Impact of the Digital Services Act on Gambling and Lotteries

Overview

The transformation of the digital world has brought convenience but also challenges related to illegal content, user protection, and operational transparency. The European Union’s Digital Services Act (DSA) aims to address these challenges by establishing a regulatory framework for digital services.

The DSA sets out rules on how digital service providers can be informed of illegal content, which they will then have to take down. It also imposes advertising restrictions as well as additional protective measures for minors, in particular.

While the DSA does not directly target gambling and lottery operators, the set of regulations which stem from it significantly influence the online operations of these industries, in which compliance has long since evolved around issues of illegal content (unlicensed gambling operators), advertising, and the protection of minors.

Introduction

Long gone are the days when your only option was to reach for a book if you needed to get information on a certain topic. In today’s world, if you need to get in touch with an old (or new) acquaintance, you can turn to a number of social media apps. New clothes, electronica, food, or basically anything you can think of is just a few clicks away. Flights and hotel rooms are booked from the comfort of your desk. It has become increasingly convenient to navigate through the different products and services available in our digital society. But this transformation of our world brings challenges related to illegal content, user protection, and operational transparency. This also holds true for the lottery and gambling industry, which has seen a rapid evolution in how games are played.

The European Union’s Digital Services Act (DSA), which entered into force in November 2022 (and for the most part became applicable in February 2024), seeks to address some of these challenges by establishing a comprehensive regulatory framework for digital services. The DSA is designed to regulate online intermediaries and platforms, including marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation services. Its main objectives are to prevent illegal and harmful activities online, curb the spread of disinformation, ensure user safety, protect fundamental rights, and promote a fair and open online platform environment.

The DSA applies to all digital services operating within the EU. It categorizes services into different tiers based on size and nature:

• Very Large Online Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs): Platforms reaching more than 10% of the EU’s population (approximately 45 million users) face specific rules due to their significant role in disseminating illegal content and societal harms.
• Online Platforms: These include online marketplaces, app stores, collaborative economy platforms, and social media platforms.
• Hosting Services: Services such as cloud and web hosting, including online platforms.
• Intermediary Services: Entities offering network infrastructure such as internet access providers and domain name registrars, as well as hosting service providers.

Larger platforms face more stringent obligations under the DSA. VLOPs and VLOSEs must, for example, establish a point of contact for authorities and users, report criminal offences, have sufficiently user-friendly T&Cs, and must be transparent in their functioning as regards advertising, recommendation algorithms or content moderation.

DSA impact on gambling and lotteries

Gambling or lottery operators are not really the target of the DSA thus it is not very likely that a gambling platform would be considered subject to the obligations imposed by the DSA. The main relevance of the DSA with regard to the gambling and lotteries industry is in the notion of illegal content that can be found online, and in the restrictions on advertising.

The DSA mandates that all online platforms promptly remove any content deemed illegal under EU law. This includes illegal gambling operations, advertising promoting unlicensed gambling services, and also advertising making illegal use of a trademark (something we often see with the infamous “secondary lottery operators” that offer betting on lottery draws). The DSA does not define what is illegal, but it does set out a framework for how illegal content is tackled. The DSA will henceforth not define which gambling services are illegal as such. That is and remains a question of national law in each single Member State.

In addition, the DSA provides for specific measures to protect minors and people in general from certain advertising practices, which may also impact gambling and lotteries advertising.

Notice and take-down of illegal content

The approach to the removal of illegal content from online platforms under the DSA was clearly inspired by the much older e-Commerce Directive, but adds some significant compliance layers to the mix. Under the e-Commerce Directive, intermediary service providers have enjoyed relatively straightforward legal protection. It allowed them to avoid liability for illegal content on their platforms, provided they did not have knowledge of the illegality and acted swiftly to remove such content upon becoming aware. In order to achieve greater harmonization, the DSA incorporates the existing liability exemption rules of the e-Commerce Directive with minimal changes.

However, the DSA now also sets up specific processes as to how intermediaries are notified of illegal content by the authorities4, and imposes the requirement that users should have the ability to point to illegal content through accessible, user-friendly, means which allow for the submission of notices exclusively by electronic means.5 Hosting services (including online platforms) are subject to specific obligations in this respect and must facilitate the submission of sufficiently precise and adequately substantiated notices.

