Online Gaming and Gambling : what is the French legal framework ?

Version 12/04/2023

 

Please contact me by email (reynaud.avocat@gmail.com) if you would like a legal advice and a quote. This article is published for information purposes only and is not intended as legal advice.

 

French version here

 

Introduction

 

Many games offered on the internet offer the possibility to spend money, the participant hoping to win a prize or a sum of money in return. This can be a lottery, a casino game, online betting, eSports, stock market games and “play to earn’ games, skill games, video games etc. ...

 

However, before launching a gambling operation on the Internet, it is necessary to determine whether the proposed operation constitutes prohibited gambling.

 

Are these games legal under French law? 

 

The main legal provisions concerning gambling can be found in :

 

- The Internal Security Code in articles 320-1 and following in its version applicable as of 1 January 2020 (hereinafter CSI).

 

- Law n° 2010-476 of 12 May 2010 on the opening to competition and the regulation of the online gambling sector.

 

These texts lay down a general prohibition of gambling under 3 conditions (part 1), unless one can benefit from legal exceptions, for example that on advertising lotteries and sweepstakes (part 2).

 

Part 1. Prohibition and control of gambling

 

The main reasons for the prohibition of gambling are the risk of gamblers' addiction and money laundering from gambling.

 

1.1             The principle of gambling prohibition

 

Organising paid bets is prohibited in France. There is no legal bookmaker except for sports and horse betting, namely:

Organising poker games with real money is prohibited in France, except:

Offering paid lotteries is prohibited except for the FDJ on and off the internet.

 

Paying "lotteries" on the Internet are still the monopoly of the Française Des Jeux (FDJ). Only FDJ can legally offer online draw and scratch games due to its very specific legal status. The legislative changes of 2010 and 2019 did not liberalise lotteries, which remain prohibited on the internet outside the FDJ. However, there are several legal exceptions to the ban on lotteries (see Part 2).

 

Offer casino games (slot machines, roulette ...):

The French regulations appear to comply with the requirements of European Union law as specified by the Court of Justice and, in particular, by its decision of 30 June 2011 (CJEU, 8th ch., 30 June 2011, aff. C-212/08, Zeturf Ltd). The monopolies of the PMU and the FDJ comply with European law according to the Conseil d'État (CE, 9 Dec. 2016, n° 385934, CE, 10 July 2013, n° 357359). The dominant position of these operators nevertheless requires certain precautions to be taken in their relations with their competitors and subcontractors. (Opinion No. 11-A-02 of 20 January 2011 on the online gambling sector). However, proving abusive behaviour is far from easy (Decision No. 17-D-17 of 27 September 2017 on practices implemented by the FDJ in the scratch card games sector). Finally, the privatisation of the FDJ raises important questions. Indeed, the remuneration of the exclusive rights granted appears, at this stage for the European Commission, to constitute State aid incompatible with the internal market. (State aid - France - State aid SA.56399 and SA.56634 (2021/C) (ex 2020/FC)).

 

Gambling, as an economic activity, is subject to Article 49 on freedom of establishment and Article 56 on freedom to provide services of the Treaty on the Functioning of the European Union (TFEU).  Thus, any national measure, whether of legislative or administrative origin, which hinders or makes less attractive access to the activity in question constitutes an obstacle under European law. The justifications for these obstacles invoked by the Member States in terms of freedom of establishment and freedom to provide services are only admissible if they comply with several conditions, namely: 1/ the existence of an overriding reason of general interest justifying the restriction, 2/ the absence of discrimination of the restriction vis-à-vis other gambling operators, 3/ compliance with the principle of coherence of the development policy of gambling carried out by the State, 4/ compliance with the principle of proportionality of the measures in relation to the objectives pursued These requirements generate numerous appeals before the CJEU (see for example, CJEU, 8 September 2009, Liga Portuguesa C-42/07; CJEU, 28 Feb 2018 Sporting Odds C-3/17; CJEU, 2 March 2023, Recreatieprojecten Zeeland BV C-695-2).

 

Offering a prohibited gambling activity to the public is severely punished under criminal law. Violation of this prohibition is punishable by up to three years' imprisonment and a fine of up to 90,000 euros, as well as numerous additional penalties, particularly for legal entities (Art. 56 et seq. of the Law of 12 May 2010 & L 324-1 et seq. of the CSI, as amended), not to mention the possible offence of laundering the proceeds of illegal gambling (Art. 324-1 et seq. of the Criminal Code).

 

Advertising for illegal games is of course prohibited (art.57 Law 12 May 2010), including through affiliation mechanisms, sponsorship, publication of odds and reports proposed by these unauthorised sites, or even for simple search engines (Italy: 100,000 euro fine for Google for advertising an illegal casino site; Le Monde: Jeux d'argent en ligne: sur Twitch, les jeunes spectateurs raffolent de vidéastes au business douteux).

 

Commercial communications for legal games are lawful, but advertisers must comply with multiple constraints regarding the media, warning messages, audiences that are prohibited from being targeted (minors, prohibited games) and the content of the advertising messages themselves (art. L. 320-11, L320-12, D320-2 to D320-8, D320-9 to D320-10, L324-5 CSI, art. 29 of the 2010 law), on pain of criminal sanctions (Art L324-5, L324-8, L324-8-1 CSI). However, legal operators are caught up in a logic of advertising overkill and targeting of a "fragile" public, to which the ANJ wished to react: (Euro de football et paris sportifs: l'ANJ réunit les opérateurs et annonce un plan d'action énergique et structurant).   The ANJ presented its guidelines and recommendations on gambling advertising in great detail (23/02/2022); for a first application to Winamax for an advertisement deemed non-compliant by the ANJ (18/03/2022), see. C. Bouchenard, G. Debiesse, L. Bonnel, Glorification du parieur : l'Autorité nationale des jeux siffle la fin de la partie, Légipresse 2022 p.305 ). Advertising for gambling in the audiovisual media and on platforms is regulated by a new ARCOM decision dated 19 October 2022 (OJ 6 November 2022).

 

Finally, the sale of horse racing forecasts, outside the media and the horse racing press, is prohibited (art. 4 of the Act of 2 June 1891).

 

In addition, offering services that allow gambling on credit and advertising such services are also prohibited.

 

However, traditional sports must be excluded from this prohibition of gambling. Indeed, under certain conditions, the organiser of a sporting event may award a prize to the winner and require a financial outlay on registration (see for example Art. L331-5 of the Sports Code).  The question is then to differentiate between "sport" and "game". Thus, a sport is notably characterised by a non-negligible physical component (CJEU, 26 October 2017 C-90/16 for tax law).  It remains that for physical games, the distinction between "sport" and "game" is far from obvious (On the definitions of the notion of sport in law, see for example F. Buy, JM Marmayou, D. Poracchia, F. Rizzo, Droit du sport, LGDJ n°2 and following. ).

 

It is the organiser in the broad sense of the term who will be prosecuted, even if he tries to hide behind the activity of a simple service provider. In fact, the service provider is the real organiser of the game if he allocates all the resources needed for the games within the framework of a commercial activity (Court of Cassation, 17 February 2016, No. 14-87709). However, this offence implies proof of awareness and the will to organise a prohibited lottery on the part of the organiser... (CA Poitiers, 5 Oct. 2006, n° 06/00146: JurisData n° 2006-321848).

 

Social networks, payment service providers (PSPs) and app stores have set up rules on gambling, for example for Facebook (here), or for Google (here). Gambling operators may have to provide their licenses or approvals or a lawyer's opinion on the legality of their offers, where a gambling license is not possible (example of the procedure for Facebook).

 

In principle, if the ordinary player or bettor does not participate in any way in the organisation of an illegal game, he or she cannot be criminally convicted. However, in certain cases, the player may become an "accomplice", a "fence" or participate in money laundering operations and risk prosecution.

 

Minors are prohibited from participating in gambling authorised by law, even in free versions, except for advertising lotteries (see 2.1), games in fairs, traditional lotteries, charity lotteries (see 2.2) and video game competitions (see 2.3) (art. L 320-7 & L320-8 al.2 CSI). (on this issue see: the ANJ's reference framework for the prevention of excessive or pathological gambling and the protection of minors.

 

The gambling must be done by the player himself. Third parties (lottery players' associations, betting clubs, intermediary companies, tipsters, etc.) may not take part in gambling on behalf of players, for example by offering copy betting services. It is forbidden for legal persons to take part in gambling in the name and on behalf of natural persons (art. L 320-16 CSI). Before this new law, there was some vagueness on the issue for associations that acted on a non-profit basis. This is no longer the case.

 

It should also be noted that it is prohibited to sell or operate FDJ games without its authorisation (Art. L322-12 CSI new). Some associations used to sell FDJ games to their members.

