Secondary Lotteries: The experience in the Czech Republic
Secondary or synthetic lotteries, as they are also sometimes known, are a relatively new kind of gambling games, usually described as betting on the outcomes of official draws of licensed lottery operators. The question stands – whether the secondary lotteries are to be perceived as a new, innovative way of playing lotteries (as suggested by the currently best-known operator, company ‘Lottoland’), or if they simply represent an illegal business practice? Furthermore, what are the underlining business and legal practices adopted by the secondary lotteries’ operators? I would like to propose an answer to these questions, deriving from the Czech experience with the secondary lotteries.
Company SAZKA, Czech Republic’s biggest lottery operator established in 1956, first faced Lottoland’s activities in the Czech Republic on the occasion of SAZKA’s marketing event celebrating the Eurojackpot lottery launch in October 2014. During a show organized by SAZKA in the Prague’s city centre, hostesses in Lottoland’s branded dresses started offering to the participants an option to play Eurojackpot via the internet on Lottoland’s websites. Such marketing practises by themselves can hardly be considered as a fair competition. Most importantly, internet gambling (with the exception of online sports betting) is still prohibited in the Czech Republic. Not even SAZKA, as a member of the Eurojackpot partnership and the official license holder for the operation of Eurojackpot in the Czech Republic, is thus allowed to offer Eurojackpot online.
Disregarding the legal restrictions, Lottoland introduced its new website “lottoland.cz” enabling Czech citizens to “play” Eurojackpot online, while assuring them that such offering is compliant with the Czech laws thanks to Lottoland’s respective license granted by the Government of Gibraltar. However, the Ministry of Finance that is the regulatory body for the Czech gambling market, did not share Lottoland’s legal opinion and issued a public statement declaring Lottoland’s activities unlawful while warning Czech players that their participation in illegal gambling could also raise charges against them. Accordingly, Czech police initiated a criminal prosecution of Lottoland for unlawful operation of a lottery or other like game and, as a result, the domain name “lottoland.cz” was blocked. The content of the blocked website was, naturally, immediately moved to Lottoland’s “.com/cs” domain and Lottoland in turn also registered a new domain “sportka.org”. For better understanding, Sportka was established in by SAZKA in 1957 and continues to be SAZKA’s traditional and most popular lottery game. On this new domain Lottoland started offering “a new on-line game” called “Sportovka 6 from 49”. The fact that the matrix of SAZKA’s game Sportka is also 6 from 49 is probably not a surprise. Again, this business practise can hardly be understood as a fair competition or any sort of bona fide action.
Consequently, SAZKA immediately sought remedy through preliminary injunction issued by a competent Czech court. SAZKA then filed a petition against Lottoland for violation of trademark rights. At the same time, SAZKA also initiated domain name arbitration which ended successfully with the domain sportka.org transferred to SAZKA.
At the time of this writing (end of November 2016) the criminal prosecution of Lottoland was suspended, because Lottoland does not possess any property in the Czech Republic, nor do any of its representatives have a physical presence there, and the cooperation with Gibraltar’s authority was, according to the Czech police, fruitless and complicated. Moreover, Lottoland has breached preliminary injunction by its website offer of a new game Sportovka, which is in fact betting on the outcome of SAZKA’s game Sportka. As civil proceedings and enforcement of the court’s decision can be quite time consuming, SAZKA relies on newly introduced restrictive measures contained within the new Czech Gambling Act, effective as of January 1, 2017, mainly on the instruments of IP and payments blocking.
Finally, it is important to bear in mind that the new Czech Gambling Act was confirmed by the European Commission to be fully in compliance with European law and, as of the beginning of next year, it sets out the same conditions for all EU/EEA gambling operators. From this perspective, it will be interesting to see whether Lottoland will be able to obtain the license for its business activity. So far, its main argument for not having license in the Czech Republic was the inconsistency of Czech gambling law with the EU laws (a common argument proffered by many unlicensed operators). With the new Act in effect, Lottoland’s true motivation will become clear: either it will obtain the Czech license and comply with all the regulatory and tax requirements, or it will become openly illegal in the Czech Republic.
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