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Britain and Malta teamed up on Monday in a bid to head off moves by EU president France to forge a bloc-wide policy for regulating the multi-billion euro gambling industry.
France put forward a discussion paper to a meeting of the bloc's 27 industry ministers that said there were "already grounds for seeking a common approach".
In the past, gambling could be dealt with nationally, but the rise of cross-border online betting undermines this.
"The common challenges identified would appear to justify the development of a new EU-level approach," the document obtained by Reuters said.
EU Internal Market Commissioner Charlie McCreevy told the meeting he has not proposed common EU rules on gambling as no consensus existed among the bloc's states to adopt it.
That stalemate was much in evidence on Monday.
The issue is politically sensitive as it touches on important tax revenues and traditions in many countries. Online gaming firms are battling many governments as they face barriers to operating freely in some countries.
The Czech Republic, which takes over the EU presidency on Jan. 1 signalled it may continue with the debate but avoided giving any clear commitment, diplomats said.
"They left the door open to discussing the issue in future despite strong opposition from Britain and Malta," a diplomat who attended the meeting said.
The two countries, both known for their liberal attitude to gaming firms, intervened to say gambling should remain a national competence, the diplomat said.
The European Court of Justice has ruled several times that restrictions on gaming must be non-discriminatory and proportionate, and McCreevy has launched legal actions against about 10 EU states to uphold these rulings.
Many of the countries subject to the legal actions backed the French paper, triggering accusations from some officials that it was no more than a delaying tactic and an attempt to impose stricter rules on some countries.
"Malta said the French initiative is a cul de sac," a second EU official said. (Reporting by Huw Jones; editing by Simon Jessop)