 

With regard to the taxation of players' winnings, a distinction must be made between the situation of professional bridge and poker players and other players:

  • Professional bridge and poker players are taxed as BNC (bénéfices non commerciaux) (see BOI-BNC-CHAMP-10-30-40). This should probably include eSport players and Black Jack. The keys to determining who is subject to tax are, on the one hand, the player's ability to control at least part of the chance, depending on the nature of the game, and, on the other hand, the professional nature of the player's activity, based on several indicators, for example the player's investment of time and money, the level and share of the game winnings in relation to the player's total remuneration. (CAA Paris, 7 February 2017 concerning poker winnings; CE, 8 ch., 17/11/2021, 445981)
  • For other players, the practice of games of chance such as lotteries, roulettes, tombolas, sports betting and horse racing does not give rise to taxation (see //bofip.impots.gouv.fr/bofip/2824-PGP) 
  • It is also necessary to take into account the obligation to declare foreign bank accounts pursuant to Article 1649 A, paragraph 2 of the CGI for individuals and companies not having commercial form, domiciled or established in France. Each account must be declared separately (see form 3916-3916 bis).

On the taxation of legal online gambling operators, one may consult the CGI, (Chapter XX: Levies on gambling and betting). For illegal gambling operators, in addition to criminal sanctions, there are also tax sanctions. The Court of Cassation confirmed this double conviction (Cass. crim., 5 June 2013 n°12-83.288), for a defendant guilty of organising a prohibited lottery (common law offence - now a game of chance) and violating the legislation on gaming houses and shows (tax offence).

 

In 2019, the Government amended the legislation on gambling by Ordinance No. 2019-1015 of 2 October 2019 (hereinafter the Ordinance).  The 2019 reform focused mainly on:

To find out more about this reform, see our blog (point 30)

 

1.2 The legal definition of prohibited gambling.

 

The definition of a prohibited "game of chance" remains very broad.

 

According to the new article L 320-1 CSI, the following is prohibited

 

"All operations offered to the public, under any name whatsoever, in order to raise the expectation of a gain which is due, even partially, to chance and for which a financial sacrifice is required by the operator from the participants".

 

This new article L320-1 CSI on gambling takes up the usual scope of the lotteries prohibited in the repealed legislation.

 

In terms of substance, since the old lottery provisions have officially become the "general" law on games of chance, it is most likely that the same reasoning must be applied to the old lottery case law. On the other hand, the subtle distinctions between "lottery" and "games of chance" are no longer relevant under the new legislation.

 

What then are the conditions for the application of this ban?

 

The offence consists of three material elements which must be cumulatively met. If only one of these elements is missing, the game becomes legal. The moral element of the offence seems to be relatively unrestrictive...

 

We will analyse each of these three criteria in turn:

  •  1st condition: the expectation of a gain.
  •  2nd condition: the public nature of the offer.
  •  3rd condition: a financial sacrifice on the part of the player.

The presence of chance was a fourth condition for prohibiting gambling before 2014. However, since 2014, it is no longer, in principle, a relevant factor.

 

The fact that the lottery is associated with an advertising objective aimed at consumers is covered by the specific regime of the Consumer Code (see below, point 2.1).

 

The fact that the lottery is associated with a charitable objective is covered by the specific regime of Article L322-3 CSI (see below point 2.2 on this mandatory regime).

 

A sponsorship contract (payment of the buy-in, expenses, etc.) between a poker player and a company to participate in poker tournaments is not a "lottery" or a game of chance. This contract is not contrary to French public policy and must be enforced (CA Paris 16 September 2021 - n° 18/09730).  

 

1.2.1 First condition: the expectation of a win for the player

 

The hope of winning money, a prize, or a service with monetary value is sufficient to characterise this condition.

 

First, the expected gain must be subject to a minimum of randomness. It is in this hope of enrichment created by the hazard that the addictive character of this type of game lies. On the contrary, if the gain is certain in its value, it is no longer a game of chance, but the purchase of a good or a service with a value known by the player.

 

This 'gain' then needs to be valued and converted into money. For example, hoping to meet a celebrity is probably a gain with a monetary value. Indeed, many stars offer this type of service for a fee as an accessory to concerts.

 

If the player wins nothing and pays to play, this condition is not met, and the game is legal.

 

What about paid games that offer winners free games, virtual points, game currency, new character powers, higher ranking with a hazard?

  • If the benefit the player hopes to gain has a financial equivalent in the game, e.g., an official currency, a virtual currency with a financial value such as bitcoins, cryptocurrency, images or avatars that can be exchanged for prizes or real money, there is a legal risk for the game operator. This is because the player has the hope of "winning" something that has an economic value.
  • On the other hand, the hope of a higher ranking for the player, the benefit of new powers in the game, a nice avatar, a game currency without a monetary counterpart probably do not fall within the scope of the ban.

* The case of "loot boxes":

 

These are "goody bags" or "loot boxes" containing random bonuses for players, such as extra playing time. These random paid bonuses offer concrete advantages over other players. (clothes, colours to customise your avatar or weapons or "skins", virtual currencies within the game ...) (See LOOT BOX : LAS VEGAS PARANO By Caroline )

 

The qualification of gambling within the meaning of Article L 320-1 CSI is therefore entirely possible for loot boxes if one associates with them the hope of winning "in kind":

  • A priori, these paid random powers do not have direct monetary equivalents. It is not about winning a prize, a service with a monetary value or money. It is simply a question of being ranked higher in the game without the player being able to derive any direct economic benefit from it. Loot boxes are not then games of chance.... (for an article along these lines). The protection of consumers and especially of minors (one-click purchase...) must here be covered by consumer law rather than gambling law.
  • However, the addictive potential of the practice must be taken into account when deciding whether to prohibit it. The randomness (the hope of a win) is here the source of a potentially addictive and damaging pleasure for the player, especially if it is associated with a prior payment. (For a Dutch legal analysis of addictive games: https://www.eurogamer.net/articles/2018-04-19-the-netherlands-declares-some-loot-boxes-are-gambling).

 The combination of 3 elements below makes the game illegal, namely:

 

1) payments by players in the course of the game to obtain Loot Boxes.

 

2) a random gain, which amounts to introducing a random mechanism into a video game. We can see in passing that it is difficult to dispense with the criterion of chance to prohibit a game... despite the recent evolution of the legislation.

 

3) the possibility of reselling the winnings won on the gaming site in real money.

 

It is clear that the combination of points 1, 2 and 3 above, on the same site, makes this type of gambling illegal. But there are several fewer clear-cut situations that leave the discussion open. The ARJEL's position was not too repressive in its report for 2017 2018 (p.7), but left room for some questions and case-by-case analysis ... (See on this subject, M. Pernet - Lootboxes in video games: where is their regulation in France? le Monde Pixels) 

 

Often the monetisation of rewards is not done on the game site, but on a third-party site where the player sells his reward for real money. This raises the question of the complicity of the game site in this system and leads to a global analysis of the game ecosystem, particularly on the difference between game currency and virtual currency.

  • Websites using skins as a means of payment could be considered as reporting entities in the sense of the financial regulation (Recital 10 of Directive (EU) 2018/843 of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing ).
  • Loot boxes are thus used to launder money through their resale possibilities in official currency. The publisher Valve has reacted by announcing the removal of these virtual containers (to find out more, visit Zdnet.fr).
  • It is also necessary to consider the regulations on fintech in the case of speculative financial arrangements (NFT, blockchain, etc.). A player may be considered a digital asset service provider (DASP) if it provides at least one of the digital asset services mentioned in Article L. 54-10-2 of the Monetary and Financial Code. (for more information, see the AMF website)

* Note that French legislation largely prohibits "hard" games with random benefits other than monetary.

 

Thus, with regard to gaming "machines" that rely on chance, Article L 324-4 al. 1 CSI prohibits any advantage, even "simple free games", beyond the gain having a financial equivalent.

  • This provision, introduced in 1983, establishes a particularly strict system of prohibition of all devices that may underlie gambling.
  • This provision was intended to "overturn" favourable court decisions which held that obtaining non-refundable free games should be analysed as "a mere benefit in kind consisting of a prolonged distraction".
  •  Does this ban on free games apply to internet games? In principle, the notion of "device" refers to hardcore games and not to the internet. However, a broad interpretation of the term "device" is not impossible.

 

To our knowledge, there is no French court decision on this issue of the prohibition of any random advantage, other than directly or indirectly monetary, as a result of a player's expenditure on online games.

 

1.2.2 Second condition: the public nature of the offer

 

The offer of gambling must be public to be illegal.

 

In practice, if the gambling site is publicly accessible, gambling is illegal.

 

Only games between close friends in a purely private setting are legal.

 

Offering the game only to a limited group of people based on a subscription, prior registration, or in the context of a "private circle" with sponsorship is not likely to transform the operation into a "private" offer. This is therefore prohibited.