As such, these hosting service providers are made responsible for ensuring that the notices adhere to certain qualitative requirements so that they can be considered to give rise to actual knowledge or awareness, triggering the liability in respect of the specific item of information concerned, and allowing a diligent provider of hosting services to identify the illegality of the relevant activity or information without a detailed legal examination. Upon receiving a valid notice, intermediaries are deemed to have actual knowledge of the content’s illegality and must act swiftly to remove or disable access to it.

Take-down of illegal content also comes with communication requirements both towards the reporter of the content and towards the impacted party. There is also a requirement under the DSA for online platforms to offer an appeals process for at least six months over decisions to remove/disable content, suspend or terminate services, or suspend/terminate user accounts.

The DSA also sets up a system of so-called “trusted flaggers”6 – entities which have demonstrated particular expertise and competence – to report illegal content to which platforms will have to react with priority. These trusted flaggers can be appointed by Digital Services Coordinators, the national authorities in charge of supervising and enforcing the DSA in Member States. In practice, this is not currently happening effectively in all Member States.

Entities subject to the DSA have specific reporting obligations with regard to content moderation undertaken under the provisions of the DSA.7 This relates to information such as how many notices were received from Member State authorities or by trusted flaggers, the type of illegal content in question, response time, etc.

So, while the DSA does not require intermediaries to monitor information or engage in proactive fact-finding, as was already the case under the e-Commerce Directive, it does add new compliance layers in the form of specific notification procedures. Non-compliance can result in penalties8 of up to six percent of the service provider’s annual income or turnover, making it imperative for intermediaries, and especially for online platforms, to develop the necessary infrastructure to meet the DSA’s demands.

Protection of minors

A topic that will sound particularly familiar to operators of gambling or lottery services, is the protection of minors. The DSA specifically focuses on this issue, knowing that online platforms like social media apps are very frequently used by young people. Under the DSA, providers of online platforms that are accessible to minors are required to put in place appropriate measures to ensure high levels of privacy, safety and security of minors on their services. VLOPs and VLOSEs must, for instance, consider the risk of minors finding content that could harm their “health, physical, mental and moral development”. According to the pre-amble, “such risks may arise, for example, in relation to the design of online interfaces which intentionally or unintentionally exploit the weaknesses and inexperience of minors or which may cause addictive behaviour”. This would also include gamification features, which can be very much akin to gambling-related content. These platforms and search engines must identify and assess the potential online risks for children and young people using their services.

The protection of minors is also apparent in how the DSA regulates advertising, as it bans targeted advertising to minors based on profiling using the personal data of users of their services when they can establish with reasonable certainty that the recipient of the service is a minor. We can already see that Snapchat, Google, YouTube, Instagram and Facebook no longer allow advertisers to show targeted adverts to minors.

The advertising regulations go beyond the protection of minors, however.

Online advertising

The Digital Services Act covers any type of advertising, from digital marketing to issues-based advertising and political ads, and complements existing rules such as the General Data Protection Regulation, which already establishes, for example, rules on users’ consent or their right to object to targeted digital marketing.

In addition to advertising towards minors based on profiling, the DSA also bans targeted advertising based on profiling using special categories of personal data, such as sexual orientation or religious beliefs.

Users have to be clearly informed whether and why they are targeted by specific advertising and who paid for the ad; they should also see very clearly when content is sponsored or organically posted on a platform and should also see when influencers are promoting commercial messages.

For very large online platforms, the societal stakes are higher, and the rules include additional measures to mitigate risks and enable oversight.

They have to maintain and provide access to ad repositories, allowing researchers, civil society and authorities to inspect how ads were displayed and how they were targeted. They also need to assess whether and how their advertising systems are manipulated or otherwise contribute to societal risks, and take measures to mitigate these risks.

Conclusion

The Digital Services Act represents a significant shift in the regulatory landscape for digital services. The DSA does not directly impact the lottery and gambling industry in the sense that it targets gambling or lottery operators directly. However, the gambling and lottery business is being conducted more and more online, and online platforms have become an essential tool in engaging with players. In this respect, the rules imposed by the DSA on digital service providers effectively play a role in the legal landscape of online gambling, especially as regards illegal content and advertising on online platforms.