Dr. Joerg Hofmann and Matthias Spitz of Melchers law firm talk to iNTERGAMINGi about the latest legislative changes to take place in the German online gaming market
A conference on April 6 saw 15 of the 16 federal states of Germany (the Länder) agree on the essentials of a future state treaty regarding gambling in Germany, including the regulation of online gambling.
Following this conference, a corresponding draft treaty was submitted on April 15 to the EU Commission for notification. Notification to the EU Commission activates a three-monthly standstill period for national legislation, wherein the Commission or member states may object to the submitted legislation. The prime ministers have already announced that they intend to sign the treaty on their forthcoming conference, which might be re-scheduled from the original date of June 9 to a date after expiry of the standstill period. The Technical Regulations Information System of the EU Commission specifies June 18 as the end of the standstill period. Core stipulations of the draft treaty, which have been made public on the website of the State Chancellery of Saxony-Anhalt, might keep the gambling industry struggling.
Regulation of online gambling agreed upon by the majority of the Länder
At an early stage of the interstate negotiations, the 15 Länder decided to continue the state monopoly in lotteries, but to allow online distribution of lottery products through a centralised hub. While this decision was expected, the announced regulation of sports betting challenged harsh criticism from the industry: Although the draft treaty provides an opening of the sports betting market to private operators, including brokering and operation of online betting, the prescribed limitation to a total of seven federal licenses for the German betting market is seen as a farce. Furthermore, licensees will have to pay a concession levy of 16.66 per cent of the stakes in a game, in addition to an administrative charge of €250,000 for the first concessionary year and €175,000 for each additional year. The concession levy essentially is turnover-based and equals the tax rate for betting the state operator of sports betting Oddset is subject to. Representatives of major operators of sports betting, such as bwin.party, have already criticised the tax rate as uncompetitive on a joint press conference of April 13 near Kiel, Germany.
Operating casino games online is only allowed to license holders of land-based casinos by the draft treaty. The relevant stipulations further restrict the permissible types of online casino games to live games in the gambling hall of a casino, which are transmitted to the player via the internet. Filming a roulette wheel is an example. It appears as if the prime ministers of 15 Länder made a decision against online poker as offered by international online poker rooms – certainly a significant mistake, considering the fact that Germany already is the second largest market for online poker worldwide and could possibly move up to become the largest market for online poker after the US Department of Justice crippled US operations of leading companies in online poker on Black Friday.
In essence, the prime ministers of 15 Länder agreed upon a new regulation for online gambling, which appears unsuitable to attract leading companies to these Länder, but preserves the status quo for existing state monopolies.
Resistance in Schleswig-Holstein
The government of the Land of Schleswig-Holstein in northern Germany has objected to the draft treaty as of yet. In February, Schleswig-Holstein already submitted its own gambling bill to the EU Commission for notification. In contrast to the regulation of the 15 Länder, the gambling bill of Schleswig-Holstein prescribes no limitation to the number of licenses for private operators of sports betting and online casino games. Also, the gambling bill stipulates a gambling levy of 20 per cent on gross gambling revenue. Online casino games in terms of the gambling bill specifically include poker games offered on the internet. For this reason, a Schleswig-Holstein license will be of particular interest for companies offering online poker, should Schleswig-Holstein adhere to its opinion.
The problem remains that the rest of the Länder is not legally obliged to recognise a Schleswig-Holstein license for their territories and most likely will not do so. However, the existence of two different gambling legislations within Germany might be a striking legal argument that the regulation of online gambling in Germany is not consistent in its entirety and thus violates the freedom of establishment and of services. In this regard, the European Court of Justice held in Carmen Media (judgment of September 8, 2010, case C-46/08) that a member state may not rely on provisions, practices or situations of its internal legal order in order to justify non-compliance with its obligations under EU law. Although not recognised by the rest of the Länder, a Schleswig-Holstein license will probably be the legal gateway in the struggle for the German online market. Hence, a small step for a sports betting operator into Schleswig-Holstein might turn out to be a giant leap for the gambling industry in Germany.