 

Organising poker games at home is not enough. The entire organisation of the game must take place between close friends (Cass, crim, 27 June 2018, n° 17-83.216)

 

Whereas, in order to characterise the free admission of the public to the home of Mr A... at whose home, once or twice a week, games of chance were organised, bringing together, in addition to a croupier, approximately nine players per session, the judgment states, in particular, on its own grounds and adopted, that the latter declared that, although he had relations with certain players, he did not know them all, that it emerged from the hearings held that they were not linked to each other by ties of friendship, but only by their taste for the practice of poker and by their financial capacity to wager very large sums of money (...) ;

 

We consider it dangerous to offer the organisation of so-called "private" gambling games without approval on an electronic platform. On the one hand, there is no guarantee that the online participants are friends, and on the other hand, the courts often punish the real economic beneficiary of the game, i.e. the platform operator.

 

It should be noted that in the field of games of chance, the unlawful operation of a gaming house can probably be established independently of the criteria of habit and continuity according to the Cour de cassation. In a recent case, an association and four companies had organised a mobile poker tournament. They were sued for the Paris leg of this event in 2009. The question was whether habit was a constitutive element of the offence since only one tournament was prosecuted. The Court of Cassation considers that one event is sufficient for the offence to be constituted (Cass. crim., 17 Dec. 2014, n° 13-86.617).

 

1.2.3 Third condition: financial sacrifice on the part of the participant

 

A game of money that is free for the participant is in principle legal unless it is offered to a minor (Art. L. 320-8 CSI new). Regarding minors, it is now forbidden to offer a free game associated with a prize, except in exceptional cases.

 

1/ The financial sacrifice of the player lies in his payment and in the obligation to purchase credits to participate in the game or to continue to participate in it (Cass. civile, com., 20 January 2015, n°13-28.521). The game is therefore not free, which is an element leading to its prohibition.

 

The financial sacrifice can take different forms: the purchase of an entry form, an NFT (Blockchain game) stake, the purchase of a raffle ticket, the cost of sending the answer, the prior purchase of a product to play, the purchase of game credit, a prior subscription to a site, etc.

 

It is therefore forbidden to sell one's movable or immovable property (flat, house, etc.) through a paid lottery, for example: http://www.lecourrierindependant.fr/la-tombola-du-cheval-blanc-vraiment-compromise_6457/

 

Play-to-earn games fall under the category of gambling if they combine a financial outlay with the expectation of a win, for example tokens, cryptocurrencies. The only way to escape the prohibition of gambling is to clearly comply with the legal regime for digital asset service providers (DASPs) and try to obtain AMF approval.  In fact, it is difficult to distinguish games of chance from certain speculative financial products. One way to resolve this difficulty is to comply with the requirements of the Monetary and Financial Code. The appropriate AMF regime and authorisation must be identified in order to carry out this activity by "authorisation of the law". Otherwise, the prohibitions of the Internal Security Code are likely to apply ...

 

2/ Regarding the amounts paid by the player, the courts have been particularly strict. The courts consider the financial participation of the player (i.e. a stake and/or a fee for participating in the game and/or a surcharged communication fee) as essential, regardless of the amount of the participation. A stake of a few cents, a micro-transaction is sufficient to prohibit the game (On the ARJEL position on micro-transactions in video games: p.4-7 http://www.arjel.fr/IMG/pdf/rapport-activite-2017.pdf). 

 

3/ Furthermore, it is not necessary for the player to lose money overall. It is sufficient that he has to participate financially in order to play, even if he wins overall in the process. For example, it has been held that "fictitious casino" parties are legal under two conditions:  - 1: Guests do not have to make any financial sacrifice to participate in the game. - 2: The prizes won are not replayable (Rép. min. n° 41142 du 5 déc. 1983 (JOANQ 5 mars 1984, p. 1035.). On the other hand, if the prize with a financial value (NFT, tokens, cryptocurrency...) is bet in a new game, there is a loss on the part of the player, which constitutes a financial sacrifice, even if overall he has not suffered any loss in his assets as they existed at the beginning of the evening.

 

The debate is reopened on this question of the definition of financial sacrifice concerning Sorare. The latter argues that the cards bought by the players, once played, were never lost. The operator contests any notion of "stake", which is understandable, since there is no real sum played and placed with a risk of loss, as in a classic bet. On the other hand, it seems difficult to exclude the notion of "financial sacrifice", in accordance with the traditional understanding of the latter notion, i.e. the existence of a simple expenditure, stricto sensu, in the process of gambling analysed globally. This notion is usually interpreted in the broadest possible way by judges and the administration. However, as this overly strict interpretation puts Sorare's business model at risk, the ANJ has chosen to be flexible by allowing, on the one hand, the existing legal framework to be adapted and, on the other hand, to allow this operator to modify its practices. There seems to be a move towards the already legally permitted "fantasy league" model and by increasing the free offer at tournaments. It is true that the free offer of gambling is in principle legal and it is possible to segment the gambling process by distinguishing between the "no win channel with purshase" and the "free win channel with prizes" (see bridge 6: below for double entry lotteries). The analysis is risky, but feasible, especially if the operator has a direct link to the ANJ.  However, it is also questionable whether there is a degree of unevenness between gaming operators depending on their economic size and whether judges would proceed with the same flexibility as the ANJ. 

  

4/ Asking for a payment or an "advance", but proposing a reimbursement of the costs of the game at a later date, no longer makes the game legal (Article L 320-1 paragraph 3 CSI), except in the specific case of games on TV, in the press and on the radio. (See below 2.4 for these specific games).

 

5/ At present, it is therefore possible to finance free gambling through advertising, often by collecting personal data from consumers, subject to the relevant legislation (RGPD, etc.).  Beware, the debate is not closed on this issue, because one can "pay" with his personal data according to some.  According to the ANJ ( Activity Report 2017-2018 page 8):

 

"The question now arises as to how to go beyond this notion of financial sacrifice, which, in view of the general terms of the law, might not require any intervention by the legislator. Thus, the assimilation to a financial sacrifice of the processing of a player's personal data could be discussed. The right accepted by the player to the processing of his data could constitute the consideration, the price as it were, that he agrees to pay to the operator, who is thus remunerated, for obtaining the win. This brings us back to the delicate and current issue of the patrimonialization of personal data.

 

6/ Combining a free channel with a pay channel is risky. This is the case of "double entry" gambling. In practice, the same site offers paid access and free access to games with a possibility of winning. In this case, the ANJ examines whether the player has an incentive to pay to improve his chances of winning.

 

If the player's optional payment has any influence on the expected winnings (frequency of play, game winnings, etc.), even if there is a way to play for free, the game is prohibited. It is therefore very rare in practice to see lotteries of this type that meet this condition. How to ensure the profitability of the game when its free access is identical to its paid access?

 

Court of Cassation, Criminal Division, 28 September 2016, 15-82.587:

 

Whereas in the light of these statements, from which it follows that the operation of the contested devices encouraged the player, in the perspective of access to the games presented as free, to make a payment of money constituting a stake, the Court of Appeal, which characterised all the elements, both material and intentional, of the offences of which it found the defendants guilty and fixed the amount of the proportional penalty on the basis of the amount of duties evaded, calculated on the basis of the receipts that it established, justified its decision;

 

Thus, the Paris Court of Appeal, in a decision dated 23 May 2018 (RG n° 17/20353), prohibited a "hard" poker tournament with online qualifications due to its pay-to-play nature in certain circumstances (Extract CA Paris, 23-05-2018, n° 17/20353). This Decision was confirmed by the Court of Cassation on 29 January 2020.

 

Extract from the decision: (...) it appears that, if tickets for entry and participation in the tournament could be obtained free of charge, these had to be supplemented by loyalty points obtained by playing cash games either in the room or on the site, which required real financial bets from the players (...).

  

The Francky Surf decision provides further information on this subject (extract from the decision of the Court of Cassation 14 May 2014):

 

"(...) that the court also noted that access to the game was necessarily for a fee, whether through the so-called "free pay" channel, which allowed access to the game only after payment for an Internet access service, or through the so-called "free-free" channel, which was statistically very little used compared to the "free pay" channel and above all was almost impossible to use and was unknown to the operators, who were only aware of the "pay" access; (...) that, as the court noted, purely free access was in fact virtually illusory and the game was in fact only usefully accessible after payment for access to another service.) that, as the court correctly pointed out, purely free access was in fact virtually illusory and in reality the game was only usefully accessible after payment for access to another paying service; that it follows that even if, as Mr Gilles X... forcefully maintains, the introduction of change into the device did not in itself allow direct access to a game, but obliged the prior purchase of another service, this precaution is not sufficient to make access to the game entirely free;"

 

7/ The confusion between the advertising game and a separate paid service does not protect the organiser. For example, the fact that spending money to play also allows the purchase of internet connection time was enough to convict the game organiser (On Visionex terminals, Cass. 28 May 2014, N°13-83759; CA Paris, 16 April 2013, RG 11/02854) :

 

"(...) it results that these devices were not similar to a commercial lottery and that their operation encouraged the player, with a view to accessing the games presented as free, to make a payment of money constituting a stake, the Court of Appeal, which characterised all the elements of the offence of which it found the defendant guilty, justified its decision;

 

Care must be taken to distinguish between free play and the paid access route for a separate purchase of the game.

