A few weeks ago, FinTelegram reported about MuchBetter (PC42 profile) and its issues with illegal gambling in Norway, where gambling is a state monopoly. Online gambling providers without a license from the Norwegian regulator are not entitled to offer their services to Norwegian consumers even though they hold a permit in another EU member state. That is true for most of the EU member states that maintain a gambling monopoly. Lately, the Austrian Supreme Court reiterated the Norwegian position and ruled that gambling contracts with Austrian players are invalid, and thus they are entitled to a refund of their losses.

The Norwegian situation

According to The Norwegian Gambling and Foundation Authority, MuchBetter has facilitated illegal gambling in Norway (link to public information). Therefore, the regulator instructed Norwegian banks to reject deposits to MuchBetter accounts. We do not know whether this has also resulted in the seizure of MuchBetter funds.

In particular, the Norwegian regulator found that MuchBetter facilitated the gaming sites Kaboo, ComeOn, or Coolbet, which are illegally offering their gaming services to Norwegian citizens. The operators of these gaming sites are regulated by the Malta Gaming Authority (MGA), which, however, does not allow them to offer their services to Norway or other jurisdictions.

The Austrian situation

In the Austrian court case, the defendant holds a gambling license in Gibraltar. The plaintiff suffered losses in the games offered by the defendant, the compensation of which he seeks from the defendant. He accuses it of not having a license under the Austrian Gaming Act and of carrying out its activities in Austria unlawfully. The defendant argues that the Austrian gambling monopoly violates EU law and must remain inapplicable. Compensation for the gambling losses incurred is therefore excluded.

The Supreme Court found (again) that the Austrian gaming law is not contrary to European law and pointed out that the Court of Justice of the European Union also ruled that gambling monopolies of EU member states are not violating EU law if they are aimed at protecting consumers. Like drugs, gambling may be an addiction and thus the state may implement the monopoly as a sort of consumer protection.

The lessons for payment processors

Experts say that payment processors that knowingly and intentionally facilitate illegal transactions with their services are also liable for refunds to customers. As the Norwegian regulator has clearly stated in the case of MuchBetter, the illegal business is made possible by the payment services, and MuchBetter is, therefore, a central part of the illicit business. Payment processors would therefore be well advised to use their algorithms to monitor their merchants’ activities on a transaction level closely. While gambling deposits may be perfectly legal in one jurisdiction, they may be illegal in other jurisdictions.