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The European Union’s top court has criticized ’s slot machine law for running contrary to the European Commission’s principles on the freedom to provide services.

In 2011, Hungary imposed a fivefold increase on slot machine taxes, followed quickly by an additional 20% tax on slots in amusement arcades, while slots in casinos were exempt from the new tax. The following year, Hungary restricted slots operations to casinos, leaving arcade operators crying foul and seeking compensation. Hungarian courts referred the matter to the Court of Justice for the European Union (CJEU), which issued its opinion on Thursday.

The CJEU believes that Hungary’s confinement of slots to casinos “constitutes a restriction on the freedom to provide services.” The CJEU similarly ruled that the increased tax on arcade slots appeared intended to bolster the casino industry by making it impossible for arcade slots operators to turn a profit, but said this determination was ultimately to be made by the Hungarian courts.

The CJEU acknowledged that Hungary’s stated objectives – consumer protection and prevention of crime – would, in principle, justify restrictions against gambling. However, the CJEU noted that Hungary was “pursuing a policy of controlled expansion of gambling activities, ” which seemed to run counter to the state’s lofty objectives of keeping a tight lid on its citizens’ gambling behavior.

Hungary recently filed fresh amendments to its online gambling laws with the European Commission. The amendments restrict online sports betting to state-owned operator while online casino and poker products will be restricted to the state’s existing brick-and-mortar casino licensees. Approved online operators will pay tax of 15% on net game income, plus 2.5% of net income as a quarterly supervision fee.

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