 

Contrary to the Visionex and Francky surf jurisprudence, the Clermont-Ferrand correctional court on 17 June 2019 recognised the legality of a gaming terminal with the following characteristics:

  •  A compulsory purchase of internet connection time; it should be noted that this condition appears to be sufficient for the Court of Cassation in the Visionex and Francky surf cases to confirm the convictions.
  • Free gambling with the hope of winning.
  • Playing time does not count against the purchased connection time,
  • A win in gift vouchers,
  •  The moral element of the offence is highly debatable here, as the organiser had previously contacted the relevant authorities without them alerting him (police, customs, tax authorities, etc.). This is probably the main element taken into account by this court. It remains that the situation was quite comparable in the Visionex case...

 

1.2.4 The condition of chance is no longer required to prohibit a game  

 

Before 2014, in order to prohibit a game, it was sufficient for chance to have even a minimal influence in determining the winner and/or the prize. On the other hand, pure games of physical or intellectual skill, games of knowledge, general knowledge (quizzes, etc.), sagacity and speed, which were also known as quizzes, were not prohibited. Subtle questions were then asked about the existence or not of chance or randomness in a game to prohibit it.

 

Since 2014 and following certain abuses of skill games with a hope of winning, the new article L 320-1 paragraph 3 of the CSI prohibits games based on know-how (skill games). This condition related to the proof of the presence of chance in the game is no longer required in practice to pronounce its prohibition. There was already a specific provision aimed at prohibiting games based on skill (L324-4 al.3 CSI).

 

However, the reference to chance continues to appear in the ISC and in some recent decisions (e.g. C. cass. 29 January 2020, 18-22 137). The condition relating to "the hope of a gain" probably implies the existence of a hazard in the award of the gain, even if it is minimal.

 

In the absence of a random outcome, it is a simple purchase on the part of the player. Thus the law only prohibits operations where the path of fate is the condition for the acquisition of a gain and not those where, as the gain is already contractually determined, fate only intervenes to fix the date of its attribution" (Cass. crim., 13 Oct. 1993, no 91-83.703, Bull. crim., no 293, D. 1993, I.R., p. 251; Cass. 1re civ., 2 Feb. 1994, no 89-16.311, Bull. civ. I, no 38)

 

But this argument does not validate skill games with a hope of winning. Before the game starts, the participants do not know for sure who will win, even in "skill games". Therefore, there is a certain amount of chance in these so-called skill games.

 

1.3 The regulation of the gambling market in France

 

1.3.1 Regulation of the legal gambling market

 

The power to regulate the gambling market is mainly entrusted to the ANJ which replaces the ARJEL. Its scope has been extended to operators with exclusive rights (FDJ, PMU, etc.), but only partially to casinos. The issues of anti-money laundering and the integrity of the gaming offer are still under the responsibility of the Ministry of the Interior for casinos.

The Law of 12 May 2010 authorises sports and horse betting and certain ring games (only poker) on the Internet on the condition that the gaming operator obtains a licence from the ANJ (National Gaming Authority). This is therefore a legal exception to the general principle of prohibiting gambling on sports and horse betting and poker.

 

The 2010 law on the opening up of online gaming to competition and, above all, its implementing decrees provide a very precise framework for these legal online games (see the founding texts on the ANJ website). 

 

A 2019 ordinance defines and specifies the modalities for exercising the State's control and administrative police power over the entire gambling sector.

 

In practice, accreditation involves costly investments due to the requirements of French law. Regulatory constraints are strong for licensed operators. In addition, a tax system makes the French market accessible only to the largest private gaming operators (for documents and procedure see the ANJ website).

 

In addition to the special law of gambling, the gambling operator must respect the common law of contracts from the Civil Code (for example, Cass. 1re civ., 8 Apr. 2021, n° 19-20.644), as well as the consumer law in its relationship with the players, this last point having been validated by the Conseil d'Etat (CE 24 March 2021 n° 431786)

 

Except where the Consumer Code specifically excludes it, e.g. for distance contracts and the right of withdrawal (Art. L221-2 al. 3 C. Cons.), consumer law applies to gambling contracts with licensed operators.

 

As GTC and game rules are contracts of adhesion, the legislation on unfair terms is fully applicable.

A first difficulty is to distinguish the professional player from the amateur player, even if he is particularly active and informed. A player, even one who is very regular and bets large sums, remains a consumer (CJEU, 10 Dec. 2020, Personal Exchange International Limited). He becomes a professional if he offers "services" to third parties in return for payment (pt 48). A "professional player" is therefore someone who is paid by a club, federation, sponsor, "investor" or employer. A 'odds hunter' who reinvests third party money in his gambling activity is therefore probably no longer a consumer. 

 

The T&Cs and other gaming rules of the major operators are not always above board.

 

The main difficulties relate to:

  • The potestative character of certain clauses by which the operator reserves the right to decide alone.
  • Clauses limiting the liability of the trader which are not enforceable against consumers.
  • The consequences of the operator's "more or less" obvious quotation error and its massive exploitation by the player.
  • Limitation of players' bets which are taken in the interest of the operator (excluding responsible gambling).
  • And finally, the definition of the consumer's own fault which could be opposed by the operator (unfair behaviour, cheating, agreement between poker players, etc.).
  • The operator must also comply with personal data legislation as it collects and uses personal data directly related to players in order to possibly deprive them of a right.

The report of the ANJ Ombudsman provides good information on the types of complaints made by players (see p. 32 of the 2022 report)

 

1/ Thus, Bwin could not benefit from the protective regime of its rules to refuse payment of winnings and close a player account. The provisions of the rules concerning odds errors, particularly in the case of late and "relative" bets, were not enforceable against the player. The court recognised the potestative nature of certain clauses of the rules, the inexcusable error of the organiser in accepting bets, as well as the false reason for closing the player account. The player also benefits from the protective regime of consumer law as a "consumer". TGI Paris, 18 December 2018, M. X. / Société B.E.S.

 

2/ A sports betting operator cannot cancel bets when it has made a manifest error in fixing the odds of these bets, even if the contract concluded by the operator provides for such an option in its favour ( CA Versailles, 31 Oct. 2019, n° 18/04644 Com. Com. élec. n° 11, Nov. 2020, chron. 11 spe. n°5 com. D. Poracchia). It is up to the sports betting operator to bear the risks linked to its poor assessment of the sporting hazard on which it proposes to bet.

 

3/ However, a gross error committed by the gaming operator in the announcement of a game win cannot create rights for the benefit of the player. (CA Bastia, 23 October 2019 - n° 17/00990). This is an "obstacle" error.

 

4/In the same sense, the contractual commitment of the gaming operator relates only to the secure progress of the game in its computer system and not to the displays on the computer screens of the online players. The agreement of proof which gives precedence to the operator's computer recordings in the event of disagreements, is not analysed as an abusive provision since the player retains the right to use any means of proof to show that the said recordings were the subject of a malfunction within the operator's computer system.  (CA Versailles 23 January 2020 n° 18/06970 Dalloz.fr).

 

5/ If the operator can be held liable, it will be very difficult for the bettor to hold the sports club or the sportsman liable in the event of a bad result or sporting fault, unless it can be proven that the match was really rigged (Cass. civ. 14 June 2018).

 

Since June 2019, mediation is open to any player or bettor who has a dispute with an ANJ-licensed operator regarding the performance of a gambling or betting contract. It is free of charge but is not binding on the operator.

 

For more information on the ANJ Ombudsman:

- https://mediateurdesjeuxenligne.fr

- Activity report of the Gambling Ombudsman 2020.pdf

- Activity report of the Games Ombudsman 2021 (April 2022)

 

On the legal framework for gambling offers, to go further

 

 

1.3.2 The fight against illegal sites

 

The fight against illegal sites is mainly entrusted to the ANJ, but the DGCCRF is also active in this area.

 

Before April 2022, illegal sites were subject to blocking measures by the judicial courts (see for example - TGI Paris 26 September 2016 on blocking and penalty payments).  However, given the slowness, low efficiency and costs of this judicial procedure, an administrative blocking procedure is now provided for under Article 61 of the 2010 law. (see news item 33 - towards an administrative blocking of illegal gambling sites by ISPs and search engines)

  • Most often, the ANJ sends a first series of formal notices to the illegal sites to close their access to French residents. These formal notices are associated with a kind of "report" drawn up by the ANJ constituting proof of the gaming operations accessible from French territory (report drawn up by sworn investigators). The same applies to sites providing illegal advertising (affiliation, influencers, directories, links to illegal sites, search engines, etc.).
  • If this first formal notice is unsuccessful, the ANJ can now directly request internet service providers (ISPs) and other intermediaries to block access to illegal sites, according to Article 61 of the 2010 law.
  • More rarely, illegal gambling sites, most often based outside France, are subject to real criminal prosecution.

