GVC provides a test case for New Jersey’s definition of grey markets

The New Jersey Division of Gaming Enforcement has taken a step further than most regulators on the subject of grey markets and in doing so, come up with a common sense definition of the most indefinable subject.If the pedants in the room think the previous sentence is an oxymoron, they might be right. Defining grey markets is tough but DGE director David Rebuck has taken a great leap forward by coming up with a definition of black markets. “The Division will examine whether or not a jurisdiction has a law that specifically prohibits internet gaming and, if so, whether the jurisdiction has taken affirmative, concrete action to enforce that law,” wrote Rebuck in his advisory note on the matter. “Black markets are defined as jurisdictions where government authorities have taken affirmative, concrete actions to actively enforce laws that prohibit online gaming, OR [my capitals] have issued unequivocal official pronouncements that online gaming is not legal in that jurisdiction.” That’s further than just about any other regulator has taken the issue in the past. Most talk about a “common sense” or “case-by-case” analysis. The UK Gambling Commission said this: “It is not about defining grey or black as such, but much more about understanding the operator’s approach to operating in grey and black markets and what action they took to avoid acting illegally. If an operator has a history of flouting laws then it will raise questions about their suitability to hold a licence in the future if the same key people are still involved. Our view is that most operators of scale will be able to demonstrate their suitability in this regard.” The DGE listed civil and criminal complaints and the issuance of formal cease and desist letters as examples of affirmative, concrete actions taken that illustrate that internet gambling is illegal. Where a jurisdiction has refrained from taking any affirmative steps to prevent an internet gaming market to develop, the DGE will consider that jurisdiction to be a grey market and fair game. Black markets are bad, grey markets are okay in the eyes of director Rebuck. But what does this mean in practical terms? For now, it means very little to anyone without a New Jersey licence. But it will affect the likes of 888, NYX, PokerStars and most intriguingly the recently GVC-acquired bwin.party. Much to the annoyance of chief executive Kenny Alexander, GVC has long held a reputation as a master of the grey markets. It built its business in (among other places) Brazil, Turkey and Eastern Europe prior to its second acquisition of Sportingbet and the bwin.party deal. Alexander told us last week that GVC is in the midst of applying for a New Jersey licence. He says he expects to hear a positive answer from the DGE in the next six weeks. One wonders if GVC’s application is the catalyst that pushed the issue to the forefront of Rebuck’s mind. Alexander’s optimism and the timing of Rebuck’s statement suggest the pair have already had a grown-up conversation on the matter. But conversation or not, GVC will provide Rebuck with a test case for his new interpretation. Prior to acquiring bwin.party, GVC relied on Brazil, Germany, Turkey and Eastern Europe for the majority of its revenue. In Brazil last year, a bill which was partially sanctioned by President Dilma Rousseff and converted into law, updated the fines imposed on players caught betting to R$2,000- R$200,000 ($520-$52,000). It also stated explicitly that using the internet or any other means of communication, as a punter or bettor, constitutes unauthorized gaming and betting. This caused some controversy among courts and scholars, according to Brazilian lawyer Neil Montgomery of Montgomery & Associados. “It was argued that Brazilian courts could treat foreign online operators targeting Brazilian players as ‘unauthorized gaming and betting’, which would leave them open to the same fines and prison sentences as players,” wrote Montgomery in a previous article for Gaming Intelligence’s sister publication GIQ magazine. This is, of course, speculative but Montogomery said it could easily happen in Brazil. While Brazil is in the midst of legitimising gaming and betting (including online sports, bingo and casino) and the role of the operator is ambiguous, it would be hard to argue that the previous actions did not constitute “affirmative concrete actions”, in the words of director Rebuck.Similarly, the German State Treaty strictly prohibits online casino and poker. GVC’s focus in Germany was online casino. While bwin.party won one of the Treaty’s 20 sports betting licences, GVC was absent from that list. Turkey is more complicated due to the supply deal that GVC has in place with the supposedly independently owned East Pioneer Corporation. But its Sportingbet brand does not have a happy history in the country. Sportingbet was one of the few operators not to withdraw from the Turkish market following a crackdown on online gaming in March 2007. In May 2008, Turkish authorities detained a number of people suspected of being linked to Sportingbet's online gaming operation. As reported by Gaming Intelligence at the time, Turkey's Financial Crimes Investigation Board alleged to public prosecutors that Sportingbet's Turkish facing business Superbahis.com had taken money from some 600,000 Turkish citizens, which it claimed was then transferred to the UK. The money is then alleged to have been transferred to Swiss bank accounts or paid back into Turkey in payment for illegal gambling services. While GVC was not Sportingbet’s owner at the time, Alexander was the company’s European managing director before 2007. And then there is the question of GVC’s reaction to being blacklisted in Bulgaria, Hungary and Russia. GVC could not confirm whether it retreated from these jurisdictions after the authorities’ “affirmative and concrete actions”. Bwin.party, for its part, has been on many of these Eastern European blacklists but has subsequently withdrawn, as far as we know. None of this is to suggest that GVC has done anything wrong in the eyes of the law. Quite to the contrary, it has been very canny in its handling of markets that others deem too hot to touch. And frankly, most operators are active in one jurisdiction or another that might be considered black by Rebuck’s new standard. But given Rebuck’s new interpretation of black markets, one would assume that GVC is going to slip up somewhere with its New Jersey licence application, and it will not be the only one. Others will be watching closely.sah@gamingintelligence.com