Germany's online gambling regulation: An uncertain future

By Gambling Insider

With delays casting doubts over the German online market being regulated in July 2021, Iqbal Johal explores the key issues of the proposed gambling treaty. 

The regulation of the German online gambling market has been a long time coming. Back in 2012, the 16 federal states passed an Interstate Treaty on Gambling, with the intention to open up sports betting in the regulated market for the first time. However, years of legal uncertainty followed with no legally valid sports betting license issued since the treaty was passed.

But earlier this year, a breakthrough was made between the states over a new gambling treaty, with the consensus being that it’s better to have a regulated market than a large black market.

The new regulation is expected to come into force from July 2021 that will lift the prohibition on online casino, and online slots and poker games. It will also allow for the registration of an unlimited number of sports betting providers, as well as a limited number of online casino providers. However, the state lottery monopoly will remain in operation in the new model. 

But if you thought that put an end to the uncertainty, you’d be mistaken. In April, the Darmstadt Administrative Court halted the process of awarding sports betting licences. The licensing process was challenged by Austrian sportsbook operator Vierklee, which was upheld by the court. 

The decision came just weeks after the Hessian court revealed 30 operators had filed applications for a licence, with a further 20 expressing serious intent to apply. That would have resulted in 99% of sports betting activity in Germany moving to the legal market.

At the time, German sports betting association DSWV expressed its dismay at the decision, describing it as a big blow to its members. The association, which advocates a modern and competitive regulation of sports betting in Germany, has previously slated the current sports betting policy in the country. It claims that German sports leagues, such as the Bundesliga, miss out on significant amounts of lost sponsorship and advertising income compared to other top European leagues, such as the Premier League.

DSWV managing director Luka Andric spoke to Gambling Insider about the current delays in regulating the market, and just exactly what it would mean to the country.

“Traditionally there has been strong disagreement between the states governed by Social Democrats who favour banning entire product categories and more restrictive regulations versus states governed by Conservatives, who are often more open towards regulatory models that attempt to work with licenced, responsible operators,” Andric explains. “It seems, however, that the major conflicts have been settled, at least for now, and that there is broad agreement to implement the rules of the 2021 Interstate Treaty as soon as possible. The ordering of the awarding of licences to be stopped, of course, is a matter of frustration for our members who spent considerable amounts of time and effort in preparing licence applications. At the same time we have always argued that opening up the sports betting market should go hand in hand with licensing online casino games. It looks as though the court order makes it more likely that the two types of licences will be awarded at the same time or at least within a short time frame. Considering Germany’s population size and its economic standing sports betting will always be an important market and it is positive that this market is finally regulated. Whether the market can thrive will depend to a large extent on whether the authorities will be able to effectively block non licence holders from offering their products to German customers. We are not fully convinced that this will work well and some regulatory amendments may be necessary fairly quickly in order to channel consumers towards licensed operators.”

Considering Germany’s population size and its economic standing, sports betting will always be an important market and it is positive that this market is finally regulated. Whether the market can thrive will depend to a large extent on whether the authorities will be able to effectively block non licence holders from offering their products to German customersLuka Andric

 

And that brings us to what has been a key topic of debate in a number of soon to be or already regulated jurisdictions: the black market.

In our last Market Focus feature on Sweden, concerns were raised about how on-going restrictive regulation will have the opposite effect on a 90% channelisation target proposed by the Swedish Gaming Authority (SGA). The Netherlands gambling regulator KSA, have also put forward strict regulatory proposals ahead of the expected legalising of online gambling in the country from next July.

The regulation of the German market would also include such strict measures or restrictions. These include a €1 ($1.18) stake limit on virtual slot machines, a limited in-play sports betting market, a live streaming ban on betting sites, a five-minute delay when switching between different gambling sites, and commercial advertising for virtual slots, online poker and casino games on radio and the internet prohibited between 6am and 9pm.

These measures have provoked a critical response in the industry, with claims the requirements won’t be effective in terms of player protection, and will create an unfulfilling experience for customers.

Speaking on a regulatory blog on GVC’s website, the operator’s director of regulatory affairs Martin Lycka believes the restrictions will be “much less attractive and less competitive” than the unlicensed market, encouraging black market play.

While Andric agrees that the German regulation will be restrictive, the DSWV MD thinks some of the regulation is in line with European counterparts and is hopeful it can evolve as time goes on. “Having said that, many European jurisdictions, which have had liberal regimes for many years, are increasingly introducing stricter rules and limitations,” he says. “Some of the German regulations are mild in comparison. It also needs to be taken into account that this will be version 1.0 of the new regulations and that as a trade association we will be talking to politicians and regulators to facilitate necessary and sensible amendments as soon as possible.”

Despite all the dither and delay – we’ve heard that before – surrounding the regulation of the German market, Andric is still confident the rules will come into play by the scheduled time frame of July 2021, but warned that “any potential delay caused by political disagreement, must not affect the rights of operators to offer their services in Germany under EU law.”

And in reiterating the importance of having sports betting operating in a regulated online market, Andric concludes saying: “The German sports betting market has grown in double digit figures for the past decade. Sports betting has become ever more visible in the media and in advertising. Without accounting for the COVID-19 related drop in the last year we expect this trend to continue once normal sports tournaments resume fully.”

From an operator point of view, Interwetten speaker of the board (CEO) Dominik Beier, isn’t as hopeful that the regulated German market will encourage channelisation, not at least in its proposed form. Bear in mind that’s coming from the CEO of a German speaking and focused operator who, on the face of it, would benefit tremendously from operating in a regulated space.

Beier is unconvinced however, telling Gambling Insider: “Let’s say in theory we definitely all want a regulated market. We all want planning security and sustainability to happen. But the regulation as it stands in Germany, and as they plan it to be, is regulation that only accelerates black market play, because so many things are not included in the regulation. We are talking about very strict limits which I don’t think are anywhere else in Europe. In theory, regulation is something everyone was wishing for in Germany for a long time. But the way it’s set up now is probably much worse than we have at the moment. What I’m seeing is the main goal is channelization, but they’ll absolutely achieve the opposite with the regulation and definitely not channelling into the legal market. That is what I fear the most.”

The need to regulate the online market is important. As things stand, from July 2021 many online verticals will become legal in Germany. That’s not to say uncertainty doesn’t remain, with the dishing out of sports betting licences up in the air, and the long, raging debate rumbling on about if the proposed regulations will do nothing but encourage illegal play. Here’s hoping to a more certain future come July 2021.


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