ARJEL Activity Report 2019 - Statistical review of activity to combat illegal supply (between 1 April 2018 and 31 March 2019) (see p. 52 and following)

 

Extract from the activity report concerning the actions carried out by the ARJEL (p. 56) :

  • 243 fines issued;
  • 525 letters of formal notice, notification and information sent to illegal operators, hosts of illegal content, Internet access providers, providers of gaming software or payment solutions;
  • 92 summonses and petitions (bypassing) before the President of the Paris High Court for injunctions to block illegal sites by ISPs, including 6 initial hearings and 13 bypass hearings;
  • 19 hearings of the President of the Paris Tribunal de Grande Instance;"

To our knowledge, only a few foreign companies have been criminally prosecuted since 2010 for online gambling sites, with convictions of up to €300,000 in criminal fines. It should be noted that decisions in this area are rarely published on Légifrance.

 

Often the game organiser seeks to base his activity in a country that is more 'welcoming' legally and fiscally. But this does not avoid the risk of criminal prosecution by the French authorities.  Indeed, it is sufficient that foreign gambling is simply accessible to French players, without approval, to be illegal (see already Cass. Chambre criminelle, 22 May 1997 N° 94-85.933).

 

It does not matter whether a gambling licence has been granted abroad by a state (e.g. Malta), or even within the European Union: there is no such thing as a state permit that extends beyond its own borders in Europe. Since the Santa Casa ruling (CJEU, 8 Sept. 2009, Case C-42/07) it is known that in the absence of specific European legislation and harmonisation in the gambling sector, the reciprocal recognition of licences (or the possible freedom of certain games) in one EU country is not binding on other Member States.

 

However, despite the strengthening of criminal cooperation for the enforcement of court decisions in Europe, the French decision risks being deprived of concrete effect. Indeed, if the activity of the gaming operator is based and fully legal in the country of enforcement of the repressive decision due to an authorisation or a licence, there is little chance that the said state of enforcement will accept to sanction the gaming operator...

 

Of course, the French criminal decision remains fully applicable on French territory and the return of the financial benefits to French soil will be considered as money laundering.

 

It should be noted that additional measures concerning the blocking of financial flows linked to gaming are possible. It seems that this measure is difficult to implement according to the ARJEL 2013 report (p.40)

 

For further information, please consult the IGF report: Evolution of the regulation of the gambling sector in relation to the project to open the capital of La Française des Jeux to private investors http://www.igf.finances.gouv.fr/files/live/sites/igf/files/contributed/IGF%20internet/2.RapportsPublics/2018/2018-M-045-03.pdf

 

Part 2. Legal exceptions to the prohibition

 

The new article L320-6 CSI lists the legal gambling games in France that benefit from exceptions to the prohibition. These games may therefore combine payment and the hope of winning under certain conditions.

 

The 2019 Act did not change the scope of the legal games that previously existed, namely:

 

1.   Casinos and off-line gambling clubs,

2.   Video game competitions (e-sports) online and indoor,

3.   fairground games, charity games and traditional lotto,

4.   Games and competitions organised by press publications (TV, press, radio),

5.   FDJ lottery games off and on the internet,

6.   Sports betting, horse betting and ring games (poker) off and on the internet,

7.   Advertising lotteries.

 

We will analyse below the gambling sectors other than casinos, FDJ games, sports and horse betting, and poker, which require very specific developments. These sectors are subject to approval, authorisation or an exclusive right from the State or the ANJ. (to find out more about the regulation of games subject to ANJ approval)

 

2.1 Organise lotteries and promotional contests (sweepstakes)

 

Games of chance such as "lottery advertising" or "competitions" are massively used to promote the products and services of companies. This is known as the "gamification of marketing".

 

The new Article L 320-6 7° of the CSI derogates from the general prohibition of gambling. It allows the organisation of advertising operations in accordance with Article L. 121-20 of the Consumer Code. Thus, consumer law is an exception to gambling law.

 

In order to apply this exception, there must be a draw in a relationship between a consumer and a trader.

 

The advertising lottery may be free, but as long as the aim is to attract customers, the practice has a commercial purpose and falls under the Consumer Code (Cass. crim., 20 Nov. 2012, No. 11-89 090).  

 

It should be noted that the regulations have been simplified: the law of 20 December 2014 on the simplification of business life has lightened the system by eliminating many of the constraints that previously existed in the Consumer Code.

 

The following shall be deleted:

  •  Prohibition of financial consideration or expenditure in any form (Art. L 121-36 of 17 May 2011, repealed 17 March 2014). Games with a purchase obligation are legal.
  • The specific regime of non-overtaxed postage, communication or connection costs payable by consumers and the mandatory reimbursement of participation costs to consumers (Art. L. 121-36-1 repealed on 20 December 2014). There is no reimbursement to be provided in the case of player expenses.
  • The specific obligations regarding the presentation of games and prizes (Art. L. 121-37 repealed on 20 December 2014); no formal mention is required in the rules of the game and/or in the advertising.
  • The obligation to file the rules and a copy of the documents sent to the public with a bailiff responsible for ensuring their regularity (Art. L. 121-38 repealed on 20 December 2014).
  • Articles R. 121-11 and R. 121-12 of the Consumer Code, which required certain information on advertising documents or the presentation of prizes in order of value, were repealed by Decree n°2016-884 of 29 June 2016. 

 

2.1.1 Legal advertising gambling with some exceptions 

 

Advertising gambling is legal under the new L 121-20 C. Cons. Cons. (Formerly 121-36 C. Cons.) if they are not unfair, without any other conditions.

 

The legislation has become more flexible in recent years. Indeed, since 2011, it is possible to reserve the advertising lottery to its customers only, and thus to offer lotteries "with obligation to buy" (see already CJEU 14 Jan 2010 C-304/08).

 

For example, the opportunity to take part in a competition with a prize does not constitute an unfair commercial practice merely because that opportunity to take part in a game is the decisive reason for them to buy a newspaper offering the game only to its customers (CJEU, 9 November 2010, Case C-540-08).

 

Previously, the organiser of the promotional game was obliged to open the lottery to anyone interested in the game.

 

In practice, many advertising games give extra chances to win when the consumer spends more in order to reward loyalty, for example in the context of lotteries in supermarkets. To our knowledge, this variant is not prohibited. However, it is important to distinguish between payment for the product or service and free access to the promotional game, as we shall see below.

 

2.1.2 Reconciling the principle of free access with the compulsory purchase of advertising lotteries 

 

The principle of free play (see point 1.4.3 above) implies that gambling does not involve any expenditure on the part of the player.

 

It is not possible to offer paid "tickets" to the advertising lottery, nor surcharged SMS to participate.

 

As an exception, any costs incurred in participating in the promotional lottery (postage, communication or connection costs that are not surcharged) are often borne by the participant and are not necessarily refundable, which should be specified in the rules of the game (see Lefebvre Competition and Consumption 2021 Practical Guide No. 44030 - see below 2.1.3 c) on the question of free entry). However, be careful not to link these fees to the announcement of a win, as we shall see below. Indeed, it is forbidden to ask the player for a financial contribution in return for obtaining a win, even if the financial contribution is minimal (for example, postage, SMS or a surcharged call) (C. cons. art. L 121-7, 7).

 

Subject to this, the player's payment must be for the product or service being promoted (e.g. hamburgers, etc.), but not for access to the advertising game, which must remain completely "free": 

 

Paris Court of Appeal 14 February 2020 n° 17/20830 (extract)

 

"the collection of the Gifi vouchers won is subject to a minimum amount of purchases in the company's shops, does not constitute a misleading commercial practice since the consumer does not have to incur any prior costs conditioning his participation in the lottery, which would make the Bravoloto game payable.

 

The fact that the collection of winnings in the form of vouchers or discounts is conditional on making purchases for amounts that may exceed the prize won does not make the Bravoloto game profitable, as the beneficiary of the prize has not previously made any financial contribution and remains free to make the purchases necessary to benefit from the voucher or not. "

 

A first difficulty arises from the false advertising nature of the lottery. Sometimes, behind an advertising operation, a real money game is "fraudulently" hidden. To be in the presence of a genuine advertising game, the organiser of the operation must sell genuine products and services that are distinct from the advertising game, which the judge will verify in practice. The consumer's expenditure must be on products and services and not on gambling. When the existence of the product or service to be promoted is questionable, the judge will prohibit the practice (see already the Visionex case Cass. 28 May 2014, N°13-83759).

