Author: George Mangion
Published on Business Today 1st April 2019
One thing I can tell readers is that online gambling is popular in Germany. More importantly, not a single German has ever got in trouble by placing a bet over the internet.
Having said that, Germany is one of those places where it’s definitely illegal to host a gaming site, but the legality of just placing bets online is uncl ear. Legal battles in Germany mostly revolve around the right of operators to offer their services to the public.
The difficulty in discussing the German market is that the laws have experienced a great deal of turbulence in recent times. Adding to the confusion is the ability of each state to regulate gambling how it sees fit. Many will tell you that Germany has a mix of wide-reaching national laws regulated by more limited state laws.
Up until 2008, online gambling was unregulated in Germany. As can be expected, the laws previous to 2008, didn’t address the internet in any way. Things changed when the Interstate Treaty on Gambling was passed in 2008. This effectively banned all forms of online gambling other than sports betting and horse racing offered by state-owned monopolies.
As can be seen in this article, some forms of betting are allowed in some states while most others are banned. It was more than six years ago that I travelled to the German state of Schleswig-Holstein where at an impromptu organised conference, I enjoyed listening to a debate by experts on the topic of online licenses that were planned to be issued on an exclusive basis in this northern state.
Looking back with nostalgia, one lauds the legislative adventure pioneered by Schleswig-Holstein which led to the issue of a limited number of gaming licenses. These licenses are still valid but they are limited in scope to the territory of Schleswig-Holstein and were due to expire in 2018.
From January 2012 until February 2013, the state of Schleswig-Holstein pursued its own gambling policy, which included granting online casino and sports betting licences at the same time, omitting to join the complete ban instituted by the other 15 states in the Interstate Treaty. No doubt, this unilateral move created an anomaly and it was in March 2017 when there was a collective drive by all leaders of Germany’s 16 Bundesländer to regularise the situation.
They voted to approve a new Interstate Treaty on Gambling. This had to take effect on 1st January 2018. In essence, the Interstate Treaty generally prohibits the operation and brokerage of online games of chance. The only exceptions concern sports betting, horse race betting and state lotteries.
Online casinos therefore are not currently licensable. Such restrictions were challenged under the EU law and test cases have instituted more pressure on Germany to relax its online prohibition. Slowly, this led to reforms that were initiated by the 16 Lander at the end of 2016. Unfortunately, these are referred to as minimalist reforms since they only concern sports betting.
But an over-arching condition of the Interstate legislation required the unanimous approval of each state’s legislature. The fly in the ointment was that legislators in Schleswig-Holstein voted to opt out of the treaty. In a curious twist of legislative history, Schleswig-Holstein had announced its intention to team with the state governments in North Rhine-Westphalia, Rhineland-Palatinate and Hesse on a new regulatory scheme based on its own original licensing regime. It hoped the rest of the states would eventually join.
Sadly, the horse was taken to the water but refused to drink. All this in a country with the largest economy in the EU family and it is not a surprise how online prohibition has consistently led to the industry’s growing impatience with the country’s 16 states in their failure to put together a cohesive strategy.
In fact, only three years ago, the EU ruled that Germany cannot continue to penalise or restrict unlicensed foreign operators, because it made it impossible for them to acquire licenses. The only exemption was Schleswig-Holstein, which as stated above, has challenged the rest and allowed for online casino licences to be issued.
The good news for gaming operators that went through the trouble of getting licensed in 2012/3, this empowered them to operate under a six-year license. These included real money casino games and poker to players within the state of Schleswig-Holstein until end 2018.
As things stand now, online gambling is largely outlawed across Germany with the exception of the two dozen or so operators who signed licenses to operate in Schleswig-Holstein. There are no other legal gaming sites in the 15 Bundesländer and there’s no way to obtain a valid license to offer games.
Recently talks started to pave the way for an interim solution. This agreement opens the way for the state of Hesse to start accepting applications for sports betting licences. The state of Schleswig-Holstein which had previously broken away from the inter-state treaty to set up its own online gambling licensing system which expired last year, will grant a short extension to its 23 licence holders till June 2021.
Quoting Steinkrauss (managing director of Merkur Sportwetten): “A new licensing process will take place with permits beginning in 2020 without a limit on the number, but would only be valid until June 2021, which is a quite unreasonably short time-frame.” He said that the agreement was no more than “an interim plaster rather than a long-term solution”.
The unhappy situation for foreign operators is that the status quo will prevail in Germany for the foreseeable future. Does this mean German-facing sports betting operators holding licenses in other European Union jurisdictions can continue to serve their German punters provided they pay attention to anti-money laundering responsibilities and don’t violate advertising restrictions.
One cannot but mention the deleterious effect in the media by the publishing of the so-called “Panama Papers” in November 2017. Newspapers commented on the role of various large German banks which were involved in payment transactions for private gambling operators.
The pay-out of winnings arising from supposedly unlawful gambling could be regarded as money laundry resulting out of aiding and abetting the illegal organisation of gambling. This has added more pressure on state regulators to tighten the screws on casino operators especially where AML rules are concerned.
No doubt, it will further strengthen their resolve to maintain the status quo on the uncertain licensing regime prevailing in Germany.
Author: George Mangion
Published on Business Today 1st April 2019
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