Dr Joerg Hofmann: Exploring how regulators can ensure effective gambling limits
There is no question that limits are important and useful. They can protect players from placing stakes that exceed their economic capacity. This is why they can be found in most frameworks for gambling regulation. We are talking about stake limits, deposit limits and sometimes also loss limits in this context.
With the introduction of the Interstate Treaty on Gambling, which came into force on 1 July 2021, Germany introduced a cross-operator deposit limit for the first time. The interesting thing about this is that it records the deposits of all players in the respective calendar month almost in real time via a cross-operator server system (the so-called LUGAS system) and checks compliance with the deposit limits. This means a player not only has individual limits with their respective operator, but also has an individual deposit limit that applies to all operators. For example, if this limit is €1,000 ($1,092), the player can only deposit up to this amount per month in the regulated market in Germany, regardless of how many operators he plays with.
The legal regulations and the ancillary licence provisions in Germany stipulate a standard deposit limit of €1,000 per month for each player. However, it is possible under certain circumstances to increase the cross-operator deposit limit to up to €10,000, in particular by providing proof of income. Subject to even higher requirements, in particular additional close monitoring, the cross-operator deposit limit can be increased to up to €30,000. The higher the limit, the more demanding the requirements for the monitoring of gambling behaviour by the operators. If the specified cross-operator deposit limit is exhausted, the operators must ensure no further deposits can be made by the player.
The monitoring system
Compliance with the cross-operator deposit limit is monitored by the Joint Gambling Authority of the German Federal States using the “LUGAS” monitoring system, which includes not only the limit file but also the activity file for the prevention of parallel gaming. Connection to the limit file is mandatory for operators. In addition, the player may set themself a daily, weekly and/or monthly operator-related stake, deposit and loss limit, i.e. limited to one operator, whereby the operator-related deposit limit may not exceed the cross-operator deposit limit. Reductions take effect immediately, while increases take seven days to be implemented.
The cross-operator system in Germany is technically complex, but it works – at least technically. The monitoring of deposits is functioning. Setting up and programming such a system is very time-consuming. Minimum periods of more than six months for programming alone are quite realistic. Fortunately, Felix Schleife and his team at GGL (Regulator) provide constructive support to the operators on complex technical issues by sharing their IT expertise.
Learnings taken abroad
Spain has followed the German regulatory approach with interest and already announced in November 2023 in a so-called “Draft Royal Decree amending the old Royal Decree 1614/201” the introduction of a system of joint deposit limits per player. The old Spanish system from 2011 provides for limits set independently for each operator, so that the total amount of deposits a player can make ultimately depends on the number of operators in which he participates and holds an open gambling account with. This is not deemed fully satisfactory from the perspective of consumer protection. According to the cited decree, Spain will in future have a cross-operator solution similar to the German system.
The German system, which basically serves as a model, does not take into account the individual circumstances of the players and has opted for a seemingly “one-size-fits-all” model – regardless of how different the economic capacities of the players may be. Even a billionaire cannot deposit more than €30,000 per month with a licensed operator in Germany.
The question therefore arises as to whether the system, which is well-intentioned in theory, fulfils its protective purpose. The main purpose of limit regulations is to protect players from ruinous gambling behaviour and to protect them from gambling addiction.
How effective are these deposit limits?
Within the microcosm of players who accept such restrictions and consider them sufficient, this player protection actually works very well. Players for whom the possibility to deposit up to a maximum of €30,000 per month is (far) too little, however, switch to offers that allow unlimited deposits. But this can only be found in the unregulated market. It is probably a well-known figure across the borders of many countries that around 20% of players account for around 80% of gross gaming revenue (the Pareto principle in action). Even if these figures were to be adjusted up or down by 5%, it can be assumed that these proportions are realistic in most countries and markets.
This also means that 80% of all players generate only about 20% of gross gaming revenue. It doesn’t take much imagination to visualise the market in which large parts of the stakes flow if players are not given the opportunity to make deposits of whatever amount they wish – not to mention their stakes. This is the problem with the German regulation system, which is currently under review. It remains to be seen whether the existing system of limits will be adjusted – which the author believes is urgently needed.
Allow players to choose
Germany and Spain, and those who wish to follow this model, would be well advised to carefully weigh up the consequences of a “one-size-fits-all” model in the interests of channelling players.
An alternative that would reach the majority of high-stakes players would be to allow players to set their own individual limits at any level. The “one-size-fits-all” becomes a “customised suit.” No player would have to switch to unlicensed operators in order to choose the right budget for them. In return, the responsibility of regulators, supervisors and operators must focus on a tight, sophisticated monitoring system, using all available means.
In this way, any suspicious gambling or spending behaviour in the regulated market can be identified. This can be countered with the possibilities of advanced responsible gaming concepts. Above all, however, it would be an important step towards channelling high rollers and other high-stakes gamblers away from the unsupervised market and back into the protected legal market.
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