 

A second difficulty arises when the service to be promoted is itself gambling. When French judges identify gambling in a commercial practice, they give precedence to the prohibition of gambling and reject the exception relating to advertising games, for example in the case of a combination of an advertising lottery and loyalty points by WINAMAX (C. cass. 29 January 2020, 18-22 137 confirms CA Paris, 23-05-2018, n° 17/20353; TGI de PARIS (5e ch. 23 June 2015 RG 14/03674 ).

 

In these decisions, the judges identify the conditions for the prohibition of gambling, namely 1/ the existence of a payment for playing on the legal online poker site and 2/ the hope of a win during the indoor tournament. According to the Court of Cassation, the French legislation on gambling takes precedence over the framework of commercial practices, notably the existing European framework.

 

In concrete terms, in order to organise "hard" tournaments, a player must be able to access free qualifying tournaments (freerolls), without having loaded his account with real money and without having obtained these tickets after a paying gaming experience, even on an ANJ approved site.

 

2.1.3 Fair Gambling Advertising 

 

After this first step regarding the qualification of an advertising operation based on gambling, to prohibit the latter, it will be necessary to prove its "unfair" character.

 

The Consumer Code proceeds in two stages to identify these prohibited practices (cf. art. 121-1; L.121-2 to L.121-4, L.121-6 and L.121-7 new numbering). The sanctions are set out in Article L 132-2 C. Cons.

 

- 1. The Code sets out an abstract definition of prohibited practices, with the onus on the judge to identify them and to give reasons for his decision.

 

The "unfair" character of a commercial practice is defined as being contrary to the requirements of professional diligence. The commercial practice must be of such a nature as to materially distort the economic behaviour of the consumer.

 

Before sanctioning, judges must investigate how the practice is likely to disturb the consumer in his economic choices. (see e.g. Cass. com., 29 Sept. 2015, No. 14-13.472).

 

- 2 The Code specifically sets out a list of practices that are prohibited as deceptive or "deemed" deceptive and aggressive:

 

In the field of gambling, we mainly identify the following practices which are prohibited in all circumstances.  In this list, the criminal judge does not have to characterise an alteration of the economic behaviour of the consumer.

 

a. A payment for a promised gambling win: an aggressive lottery

 

According to Article L 121-7 (7°) of the Consumer Code, commercial practices are deemed aggressive if they give the impression that the consumer has or will win a prize, but that he or she must pay in advance in order to receive this prize, even if this cost is negligible (e.g. a stamp), even if there are free means of accessing the prize or information in parallel with the paid means, even if this payment does not benefit the organiser of the game, but a third party. (CJEU, 18 October 2012 C-428/11 - Purely Creative and Others).

 

According to the European Guide to the Unfair Commercial Practices Directive, this is where consumers are informed that they have won a prize but have to call a premium rate number to claim it. It is also the case where consumers are first informed that they have won a prize but are then told that they must order another good or service to receive the advertised prize or equivalent benefit.

 

Two examples of prohibited practices are

·         An advertising brochure says, "You've won a free CD" and then: "Order our selection of shower gels today, fill in your address and you will receive your 'prize'";

·         A lottery advertises "100% winners" with a fee for collecting the prize.

In advertising communication, care should be taken regarding the costs incurred by the consumer to benefit from the prizes.

·         For example, a prize defined as an "admission ticket" to a particular football match does not include the transport of the consumer from his home to the football stadium where the match takes place.

·         On the other hand, if the price consists of "attending" the sporting event, without any further specification, it is up to the trader to bear the consumer's travel costs.

 

b. An announced and undelivered prize: a deceptive lottery

 

According to Article L 121-4 (18°) of the Consumer Code, advertising games that state that a competition is being organised or that a prize can be won without awarding the prizes described or a reasonable equivalent are deemed misleading (Cass. crim., 10 Sept. 2019, No. 18-85315).

 

An example of a prohibited practice is the use of premium rate numbers.  All participants receive a "winning" message in competitions offered on social networks under false identities. But to finalise the sending of their promised winnings, they have to call a premium rate voice server several times, which will deliver codes, but very rarely the advertised prize....

 

c. A falsely advertised freebie: a deceptive lottery

 

According to Article 121-4 (19°) of the Consumer Code, it is forbidden to describe a product or service as "free", "free of charge", "without charge" or similar terms if the consumer has to pay anything other than the unavoidable costs of responding to the commercial practice and taking possession or delivery of the item.

 

According to this article, a free promotional game does not have to offer a refund of the non-overcharged participation fee.

 

d. Selling a martingale: a deceptive practice

 

It is prohibited to claim that a product or service increases the chances of winning at games of chance (Art. L 121-4 (15°) C. Cons).

 

One example is the sale of a method for winning the lottery or roulette.

 

The offence is constituted from the moment it is stated that the system (website, calculation method, etc.) increases the chances of winning compared to a player who does not use it, regardless of the reality of the effectiveness of the calculations presiding over the dissemination of the system (e.g. calculation grids) or the proof of the increase in the chances of winning. The criminal judge does not have to characterise an alteration of the consumer's economic behaviour in order to sanction (Cass. crim. 28 Jan. 202019-80.496 ).

 

Ultimately, the only real condition that the prosecution will have to establish is that the commercial practice being prosecuted is covered by this text, i.e. "claiming that a product or service increases the chances of winning at games of chance", and the defence can therefore only seek to show that this is not the case.

 

In the field of sports betting, a question currently being debated is whether this article can be used to prohibit the sale of paid sports betting tips, advice and analysis. The repressive argument, which has not yet been validated by the courts, is that the sale of the tip is implicitly, but necessarily, an assertion that this service "increases the chances of winning at games of chance".  How can this text be applied to the paid provision of sports statistics and results forecasts? It should be noted that in the field of horse betting, this activity of selling advice is prohibited except in the horse-racing press and media (art. 4 Law of 2 June 1891 whose purpose is to regulate the authorisation and operation of horse racing).

 

Some paying tipsters' sites could also be considered as fraud (art. 313-1 Penal Code) or as a prohibited pyramid scheme (see e. - below).

 

e. The promotional game must not have the characteristics of a pyramid scheme or "snowball" scheme.  

 

Annex I of Directive 2005/29/EC, "Commercial practices which are unfair in all circumstances", provides in point 14 that it is prohibited to:

 

"Creating, operating or promoting a pyramid promotional scheme in which a consumer pays a fee in exchange for the opportunity to receive consideration primarily from the entry of other consumers into the scheme rather than from the sale or consumption of products."

 

This prohibition is included in Article L. 121-15 of the Consumer Code (snowball sales, offers to join a chain & pyramid scheme) and the sanctions are included in Articles L 132-19 and 20 of the same Code.

 

In this case (CJEU, 15 Dec 2016 C 667-15) the organisers of the 'Lucky 4 All' scheme set up a collective participation scheme for Lotto draws (See blog post.21).

 

The Court sets 3 conditions to prohibit such an arrangement:

 

1/ first of all, it is based on the promise that the consumer will have the possibility of realising an economic benefit (prize, money, service, etc.). This prohibition is applicable where there is only an indirect link between the contributions paid by new members to such a system and the consideration received by existing members according to a decision of the CJEU of 15 December 2016 (C-667-15).

 

2/ Secondly, the fulfilment of this promise depends on other consumers entering the system. In the "Lucky 4 All" decision, groups of players take the form of a multi-level pyramid. The Court found that the distribution of winnings within a level favours the higher levels. As a result, every player has an interest in recruiting new players in order to improve his position.

 

3/ Finally, the majority of the revenue to finance the consideration promised to consumers does not result from real economic activity, but from consumer participation (CJEU 3 April 2014, 4finance, C515/12‑, paragraph 20). The system becomes "artificial" because the main enrichment results mainly from new memberships rather than from sales.

 

2.1.4 Hazard information in advertising gambling

 

In practice, most court disputes relate to client information and the risk of winning.

 

The presentation of the advertising lottery must make it very clear that there is a risk of winning on all communications relating to the lottery and that this is the case each time a win is announced, on all advertising documents. A mention in the rules of the game is not sufficient.

 

The mention of a hazard affecting the awarding of the prize only appears for the first time on the back of the second page of the document attached to the letter announcing and congratulating the person concerned on her win is not sufficient (Colmar Court of Appeal, civ. RG 15/05768).

 

Indeed, a player should never be under the impression that he or she is winning with each participation, if this is not the case. In this case, the French courts require payment of the sum promised to the player as a penalty (see e.g., Cass., civ. 1, 13 June 2006, 05-18469; Cass., civ.1, 25 January 2017, 15-26281).

