Germany’s Not-So-New Gambling Treaty Could Delay Market Regulation

The German online gambling market has the potential of turning into a highly lucrative one, if regulated properly. However, the country has been in a legislative limbo in regard to its iGaming and betting regulations for almost five years and following the latest regulatory developments, this state of oblivion and uncertainty is likely to continue for some more time.

It was late last week when the heads of Germany’s 16 states approved a new Interstate Treaty on Gambling, one that was introduced as a refined version of a 2012 gambling law. Each individual state will now have to pass the legislative piece in order for it to come into effect on January 1, 2018.

Although German lawmakers have clearly worked on amending the Treaty, the amendments introduced were not very welcomed by the European Commission, the EU regulatory body that, among many other things, monitors the process of gambling market regulation in member states.

How the New Treaty Differs from the Previous One

Generally speaking, both Treaties allow for the provision of online sports betting services across the German states. The original Treaty was approved in 2012 and was gradually adopted by all 16 states over the course of the next year or so. The regulation of the German market attracted the attention of 35 gambling operators, including some of the industry’s big names, but under the country’s newly adopted law, there were only 20 licenses up for grabs.

That approach was heavily criticized by both interested operators and by European regulatory bodies. It even came to a point when the Court of Justice for the EU ruled the law illegal, one violating Europe’s standards for free trade and provision of services among member states.

Although the new Treaty was supposed to be more flexible and more in line with contemporary demand, it was actually not that much different from its predecessor. Instead of lifting the license cap, as recommended by European authorities, the law raised the number of licenses to 40, thus making it possible for all 35 operators, which had previously applied, to enter the local market.

However, the new gambling regulations still limited the provision of sports betting services to just several operators and prevent other interested parties from the EU to offer their products to German gambling customers. This second Treaty will likely still be seen as violation of Article 56 of the Treaty on the Functioning of the European Union that provides for the “freedom to provide services” within the EU borders.

The European Commission is yet to announce a ruling on the amended German gambling law. However, it has recently informed German authorities that the legislative piece still did not provide solutions to the issues EU lawmakers had with its predecessor. This is why it would not be a surprise if German officials are urged to devise another, better functioning legislative framework.

What Is the Best Approach to Drafting EU-Friendly Gambling Regulations?

Germany’s Interstate Treaty on Gambling only contains provisions for the regulation of the country’s online sports betting market. If the law is adopted, this would mean that online casino and poker operations will be left in a gray zone. The problem with gray markets is that they lack the regulation and security regulated markets provide.

If German lawmakers opt for creating a regulated environment that includes casino and poker along with sports betting, this may appease EU lawmakers and win the country the much-needed nod. And the removal of the license cap – the bone of contention over these past years – will also be a decision favored by the European Commission.

Germany’s sports betting market raked in €4.86 billion in wagers in 2015, according to data by research firm Gold Media. Wagers taken by commercial operators, both online and land-based totaled €4.6 billion during the year in review, while state-owned operators took just €0.2 billion. The figures reported not only point to the local market’s big potential but also to the urgent need of regulation that would create a safe, well-regulated, and well-functioning industry.

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