German Online Gaming
After years of banning online gaming, Germany is poised to regulate sports betting and lotteries only. Over the past few years, its states have passed legislation authorizing the regulation of limited online gaming. But its regulatory scheme is tied up in litigation and is awaiting a resolution from the European Court of Justice.
Historically, regulation of gambling was locally controlled by each German Member State autonomously; however, that has changed in recent years.
In 2006, the 16 prime ministers of the German Member States passed a draft of a new Interstate Treaty on Gambling calling for a complete ban of online gaming. With this treaty, German officials attempted to ban Internet gambling activity by blocking access to foreign online gambling websites via ISPs and by prohibiting the processing of online gambling-related payments by German banks. The European Commission (EC) responded to the French government declaring the ban to be inconsistent with EC community law.
In January 2008, the Interstate Treaty went into effect. This treaty ultimately addressed gambling addiction; imposed limits on marketing efforts, especially to those under 18 years of age; addressed illegal gambling; and most importantly, banned online gaming except for betting on horse races.
In 2009, Internet gaming operators Happybet, Sportwetten, Digibet and Gibraltar-based Carmen Media sued for the right to offer bets over the Internet to German residents. In August 2010, the European Court of Justice (ECJ) ruled that the regulations used to maintain German gambling monopolies were in violation of European law.
As in previous rulings, the ECJ acknowledged that member states are likely to overcome the risks associated with online gaming more effectively than private operators, but the German rules were applied inconsistently and did not limit games of chance in a consistent and systematic manner.
Germany announced in April 2011 that it was going to award seven nationwide concessions for sports betting companies, beginning in 2012. Casino-style gambling would still be restricted, however. While this move would open the market to competition, it would come with a high tax rate of 16.67% on betting turnover. The proposal would also ban in-game wagers and only allow casino games to be offered by operators that already have a land-based license. The proposal never came to fruition.
There was a hope that when Germany's state treaty on gambling expired on 1 January 2012, its online gambling market would be liberalized, at least in some sectors, to bring it more in line with other EU countries that have embraced legalized, regulated online gambling. And that happened – to a degree.
By late 2011, the German Länder announced it had developed a workable gaming law. The proposal included a limit of 20 licenses, a 5% tax on every wager, severe limits on betting amounts rumored to be approximately EUR 1,000 per month, and a prohibition on casino games, poker and live betting. The proposal met with heavy criticism.
The European Gaming and Betting Association believed the State Treaty was illegal under EU law and submitted a formal complaint to the European Commission. The German Monopolies Commission was also critical of the State Treaty, saying it breached EU law, failed to deter unlawful gambling, and failed to comply with German Constitutional Law, and that the decision to tax wagers rather than profits was impractical.
Despite the legal concerns, 15 of the 16 German federal states liberalized online gaming to some extent in July 2012. Private companies could now obtain licenses to offer and broker online sports betting and lotteries in all 15 states that ratified the Interstate Treaty. Private companies may also apply for a license to advertise their online services.
On 24 January 2013, Schleswig-Holstein (SH) voted in parliament in favor of joining the State Treaty, thus repealing the existing SH online gambling law. SH's vote meant all 16 states had now joined the State Treaty of Gaming.
While SH licenses are no longer issued, the previously approved licenses will remain in force and valid for their six-year duration, amounting to 23 sports betting licenses and 13 online poker licenses. As before, the operators can only offer online gaming to the SH market.
The German Federal Court decided to suspend its decision on the legality of the State Treaty of Gaming and deferred its decision to the Court of Justice for the European Union. The key issue was whether the issuing of 20 licenses for sports betting and not permitting online casino and poker games is inconsistent with free trade laws in the EU.
In June 2014, the European Court of Justice ruled that the SH licenses were inconsistent with EU laws and would not extend to the rest of Germany.
In September 2015, RaceBets.com became the first operator to gain a horse betting license in Germany.
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