 

2.1.5 Compliance with the legal and ethical framework in the rules of the advertising game

 

These are rules of legal and ethical origin that the game organiser will respect in its rules, which are detailed below: 

  • The rules of the game must be accessible and readable (see Article L122-9 C. cons. );
  • It must be advertising content that is clearly identifiable from editorial content and where the identity of the advertiser is obvious (see also Art. L122-8 C. Cons.);
  • Participation in the game itself must be free of charge (e.g., prohibition on selling advertising lottery tickets or overtaxed SMS messages) and the treatment of non-overtaxed communication costs must be specified (e.g., stamp costs, connection and internet costs, whether or not they are refundable);
  • The opening and closing date of the operation is specified.
  • All the concrete terms and conditions of participation (restriction to participation, game with obligation to buy ...).
  • The number, value and nature of the prizes and the question of possible exchange with money.
  • The criteria for selecting the winners (draw, existence and composition of a jury, etc.).
  • The date and manner of publication of the results.
  • The period within which the lots can be claimed;
  • The regulation of personal data and the possibility of using the personal data of players and winners (see the CNIL file on this subject).
  • Compliance with the specific legislation applicable to the product or service being promoted or offered as a prize, for example, is unlawful with regard to the rules on advertising for alcohol, the fact of promising a bottle of whisky as a prize in a competition to promote the sale of alcohol (Cass. Civ, 20 October 2011 - No. 10-23.509); similarly, an advertising campaign associating the sale of champagne with the world of gambling was sanctioned (CA Paris 3 December 2020, No. 18-15699, ANPAA v. Sté Groupe Lucien Barrière).
  • In principle, the consent of the trademark owners must be obtained if one wishes to offer their products and services as a gift. Otherwise, it is a trademark infringement

Further reading: ICC Consolidated Code on Advertising and Commercial Communication Practices, especially p.23 article A6.

 

The rules of the game are subject to the regulation of unfair terms (CA Paris 19.12.2003 n°02 4822).

 

The following clauses were considered unfair and should not be included in the rules of the game:

  • With regard to personal data, the one providing that the award of the prize was subject to the winner's acceptance of the use of his or her name, address and photograph for advertising purposes, since it required the winner to waive the protection of his or her private life granted to him or her by Article 9 of the Civil Code.
  • As regards acceptance of the rules, the one stating that the mere fact of participating implied pure and simple acceptance of the rules and the instructions on the documents, since it made conditions enforceable against the consumer which he had not been able to ratify because of the presentation of the rules, printed in small, illegible characters.
  • Concerning the cancellation of the operation, the one stating that in the event of force majeure the organiser reserved the right to cancel the game, without any compensation for the participants, for example in the event of a material error committed in good faith by a service provider outside the company or by a member of staff, since it referred to the notion of force majeure in cases that did not fall within its scope, since the events in question were not unforeseeable, irresistible or even external.

 

2.2. Games in fairs, charity games and traditional lotto 

 

Gambling in fairs, lotteries and charity raffles and traditional lotos is legal provided that it complies with the various conditions laid down by French law (Articles L322-3 to L322-6). These are:

 

1°) Games of money and chance (lotteries) and gaming machines in fairgrounds offered by fairground workers (art. 322-5 & 6 CSI). No administrative authorisation is required. But the prizes can only be in kind and of a maximum value of 45 €. The unit stake must not exceed €1.5 (art. D 322-4 CSI). A travelling salesman's card (fairground) is required.

 

2°) Games of money and chance (lotteries and tombolas) of movable objects exclusively intended for charitable acts, the encouragement of the arts or the financing of non-profit sports activities (Art. L 322-3 CSI), subject to prior authorisation in the form of a decree by the mayor (and the police prefecture in Paris). A number of conditions must be met, in particular with regard to the legal nature of the organiser, the allocation of the sums collected, the amount of the issue capital and the cumulative value of the tickets issued, and the methods of advertising to the public, etc. (Art. D 322-1 CSI et seq.).

3°) Traditional lotos authorised by Article L. 322-4 of the CSI, also known as poules au gibier, rifles, bingo or quines. No administrative authorisation is required, but several rules must be respected.

 

These association lottos must not have a commercial aim. They are offered in a restricted circle of people linked to the association (so the Internet seems to be excluded) and are characterised by low stakes of less than 20 euros. The prizes cannot, under any circumstances, consist of money or be refunded. However, they may consist of non-refundable vouchers.

 

These lottos must be of an occasional nature. On the contrary, the systematic organisation of lotos for a large public, for example on the internet or in rooms dedicated to this activity, will be considered illegal, as it has a commercial objective.

 

It is important to identify the real organiser of the operation, which is not necessarily the association. The organisation and "turnkey" supply, even as a service provider, of lottos for commercial purposes by a company is therefore excluded, even if associations participate (Court of Cassation, 23 November 2016, 15-85.987)

 

For example, see the judgment of the Court of Cassation of 7 December 2016, No. 15-83826 :

 

"Whereas, in order to declare Mr X, manager of the company (...), guilty of organising prohibited lotteries and of infringing the legislation on indirect taxes relating to gaming houses, the judgment states that he chose the prizes, bought and delivered them, supplied the material necessary for the running of the lottery, sold ancillary material (pawns, magnetic sticks, etc.) or games for his own benefit, offers to the public by advertising, either through the press by means of models drawn up by him or by announcement on the occasion of a lottery for the following events, allowing the public to be informed of the results of the lottery.) or games for his own benefit, offers to the public by advertising, either through the press by means of models prepared by him or by announcement on the occasion of a lotto for subsequent events, thus allowing the appearance of a captive clientele, and carried out his animation service in return for remuneration in a professional and commercial context; that the Court of Appeal concludes that he was not only an entertainer, but that he behaved like a lottery organiser and that this activity was subject to tax obligations;"

 

Various tax exemptions are likely to benefit the Organiser within an associative framework, according to article 261-7°-1°-c of the General Tax Code. For more details, you can consult: https://www.service-public.fr/associations/vosdroits/F21565 

 

For more information on charity lotteries and traditional lotteries: 

 

 

2.3 The specific regime for eSport

 

The Law for a Digital Republic has created a new exception for video game competitions (Articles L321-8 to L321-11 & R321-40 et seq. CSI).

 

2.3.1 : A legal definition of video game competitions

 

A video game competition involves two or more players or teams of players competing for a score or a win. The definition of video game refers to Article 220 terdecies II of the CGI:

 

"II. any leisure software made available to the public on a physical medium or online, incorporating elements of artistic and technological creation, offering one or more users a series of interactions based on a scripted plot or simulated situations and expressed in the form of animated images, with or without sound, is considered a video game.

 

Thus, the Video Game implies:

  • A software with artistic and technical creation elements.
  • A series of interactions between the player and the software based on a scripted plot or simulated situations in the form of animated images, with or without sound.

Traditional sports must be excluded from this definition of eSport. A traditional sport is characterised by a non-negligible physical component (CJEU, 26 October 2017 C-90/16). eSport, in principle, does not contain this physical component, but only a playful component. However, for certain physical games with a digital component, the distinction between "traditional sport" and "eSport" is far from clear.

 

2.3.2: Betting ban confirmed

 

Paid betting on video game competitions is not covered by the new law.

 

Thus, Article L 321-8 states:

 

"The organisation of the video game competition within the meaning of this chapter does not include the organisation of betting".

 

Therefore, the legality of a bet on eSport is based on the general law and the prohibition of paid gambling. This prohibition therefore concerns bets by third parties on the game itself.

 

But the question is more open regarding the players' own winnings. According to the ARJEL (Activity Report 2018 p.78 note 68), in the strict sense, in particular in civil law, the notions of players and bettors are distinct: the player participates in the game while the bettor is outside the event on which the bet is made.

 

However, the legal expenditure of the player is precisely defined by the new text (see point below on R 321-50 CSI). Therefore, a bet by the player on his own victory seems to us also illegal in most cases if it is associated with a hope of winning. 

 

2.3.3: Exceptions to the offence of gambling in the context of video game competitions 

 

The law distinguishes between online and offline eSports:

 

1/ For offline gambling, the prohibition on gambling does not apply to video game competitions under several conditions (art. L. 321-9 CSI):

  • The games must be organised in the physical presence of the participants; here the legislator has taken into account competitions in a single enclosed area.
  • The players' entry fees are limited according to the total cost of the event. The formula has been specified by Article R 321-48 CSI.  The amount of entry fees and other financial sacrifices made by players, in relation to the total cost of organising the event, including the total amount of winnings and prizes offered, must not exceed 100%. The total cost of organising the event is defined in Article R 321-47 CSI.
  • Where the total amount of winnings or prizes exceeds EUR 10,000, the organisers of these competitions must provide evidence of the existence of an instrument or mechanism (security, trust, insurance, or escrow account) guaranteeing the payment of all winnings or prizes at stake (Art. R 321-49 & R 321-49 CSI)
  • The organisers shall declare the holding of such competitions to the department of the Ministry of the Interior responsible for racing and gaming. This declaration includes the elements referred to in article R 321-41 CSI and following. It is made online.

2/ A second exception also concerns online games where the players are not physically present.

 

For video game competitions held online and for the qualifying stages of video game competitions held online, the cost of access to the Internet and especially the cost of acquiring the game (e.g. the licence) does not constitute a "financial sacrifice" leading to the prohibition of online gaming (art. L 321-11 CSI). 

