German online gambling regulations: an uncertain future

With delays casting doubt on the regulation of the German online market in July 2021, Iqbal Johal explores key issues in the proposed gambling treaty.

Regulation of the German online gambling market is long overdue. In 2012, the 16 federal states adopted an interstate gambling treaty, with the intention of opening sports betting on the regulated market for the first time. However, years of legal uncertainty have followed without a legally valid sports betting license having been issued since the adoption of the treaty.

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

The new regulations are expected to come into effect from July 2021 and will lift the ban on online casinos, slots and online poker games. It will also allow 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 effect in the new model.

But if you thought that ended the uncertainty, you would be wrong. In April, the Darmstadt Administrative Court suspended the sports betting licensing process. The licensing process was challenged by Austrian sports betting operator Vierklee, which was confirmed by the court.

The decision came just weeks after a court in Hesse revealed that 30 operators had applied for a license, with 20 others expressing serious intention to apply. This would have resulted in the displacement of 99% of sports betting activities in Germany to the legal market.

At the time, the German sports betting association DSWV expressed dismay at the decision, calling it a blow to its members. The association, which advocates modern and competitive sports betting regulation in Germany, has already planned the current sports betting policy in the country. He claims that German sports leagues, such as the Bundesliga, are missing significant losses in sponsorship and advertising revenue compared to other top European leagues, such as the Premier League.

DSWV Managing Director Luka Andric spoke with Initiated to the game on the current delays in market regulation, and exactly what that would mean for the country.

“Traditionally, there has been strong disagreement between states ruled by social democrats who favor banning entire categories of products and more restrictive regulations compared to states ruled by conservatives, which are often more open to regulatory models that attempt to work with licensed and responsible operators, ”Andric explains. “However, it appears that the main 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. Stopping licensing is of course a matter of frustration for our members who have spent a lot of time and effort preparing license applications. At the same time, we have always maintained that the opening of the sports betting market must go hand in hand with the licensing of online casino games. It seems that the court order makes it more likely that the two types of licenses will be awarded at the same time or at least within a short period of time. Considering the size of Germany’s population and its economic situation, sports betting will always be an important market and it is positive that this market is finally regulated. The ability of the market to thrive will depend to a large extent on the ability of the authorities to effectively prevent non-licensees from offering their products to German customers. We are not completely convinced that this will work well and some regulatory changes may be needed quickly enough to steer consumers towards licensed operators. “

Considering the size of the German population and its economic situation, sports betting will always be an important market and it is positive that this market is finally regulated. The ability of the market to thrive will depend to a large extent on the ability of the authorities to effectively prevent non-licensees from offering their products to German customers.Luka Andric

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

In our last Market Focus article on Sweden, concerns were raised about how the current restrictive regulation will have the opposite effect on a 90% channeling target proposed by the Swedish Gaming Authority (SGA). The Dutch gambling regulator, KSA, has also presented tough regulatory proposals ahead of the expected legalization 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) wagering limit on virtual slots, a limited in-play sports betting marketplace, a ban on live streaming on betting sites, a five-minute delay. when switching between different gaming sites and commercial advertising for virtual slots. , online poker and radio and internet casino games prohibited between 6 am and 9 pm.

These measures sparked a critical backlash in the industry, claiming that the requirements would not be effective in terms of protecting players and creating an unsatisfactory 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 gambling. black market.

While Andric agrees that German regulations will be restrictive, DSWV MD ​​believes part of the regulations are in line with that of their European counterparts and hope they can change over time. “That said, many European jurisdictions, which have had liberal regimes for many years, are increasingly introducing stricter rules and limitations,” he said. “Some German regulations are soft in comparison. It should also 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 changes as soon as possible. “

Despite all the hesitation and delays – we’ve heard it before – surrounding regulation of the German market, Andric is still confident that the rules will kick in by the planned schedule of July 2021, but warned that “any potential delay caused by political disagreement, shall not affect the rights of operators to offer their services in Germany under EU law.

And reiterating the importance of having sports betting in a regulated online market, Andric concludes by saying: “The German sports betting market has seen double-digit growth over the past decade. Sports betting has become more and more visible in the media and in advertising. Regardless of the drop related to COVID-19 over the past year, we expect this trend to continue once normal sports tournaments fully resume. “

From an operator’s perspective, Interwetten’s Chairman of the Board of Directors (CEO) Dominik Beier does not have as much hope that the regulated German market will encourage pipeline, not at least in its proposed form. . Keep in mind that this is coming from the CEO of a German speaking and focused operator who at first glance would gain enormously from operating in a regulated space.

Beier is not convinced however, saying Initiated to the game: “Let’s say that in theory we all definitely want a regulated market. We all want the safety and sustainability of planning to materialize. But regulation as it stands in Germany, and as they expect it to be, is regulation that only speeds up the black market game because so much is not included in the regulation. We are talking about very strict limits which I think do not exist anywhere else in Europe. In theory, regulation is something everyone in Germany has wanted for a long time. But the way it’s set up now is probably a lot worse than what we have now. What I see is that the main focus is pipeline, but they’re absolutely going to do the opposite with regulation and certainly not pipeline to the legal market. This is what I fear most. “

The need to regulate the online market is important. As it is, from July 2021 many online verticals will become legal in Germany. That’s not to say the uncertainty doesn’t persist, with the airing of pending sports betting licenses and the long debate raging on whether the proposed regulations will only encourage illegal gambling. Hoping for a more certain future in July 2021.

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