Money-Laundering, Censorship Fears Fanned in Swiss Gambling Vote

(Bloomberg) -- All Switzerland wanted to do was introduce rules to legalize online gambling. Instead it crafted a law that critics say amounts to Internet censorship, and sparked a nationwide referendum.

The bill approved by both houses of Swiss Parliament late last year was designed by lawmakers to crackdown on Internet gambling-related crime. But what has really fired up civil liberties advocates is the law’s stipulation that service providers will be required to block Swiss surfers from accessing gambling sites that don’t belong to Swiss casino operators, and redirect them to a ‘legal’ gambling website.

It’s led to Sunday’s referendum to help decide the questions raised by the law. Where does the government draw the line, the opposition says, if this law takes effect?

“It’s a slippery slope,” Markus Kummer, vice chairman of the Swiss chapter of nonprofit research group Internet Society, said in an interview. “Once you have this law as part of your legal framework, then there will be other parts of the Internet where people will say ‘we need to block this.’”

If the law’s supporters can win the June 10 plebiscite, only Swiss casino-owned operators will be accessible online, and new licenses won’t be issued for another six years. While critics acknowledge the need for a law, they say this one is flawed in many respects, not least in its naivete.

‘Bad Players’

“To keep bad players out is a legitimate concern but to say that only the Swiss players are good players is an argument that takes some convincing,” said Kummer, who used to work for Internet regulator ICANN.

Swiss Justice Minister Simonetta Sommaruga says the legislation is about protecting Swiss citizens and society.

“Currently, anyone in the world can set up an Internet casino operating in Switzerland without adhering to our laws,” she told reporters in the Swiss capital Bern recently. Sommaruga’s Social Democrats support the law. Opponents include the Greens and libertarian-minded Swiss People’s Party.

“There is no obligation to prevent fraud or money laundering: there are no measures in place to protect individuals prone to gambling addiction and their income is not taxed,” Sommaruga said.

‘Social Blight’

Britain’s Gambling Commission in January threatened to revoke five online casino operators’ licences, saying they weren’t doing enough to combat terrorist financing, money laundering and problem gambling. In May, it slashed the size of the maximum bet on roulette and poker machines from 100 pounds ($134) to 2 pounds and tightened rules on online gaming to fight what it called a “social blight” that preys on “some of the most vulnerable in society.”

In the U.S., things are moving in the opposite direction. The Supreme Court just made a landmark ruling allowing states to legalize sports betting across the country, and paving the way for wagers on basketball, baseball, football and hockey that could yield as much as $245 billion a year.

While Swiss online gambling remains officially illegal pending the outcome of the referendum, the Swiss government estimates more than 250 million Swiss francs ($254 million) ends up in the coffers of foreign gambling operators in offshore centers such as Malta and Gibraltar. Meanwhile, legal gambling in Switzerland is a modest business that’s shrinking.

The small Alpine nation has 21 casinos and “the market seems to be saturated,” Swiss law firm MME Legal concluded in a recent briefing on the industry. Revenue has fallen by nearly a third since 2007 to about 689 million Swiss francs, government figures show.

Censorship?

The Swiss law has struck a nerve with younger politicians from across the political spectrum, who’ve grown up with ubiquitous web browsing and see the proposal as censorship, rather than an issue of gambling regulation.

“It opens the floodgates to spread mandatory blocking measures into other areas, like the music and film industry,” Luzian Franzini, 22, co-head of the Young Green Party, said in an interview. Together with other youth wings of the right-of-center Free Democrats and Swiss People’s Party, Internet and civil rights activists, Franzini’s party quickly gathered the necessary 50,000 signatures to challenge the bill in a nationwide referendum.

Current polls are mixed. A May 30 poll by Swiss broadcaster SRG puts the supporters ahead with 58 percent, with 37 percent opposed, a gain of 6 points from SRG’s May 4 poll that had advocates of the law at 52 percent. However, a May 18 poll by newspaper publisher Tamedia says opposition and proponents each holding 47 percent support, with the rest undecided.

“If the law gets rejected, what will follow are years of re-negotiations as it will get even harder to find common ground,” Swiss Justice Ministry spokesman Guido Balmer said in a phone interview.

To contact the reporters on this story: Mara Bernath in Zurich at mbernath1@bloomberg.net;Hugo Miller in Geneva at hugomiller@bloomberg.net

To contact the editors responsible for this story: Lukas Strobl at lstrobl@bloomberg.net, Christopher Elser, Jan Dahinten

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