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Rien ne va plus? German Gambling Law at a Crossroads

December 04, 2017

By Dr. Bernd Meyer-Witting & Florian Lechner

I. Introduction

The future of gambling regulation in Germany remains deeply uncertain, with little prospect of the situation being resolved in the short term. Thus, the latest indications are that, rather than galvanizing around a new nationwide regime, a number of federal states may embark on a separate route, introducing their own inner-state legislative framework. All of this is taking place against the backdrop of a European Commission that is not amused at the way gambling regulation in Germany seems to defy all calls for liberalization and which might yet commence formal infringement proceedings against the country.

II. Current Gambling Regulation in Germany

1. Current Interstate Treaty on Gambling

The background to the tussle between the various federal states is that gambling law in Germany is a matter for which the individual states (and not the federal government) are competent, giving rise to interstate jealousies and the need to find a common denominator which all 16 federal states are prepared to accept if gambling is to be regulated uniformly throughout Germany. In the past, the federal states have managed to come to an agreement in the form of an interstate treaty on gambling, the most recent of which was entered into in 2012 (the “Interstate Treaty 2012”)—but only after the federal state of Schleswig-Holstein had initially gone down its own path passing legislation which provided for a far greater liberalization of the market than the other federal states were prepared to accept.

Essentially, the Interstate Treaty 2012 provides for a state monopoly on the (i) organization of lotteries as well as (ii) licensing of (fantasy) sports betting and generally prohibits the operation of any private online casinos. Private online sports betting is only allowed if a gaming operator has been granted a sports betting license, with the number of such licenses, however, being limited to a total of 20 for the entire country. The licensing process initiated after the Interstate Treaty 2012 came into force was subject to intense legal scrutiny and litigation, as the number of applicants far exceeded the total of 20 licenses provided for by the Interstate Treaty 2012, and the criteria for selecting the successful 20 were extremely vague.

Ultimately, the licensing process crumbled under the massive litigation and those licenses that were issued did not grant a valid right to offer any online betting services.

As indicated above, the Schleswig-Holstein Gambling Act was far more liberal than the Interstate Treaty 2012 and in the period before it was repealed (February 2013), a total of 48 sports betting and online casino licenses were issued. These licenses are, however, all due to expire by no later than 2019 and are only valid in the territory of the (very small) state of Schleswig-Holstein.

2. “Ince” Decision of the European Court of Justice

In its ground-breaking “Ince” decision (C-336/14), the European Court of Justice ruled in February 2016 that Germany runs an unlawful de facto state monopoly on sports betting due to the non-transparent, discriminatory licensing procedure under which private licenses could not be granted in practice—while the state-owned gaming operators are allowed to continue their business.

III. Outlook on Gambling Regulation in Germany for 2018

1. Proposed Interstate Treaty on Gambling

The Ince decision was followed by a wave of national court decisions confirming the licensing process’ incompatibility with European law. German authorities experienced difficulties in issuing injunctions against private gaming operators which do not possess a German license, but do have one from another EU Member State. It became unavoidable for the federal states to consider reforming the regulatory framework for gambling in Germany. In March 2017 the prime ministers of the federal states agreed on a proposal for a new interstate treaty on gambling that—once approved by all 16 state parliaments—was meant to enter into force on 1 January 2018 (“Draft Interstate Treaty 2018”). Furthermore, preliminary gambling licenses have been granted to the 20 previous licensees as well as to additional 15 applicants for online sports betting. These preliminary gambling licenses are valid until 1 January 2019.

Disappointingly, the Draft Interstate Treaty 2018 will not result in the "big bang" that many in the industry had hoped for. Instead, its direction is clear: to limit liberalization as far as possible. In this spirit, even its policy makers described it as a “minimalist reform” that is intended to uphold most of the restrictive legal requirements of the Interstate Treaty 2012. Thus, for example, although the Draft Interstate Treaty 2018 introduces a new licensing procedure for sports betting operators, with no restriction on the number of licenses that can be granted, the total ban on private online casinos will remain.

2. Prevailing Disagreement Amongst the Federal States

The debate revolving around the German gambling regulation is not likely to stop in 2018.

While until the end of October 2017 the approval of the Draft Interstate Treaty 2018 appeared to be more of a formality, the federal state of Schleswig-Holstein (after the recent election of a more liberal state government) announced that it will not pass the new law, but re-implement its own Gambling Act, which allows private online casinos, including the offering of poker games.

Other federal states such as Rhineland-Palatinate, Hesse, and the most populous North Rhine Westphalia—all of which strongly advocated a comprehensive reform of the Interstate Treaty 2012—are now also considering pursuing their own inner-state gambling regulation. Whether the Draft Interstate Treaty 2018 will enter into force in 2018 is therefore more than questionable.

According to an official press release dated 27 October 2017, the German Federal Administrative Court in Leipzig reiterated that it deems the general ban of online gambling to be in line with German constitutional and European law (also against the background of a liberalization of online sports betting envisaged in the Draft Interstate Treaty 2018). The European Commission, on the other hand, has criticized the Draft Interstate Treaty 2018, taking issue in particular with the fact that the ever-growing online casino market (including the very significant poker game segment) is still ignored in the proposal.

IV. Conclusion

Once more, Germany’s gambling regulation is at a crossroads and it remains to be seen whether formal infringement proceedings against Germany will be initiated. For now, the rumors coming out of Brussels in this regard show no signs of abating.

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