
b. Those corresponding to the general sponsorship of these competitions.
c. The 1% of the total income from sports betting controlled by the State recognised by current legislation as being assigned to the professional League."
(19) In accordance with the Transitory Provision of Royal Decree 419/1991, dated 27th March.
(20) This being ruled afterwards by virtue of Royal Decree 258/1998, dated 23rd February, partially modifying Royal Decree 419/1991, dated 27th March, regulating the distribution of the revenue and prize money from sports betting controlled by the State and other games managed by the ONLAE and adding additional regulations.
(21) Accessible at http://www.mir.es/ SGACAVT/juego/memorias_de_juego/ informeAnualJuego2007.pdf
(22) Decision number 1368/2000, dated 2nd November, of the Galician High Court of Justice (Administrative Disputes Chamber, Section 2), regarding the appeal made by Eurobets International Sports Betting S.A.
(23) Accessible at www.cmt.es/cmt_ptl_ext/ SelectOption.do?nav=publi_info_ comercio_elect
(24) Furthermore, according to data provided by the sector (specifically, the Spanish Association of Internet Betters, AEDAPI), during the year 2007 a total of 650 million Euro were played in Spain and in business year 2008, the Internet betting business obtained results of over 200 million Euro in Spain. Furthermore, there was a noticeable increase in the importance of sports betting, which in 2009 (according to these estimates) will increase almost 30%.
(25) Accessible at www.onlae.es/contenidos/ 1116/file/np20090303laquinielaen_2008. pdf
(26) Which is not transcribed herein, as it does not fall within the object of this article.
(27) "Areas not expressly attributed to the State by this Constitution may correspond to the Autonomous Communities, by virtue of their respective Statutes. Jurisdiction over areas that have not been assumed in the Statutes of Autonomy shall correspond to the State, whose regulations shall prevail, in the event of discrepancies, over those of the Autonomous Communities regarding any matters over which they do not have exclusive jurisdiction. State law shall be, in any event, complementary to the Law of the Autonomous Communities."
(28) This refers to the Tax Authorities.
(29) For example, article 9.32 of the Statute of Autonomy of Catalonia approved in 1979 established its exclusive jurisdiction with regard to "Casinos, gambling and betting, excluding Charitable Sports Pari-Mutuel Betting." In turn, the new Statute of Autonomy of Catalonia approved in 2006 states, in its article 141.1, that "The Autonomous Government of Catalonia has exclusive jurisdiction regarding gambling, betting and casinos, if the activity is carried out exclusively in Catalonia, including," among others powers, "the creation and authorisation of gambling and betting, as well as its re gulation."
(30) One of main criticisms of these regulations is that it is technically very difficult, if not impossible, to fulfil this requirement.
(31) Clearly intending to make people confuse it with the ONCE's coupon called "prociegos".
(32) Created on 5th May 1999, according to the Resolution dated 24th June 1999, of the Technical General Secretariat of the Interior Ministry.
(33) www.congreso.es/portal/page/portal/ Congreso/PopUpCGI?CMD=VERLST& BASE=puw9&DOCS=1-1& DOCORDER=LIFO&QUERY= %28CDD200902020139.CODI.%29# (Pagina11)
by Yago Vazquez, Jordi Lopez and Jose Juan Pinto*
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|Author:||Vazquez, Yago; Lopez, Jordi; Pinto, Jose Juan|
|Publication:||The International Sports Law Journal|
|Date:||Jul 1, 2009|
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