The regulation of online games of luck and chance in Switzerland
While for a long time, online games of luck and chance, i.e., games in which a monetary prize or other monetary benefit is available in return for a monetary stake or upon the conclusion of a transaction, were prohibited in Switzerland, the Swiss Money Games Act (Geldspielgesetz (BGS)), which came into force on 1 January 2019, allows entities that have obtained a license approved by the Federal Council to offer online games of luck and chance in Switzerland. Such license can, however, only be obtained by providers domiciled in Switzerland that also offer the same or similar games offline. Offering online games of luck and chance in Switzerland from abroad is illegal and subject to criminal sanctions.
Under the applicable statutory law, online providers of games of luck and chance operating without the necessary license face their domain names being blocked. The decision to block a domain name is published by the intercantonal supervisory authority for games of luck and chance (GESPA) and the Federal Commission for Games of Luck and Chance (ESBK) without informing the providers of the online game in advance (see here for the current list). Telecommunications service providers are then obliged to block access to the relevant domain.
Only once the relevant list is published in the Federal Gazette, can the providers of the online game object to the decision to block their domain name. Such objection can be raised in particular if the provider has stopped offering the relevant game or blocked access from Switzerland with appropriate technical measures.
Swiss Federal Supreme Court approves network blocking without prior information
Recently, several providers of online games of luck and chance that were blocked by the GESPA and ESBK appealed the relevant decisions to the Money Games Court and as a last instance to the Swiss Federal Supreme Court (SFSC). In three recent decisions, the SFSC rejected the relevant appeals (decisions No. 2C_336/2021, 2C_337/2021 and 2C_338/2021, all dated 18 May 2022).
In their appeals, the providers of online games had alleged that the network blocking provided for under the applicable statutory law and enforced on their domains violated their fundamental right to economic liberty and the freedom to provide services under the bilateral treaties with the EU. They argued that the blocking only served the purpose of protecting Swiss providers of (online) games of luck and chance against foreign competition.
This argument was rejected by the SFSC, which found that the prohibition of online games of luck and chance offered by foreign providers was justified since Swiss authorities lacked the necessary supervisory power over such providers. They were thus not able to ensure that games offered by foreign providers offer the required protection against excessive gaming (addiction) and other gaming-related risks (money laundering) as well as a safe and transparent execution of the games (game manipulation). In addition, the SFSC held that the right to economic freedom does not confer a right to engage in activities in Switzerland that are prohibited without a corresponding license or authorization.
Moreover, the SFSC held that the bilateral treaties with the EU do not oblige Switzerland in any way to open the relevant market to foreign providers. More precisely, the SFSC held that the case law of the ECJ or the EFTA Court is in principle not authoritative for Switzerland, as money games are not covered by the bilateral treaties. The SFSC further emphasized that even if the case law of the ECJ or the EFTA Court were to be authoritative for Switzerland, the SFSC regards it as compatible with EU law that organizers established in one member state may not offer games of chance in another member state if they are not (also) established there. In the SFSC's opinion, this must at least hold true if the illegal gaming activity has reached a significant scale in the country concerned and the measures adopted are systematically and clearly aimed at steering the consumers' gambling desire into lawful channels. Moreover, the foreign providers alleged that the DNS network blocking used in their case was not proportionate, since it caused so-called "overblocking," i.e., the blocking of more than is intended or allowed. The SFSC noted that there are currently three different methods to block a domain: (1) DNS blocking, (2) IP blocking and (3) deep packet inspection. The SFSC held that, while DNS blocking is not technically perfect, it was currently the easiest and most appropriate solution for the blocking of unlicensed online games and therefore proportionate.
Lastly, the foreign providers argued that legal remedies for providers affected by network blocking are not sufficient, in particular since no warning is issued prior to the blocking of the domain and the relevant decisions are only published in the Federal Gazette — not sent to the affected providers. These arguments were equally rejected by the SFSC, which held that foreign providers could be expected to check the publications in the Federal Gazette as well as on the websites of the GESPA and the ESBK. Moreover, the SFSC upheld the ruling of the previous instance ordering the providers to bear the costs of the proceedings, since they had caused the procedure by offering unlicensed and therefore illegal online games of luck and chance in Switzerland.
Relevant considerations for foreign providers of online games of luck and chance
In view of the above, if the game indeed qualifies as a money game under the BGS, it is recommended that foreign providers take appropriate technical measures from the outset to prevent GESPA or ESBK from blocking their website in Switzerland, such as putting effective geo-blocking measures in place for Switzerland or not allowing Swiss players to open accounts.
In this context, it should also be emphasized that the term "money game" in the sense of the BGS is defined very broadly by the Swiss legislator. It covers all games in which a monetary prize or other monetary advantage is possible in return for the payment of a monetary stake or upon the conclusion of a legal transaction. The SFSC expressly points out that the broad scope of application also results from the fact that the legislator has expressly excluded the activities of FINMA, as otherwise structured products and the like would also fall under the BGS (Article 1 para 2 lit. f BGS). According to the SFSC, whether the game is determined by skill or by chance is also irrelevant for the qualification as a money game. The SFSC does not elaborate on the question of whether games related to the acquisition of non-fungible tokens (NFTs) qualify as money games under the BGS (citing platforms such as "CryptoKitties" for virtual pets; "Decentraland" for virtual real estate; and "OpenSea," a general marketplace for NFTs). The SFSC only states that the digital character of an object does not preclude it from being made the object or component of a money game and suggests that such games linked to NFTs may qualify as novel money games under the BGS. It will therefore be interesting to see how the SFSC will assess such offers in the future.
