German betting licensees ordered to cut online casino ties

30 July 2019

Operators looking to secure a sports betting licence for the federal German market must commit to cease offering all illegal forms of gambling, such as online casino, according to a new directive from the body responsible for processing applications.

The Regional Council of Darmstadt, representing the state of Hesse, has ordered all licensees to agree that not to offer unregulated forms of gambling, either directly or through an affiliated business, upon receipt of a sports betting licence.

This commitment is one of a range of pieces of information applicants will be required to provide as part of their submission, alongside financial information and evidence of licences in other jurisdictions.

With only sports betting currently permitted in the market, this would mean any operator active in other verticals would have to withdraw these services before they could begin operating in Germany’s regulated market.

The Council also confirmed that the licensing process will start from 2020, with any applications filed before this date treated as having been submitted on 2 January, 2020, the first working day of the year.

Ahead of the process launching, an informational event will be held for prospective licensees, allowing them to ask questions of the authority regarding minimum requirements for securing a licence. Registration for the event will close on 2 August.

This progress comes despite the European Commission’s standstill period, in which European Union member states can review the legislation, being extended to 27 August, after Malta issued a detailed opinion on the proposed regulations. The content of Malta’s submission has not yet been released, though automatically triggers a one-month extension to the standstill, with Germany now required to address any concerns raised.

In a submission to the EC, the German Online Casino Association (DOCV) criticised the legislation for offering no improvement in consumer protection, legal certainty and state control as a result of the continued prohibition on online casino games. It would lobby for a more liberal regulatory model to be introduced when the State Treaty expired on 30 June, 2021, the association said.

“Channeling the existing demand for online gambling offerings by creating a modern legal system  would on one hand create legal certainty, improve the range of products on offer, remove barriers to market entry and bring black market operators into the regulated sector,” DOCV president Dr Dirk Querman said.

“On the other, it would allow for efficient regulatory action against non-compliant and unlawful operators.”

While state Minister-Presidents have signed the Treaty, it must still be ratified by Germany’s 16 member states before it can come into law, which must happen by 31 December, 2019.

The legislation limits the market in 15 states to sports betting, with a €1,000 monthly spending limit in place for all customers and licensees subject to a 5% turnover tax. However Schleswig-Holstein will be permitted to maintain its liberalised regulatory model, with no restrictions on product and a 20% gross revenue tax.

Both regulations expire from 30 June, 2021, by which time lawmakers across Germany aim to reach a consensus on new federal regulations.

While this seems increasingly likely to result in online casino and poker being legalised, efforts to enforce the current prohibition have recently been stepped up. The state of Niedersachsen, which is responsible for enforcement, has begun issuing blocking orders to payment processors found to be powering transactions to online casino sites.