If the five-year process for the regulation of Germany’s online gambling market could be likened to anything in the world, that would be a large field planted with powerful explosive mines. Over the course of the past five years, such mines have detonated at times when it seemed that the country may finally be ready to adopt a gambling regulatory framework.
Germany put the beginning of its regulation effort back in 2012 with the introduction of the Interstate Treaty on Gambling. It took around a year for the country’s 16 states to compel compliance with the new gambling law.
Generally speaking, the 2012 Treaty allowed for the provision of licensed online sports betting services to local bettors. However, the new law had a cap on the number of international operators allowed to enter the market. Under the newly introduced regulatory framework, there were only 20 betting licenses available.
The cap on the number of licensees as well as other provisions in the Treaty were highly criticized by local courts. The country’s new regime was also ruled against by the Court of Justice of the European Union. In February 2016, the CJEU declared the Treaty one that violated EU laws and principles for the free movement of services within the union.
Under CJEU’s ruling, local authorities could not legally prosecute online sports betting operators targeting German bettors with licenses from another EU jurisdiction. The cap on the number of licensed operators allowed to operate in Germany was pointed to as one of the biggest issues of the newly introduced regulatory regime.
A new Treaty was approved by the 16 states in March 2017. However, it too did not win the EU’s favor. Instead of completely removing the license cap, the newly proposed law increased the number of licenses to 40. Here it is important to note that as many as 35 international operators had previously applied to operate in Germany. The new cap would secure them all with a license. On the other hand, the law was once again criticized as one that put too big limitations to be welcomed by EU authorities.
The new Treaty is expected to take effect from January 1, 2018. However, although states have previously approved its language, it seems that some of them may be considering a change of mind.
Earlier this month, the state of Schleswig-Holstein’s newly elected government announced that it would not implement the Interstate Treaty, but would rather adopt the previously introduced Schleswig-Holstein Gambling Act. Apart from sports betting, the aforementioned act also legalizes the provision of online casino and poker offering to local players. According to media reports, other states are also considering to adopt a different regulatory regime over the one stipulated by the Interstate Treaty.
Evaluation of the Interstate Gambling Treaty
The Düsseldorf Institute for Competition Economics (DICE) has recently published a 300-page review of the new gambling law. The Fact-Based Evaluation of the Interstate Treaty on Gambling assessed the impact the Treaty’s provisions would have on tax revenue, protection of bettors, and sports integrity.
Generally speaking, the report deemed the newly proposed gambling framework too restrictive to provide for the creation of an online sports betting market that matches contemporary demand.
The DICE review introduced the so-called Channeling Index, which measured the capability of one government or another to successfully convince gambling customers into opting for regulated options over unregulated ones.
Scholars compared Germany’s approach to gambling regulations to those of the UK, Denmark, France, Poland, and Spain. It was found out that the country did not rank very well on the index or, in other words, this shows it is likely to experience great difficulties in making its regulated market attractive enough. The fact that under the Interstate Treaty on Gambling, sports betting would be the only regulated online gambling options in the country is believed to be one of the main reasons for this.
According to the DICE report’s authors, EU authorities, and other involved parties, German officials should consider the opportunity to regulate the provision of online casino services so as for the local market to be able to capitalize on the rapidly growing sector and to attract investment and players.
