January 18, 2023

  • Jaka Repansek, Founder RePublis Media & Gaming

Will the EU Digital Services Act shape the future of on-line gaming?

Passed with little fanfare in April 2022, the eu’s digital services act promises to bring about the kind of shakeup that will make GDPR seem insignificant. Its full ramifications are yet to be felt but Jaka Repansek outlines the main provisions.

The Digital Services Act (DSA) creates new standards for digital services in the EU. It regulates illegal content online, the protection of users’ rights, and the liability of a wide variety of online intermediaries, including online marketplaces, cloud providers and app stores. DSA will have a deep impact on the on-line gaming industry and business models in the EU. As with GDPR, there will be a long-term world-wide impact as well.

The DSA, together with its sister regulation, the Digital Markets Act (DMA), forms a new set of rules intended to create a safer and more open digital space and to foster innovation and competitiveness. DSA reforms and supplements the e-Commerce Directive as it relates to online intermediaries, maintaining core pillars such as safe harbour provisions while introducing new obligations relating to disinformation, illegal goods and content, cyber violence, dark patterns and targeted advertisements. Businesses operating online, including on-line gaming and betting sites, will benefit from access to tools for flagging illegal content and activities that could otherwise damage their trade and services.

Application of DSA to all parties is from the beginning of 2024. However, for very large online platforms (VLOPs) and the European Commission, the application date may be earlier – between spring and the summer of 2023 once the exact definition of “very large” is published. All online platforms that are not micro or small enterprises will have to start reporting their average monthly user count from February 2023 the months after the entering into force of DSA on 16th November 2022.

The DSA will apply alongside its sister regulation, the DMA, which imposes a long list of obligations and prohibitions on digital platforms that are designated as “gatekeepers”, seeking to ensure fair and contestable digital markets in the EU. Each is a core component of the EU’s wide-reaching reform of digital sector regulation (“The European Digital Decade”) and, in combination, the two pieces of legislation create a strong regulatory regime for the digital environment in Europe. DSA focuses on online content regulation and user protection, while the DMA seeks to prevent large and influential digital companies from implementing practices that are considered to limit competition or to be otherwise unfair.

The DSA introduces wide-ranging obligations on intermediaries and new rights for users, including:

  • updating the regime for intermediary liability for third-party content,
  • rules to trace sellers on online marketplaces,
  • mechanisms to address illegal content, goods and services,
  • increased rights for users, including the right to challenge moderation decisions,
  • increased transparency requirements for online platforms,
  • obligations for the protection of minors,
  • new limits on targeted advertising and much more.

The DSA will apply to a range of providers of digital “intermediary services”, where such services are offered to natural or legal person recipients that are established or located in the EU. In practice, this will catch a broad range of businesses, including internet service providers, cloud providers and web hosting platforms, social media networks, online search engines, web-based messaging services and email services, domain name registrars, voice over IP services, and online platforms including app stores and online marketplaces which store or transmit the content of third parties. The concept of “offering” services is broad under the DSA, with providers of worldwide intermediary services included if they enable use of their service by EU users and have a “substantial connection” to the EU, such as targeting activities towards a Member State.

Further, the DSA imposes specific obligations related to the content, format and accessibility of documents and information, such as terms and conditions. Online platforms will have to disclose information on their number of average monthly active recipients and these obligations will require efficient internal mechanisms. Businesses need to prepare in advance for new obligations requiring the adaptation of the design, presentation and/or functioning of their online interfaces.

Impact on online gambling

Recital 32 of the DSA addresses online gambling and betting services: the applicable Union or national law on the basis of which those orders are issued may impose additional obligations and should be the basis for the enforcement of the respective orders. In the event of non-compliance with such orders, the issuing Member State should be able to enforce them in accordance with its national law. The applicable national law should be in compliance with Union law, including the EU Charter of Fundamental Rights and the Treaty on the Functioning of the EU (TFEU) provisions on the freedom of establishment and the freedom to provide services within the Union, in particular with regard to online gambling and betting services. Similarly, the application of such national laws for the enforcement of the respective orders is without prejudice to applicable Union legal acts or international agreements concluded by the Union or by Member States relating to the cross-border recognition, execution and enforcement of those orders, in particular in civil and criminal matters. The enforcement of the obligation to inform the relevant authorities about the effect given to those orders, as opposed to the enforcement of the orders themselves, should be subject to the rules set out in this regulation (DSA).

DSA further defines a number of provisions that could potentially be beneficial in the fight against illegal online gambling. These include an improved notice-and-action mechanism which will enable all users to flag up illegal content online, an introduction of the concept of “trusted flaggers” whose notifications of illegal content would need to be addressed with priority, and enhanced consumer protection and know-your-business-customer requirements. Trusted flaggers are defined as “independent entities which will identify and notify illegal content to online platforms”. Online platforms will have to react to their notifications with priority and without delay. This concept could become a powerful tool for on-line gaming and betting providers when tackling illegal content online. Several EU lotteries are already preparing to apply for the status of »trusted flaggers«, awarded by the Digital Services Coordinator.

The DSA imposes an obligation on hosting service providers to put in place “notice and action” mechanisms enabling individuals or undertakings to notify them of illegal activity or content. The DSA could therefore improve the efficiency of the fight against illegal online gambling offers and advertising, by allowing anyone to contribute through the “notice and action” mechanisms to make the Internet safer for players. The current absence of an obligation on service providers to verify the identity of their business customers, and their resulting anonymity, make it nearly impossible to bring civil or criminal actions to stop online harms. Know your business customer (KYBC) obligations could become be a powerful tool in tackling illegal content effectively online. Further, the DSA strictly prohibits advertising targeted towards minors, complementing the existing absolute bans on gambling by minors and on gambling advertisments targeted at them in all EU member states.

In conclusion: the proposed DSA is intended to be “a horizontal framework for all categories of content, products, services and activities on intermediary services”

This horizontal framework legislation does not address every concern online but rather builds the foundation and should be complemented by vertical and sector-specific initiatives where needed. Preparing for the new DSA requirements will take considerable effort and investment, as well as technical and human resources that gaming and betting businesses should anticipate today, rather than tomorrow. Failure to comply with the DSA may result in fines of up to six percent of annual global turnover. Smaller breaches, such as the provision of incorrect or misleading information to regulators, may result in fines of up to one percent of annual turnover.