 

Indeed, Article R 321-50 CSI specifies that this cost includes the initial purchase cost of the game, the purchase cost of its additional content and the cost of subscription to the game.

 

This means that the purchase of the game does not constitute a prohibited "bet". It is therefore possible in this case for the player to win money because of spending money on the game.

 

Cash prizes are thus excluded from the scope of the prohibition if the player's expenditure relates to the initial purchase cost of the game, the purchase cost of its additional content and the subscription cost.

 

However, the game publisher may itself organise the competition or be economically linked to the competition organiser. The publisher could then charge a high price for the licences of its game in return for the possibility of participating in competitions with significant winnings. This would circumvent the basic prohibition of gambling.

 

The progress report on eSport (p.14) had identified this risk by relying on the judge's appreciation and the particularly unpredictable mechanism of abuse of rights. Once again, the boundary between the legal and the illegal is not precise. This will be a new risk for game publishers wishing to launch themselves into the organisation of online competitions.

 

Note: Finally, the law provides for the conditions of participation of the minor, as well as provisions relating to the professional status of the player. (Decree No. 2017-872 of 9 May 2017 on the status of salaried professional players of competitive video games).

 

 

2.3.4: A new legal environment for e-sport 

 

The first three approvals for the employment of professional e-sport players to GamersOrigin, LDLC Event and Olympique Lyonnais were issued in 2018.

 

 

2.4 Premium and refundable games in the media.

 

Before 2014, a paid lottery was considered legal if the organiser offered a refund of the game fee to its participant within a certain period of time. By equating 'free of charge' with 'offer of a refund', a necessary element for the offence of prohibited lottery was missing. This solution was accepted by some courts.

 

The 2014 Consumer Law prohibited, in principle, this solution of the refundability of the stake.  Indeed, the financial sacrifice is established in cases where the organiser requires a financial advance from the participants, even if a later reimbursement is made possible by the rules of the game (art.L 320-1 CSI). It is therefore the very principle of reimbursing the costs of games that is prohibited, with some exceptions.

 

Since 2014, this option to resort to reimbursement is reserved for gambling on television, radio, and in press publications according to Article L 322-7 CSI.

 

This article provides four pieces of information on the scope of this media exception:

  • Refundable call charges may or may not be surcharged.
  • The possibility of a refund must be communicated to the player prior to participation and must be included in the game rules.
  • These games should be complementary to the curriculum. This "complementarity" requirement will have to be defined in practice.

The law of 1 August 2006 on the legal reform of the press defines the notion of press publication in the following terms

 

"Any service using a written mode of dissemination of thought made available to the public in general or to categories of the public and appearing at regular intervals".

 

For a publication to qualify as a press publication, it is considered that it must meet 3 criteria:

 

1. A periodicity in the publication, e.g., distribution in the form of issues.

2. A non-exclusive advertising character.

3. Editorial content: e.g., information, treatment of a general interest topic, or even entertainment content.

 

In view of these criteria, press publication via the Internet is possible: the offer of reimbursable games via the Internet is therefore still possible with certain reservations.

 

The procedures for organising games and competitions in press publications are specified in Articles D 322-5 to D 322-8 of the CSI.

 

The business model for this type of game is based on the fact that for small amounts of money, there are few claims from players.

 

To go further on this subject: see the ministerial reply of 20 July 2021 

 

Note: These exceptional measures are primarily aimed at providing financial support to French industries in difficulty due to the drop in advertising revenues.    

 

2.4.1 A comprehensive reimbursement offer 

 

The principle of free play requires a full refund of all game costs including communication costs (premium SMS, Audiotel, specific internet connection costs etc. ....). Otherwise, in the event of incomplete reimbursement, a court risks identifying a definitive financial participation of the player and thus a financial sacrifice, and thus a paying game and prohibited.

 

However, the practice and rules of internet gambling frequently place limits on the amount of money that can be returned to the player.

 

There is a strong risk that this residual gambling expenditure will be classified as an illegal "financial sacrifice". The only practice that seems to be acceptable is that of providing for a limited 'lump sum' reimbursement, but subject to the player proving additional expenditure [TGI Paris, 16th ch., 17 Dec. 2003, No. 0226904589]. In this case, either the player receives his predetermined lump sum, or he proves his actual gambling expenses...

 

It should be noted that postage costs for gifts and other prizes do not have to be reimbursed [CA Paris, 9 March 1995, Contrats, conc., consom. 1995, n°158]. This is not a legal obligation.

 

2.4.2 Reimbursement arrangements 

 

While the principle of a refund may make the game legal, it must be given its full scope. First of all, the refund offer should not be too complex in terms of the procedure to be followed.

 

The time limits should not be too short (3 months seems to be satisfactory - 2 months is a minimum since it is necessary in some cases to obtain invoices from telephone operators). But French law does not set a time limit.

 

The information on the refund must then be made known to each player in advance when they participate in the games. If the information on the possible refund is only placed in the rules of the game, a judge may consider that this refund option is "fake" and therefore fraudulent and declare the game illegal.

 

The information on the refund must not be placed "at the bottom" of a regulation that is difficult to access, or even worse, once the game has been paid for. Thus, the Paris Court of Appeal in 2008 considered in this sense, concerning a game placed in a magazine, "that however the difficulty of access to this information, or even the need to acquire a magazine in cellophane by paying for it, ruined the planned mechanism". Thus, each advertisement, commercial communication and payment form should bear a mention such as "Refund of game fees". (CA Paris, 21 Jan 2008, 13th ch., sect. A, No. 07/02319, Juris-Data No. 2008-354831 confirmed by Cass. crim, 3 June 2009, No. 08/82941).

 

Concerning "teleshopping" or "cash-tv" programmes, the CSA has provided for certain rules and obliges broadcasters to include the possibility of reimbursement under the same conditions as the contact details of the SMS or telephone service. Cash-for-clunkers, also known as "call-tv", is a game show in which, in order to participate, viewers have to call a premium-rate telephone number or send an SMS also via a premium-rate number.

 

In the case of on-screen registration, this refund option must therefore appear in the same font as the service number.

 

This information must also be brought to the player's attention when connecting to the premium rate service, prior to any actual participation in the game (CSA Deliberation of 4 December 2007 on incentives to use premium rate SMS or telephone services replacing the recommendation of 5 March 2002).

 

 

To continue...

 

 

Once the question of the legality of the transaction under gaming law is settled, more operational questions will arise, for example:

 

1/ The drafting of the General Conditions of Use or Sale (GCU or GTC) of the site and/or the drafting of the rules of the game by application of civil law and consumer law.

 

2/ Mandatory legal mentions of the website or application (identification of the publisher).

 

3 / Compliance with the Data Protection Act and the drafting of a privacy charter: on this subject, the CNIL considers that "participation in a competition, the obtaining of additional chances and, in general, the provision of a service, must not be conditional on the receipt of advertising messages". The consent given in the event that the promotional game is necessarily associated with an advertisement viewed by the Internet user would be flawed, non-specific and not fully informed. This is why the CNIL requires separate double consent for the advertising received and for the advertising game (Code des postes et des communications électroniques - Article L34-5);

 

4/ Money laundering regulations (Articles L.561-36 and L.561-36-2 of the CMF); See for example the article on the Mediapart.fr website (2.10.2022): "Blanchiment d'argent : le site Winamax se brûle au jeu. A judicial investigation shows that the online betting platform has violated several of its legal obligations in the fight against money laundering. The company did not make the slightest report to Tracfin for more than seven years. (extract) (authors Y. Philippin and J. Letellier)

 

5/ Taxation of games.

 

6/ The intellectual property on the game as well as the right to bet to be able to legally offer bets on sports events.

 

  • The characteristics of the game can be protected, under certain conditions, in the field of copyright, trademark law and unfair competition and parasitism (cf. Paris Commercial Court, summary order of 10 October 2014; Paris Court of Appeal Pôle 5, chamber 2 27 November 2015 No. 14/25373); a game application that was too similar to its competitor was thus condemned for unfair competition (Paris TGI 30 June 2017). The strong similarities of the Bravoloto games with the Loto and Euro millions (FDJ) led to the condemnation of Bravoloto in their game versions 1 & 2 (CA Paris, 14 February 2020, n° 17/20830 available on Dalloz.fr).
  • Offering bets on protected sports events outside of agreements with sports federations is mostly illegal (CA Versailles, 31-10-2019, n° 18/04644).

 

7/ The implementation of and compliance with contracts with intermediate technical service providers. On this subject, it is important to emphasise that GOOGLE's practices are more restrictive than French law in this respect, which allows it to remove the gambling application, particularly in the face of PMU.

 

Pascal Reynaud © 2022

Lawyer at the bar in Strasbourg

reynaud.avocat@gmail.com

 

www.reynaud-avocat.com