EU countries can ban online gambling if their aim is to combat fraud, Europe's highest court said on Thursday, dealing a blow to the multi-billion euro online betting industry seeking to break domestic monopolies.

The European Union Court of Justice (ECJ) issued rulings on two separate challenges involving online gambling in the Netherlands.

De Lotto, a Dutch non-profit-making foundation which offers games of chance, had asked a Dutch court to stop residents from using British bookmaker Ladbrokes' online gambling operation as it was not licensed in the Netherlands.

Ladbrokes appealed to the Dutch Supreme Court after the lower court backed De Lotto. And the Dutch Supreme Court asked the ECJ in 2008 to rule whether the Dutch licensing system was compatible with EU law allowing for the free movement of goods and services across the 27-country European Union.

In the second challenge, Betfair, the world's largest online gaming exchange, took its case to a Dutch court after Dutch authorities refused to grant it a license similar to others given to two Dutch companies. The court subsequently sought guidance from the ECJ.

The ECJ backed the position of the lower Dutch court on Ladbrokes.

Such a restriction may be justified, in particular, by the objectives of consumer protection and the prevention of both fraud and incitement to squander money on gambling, as well as the need to preserve public order, it said. It cited the same rationale for the Betfair case.

The grant to such an operator of exclusive rights to operate games of chance, or the renewal of such rights, without any competitive tendering procedure would not appear to be disproportionate in the light of the objectives pursued by the Netherlands legislation, it said.

Lobbying group the European Gaming & Betting Association (EGBA) said the judicial process could not resolve Internet issues and urged the European Commission to take action on a pan-European level.

It is for the European legislator to ensure that this IT-based medium which allows for the highest security standards warrants consistent customer protection and fraud control throughout the EU, EGBA secretary-general Sigrid Ligne said.

A host of online gambling companies have taken several European countries to court in a bid to break into lucrative markets but have found it a tough battle.

Last September, the ECJ said countries could ban gambling websites in order to fight crime.

Consultancy H2 Gambling Capital estimates the European interactive market could be worth as much as 12.6 billion euros ($15.50 billion) by 2012, up from 8.3 billion euros last year.

(Editing by Sharon Lindores and Jon Loades-Carter)

($1=.8131 Euro)

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