German state issues first federal payment blocking order

17 June 2019

The German state of Lower Saxony (Niedersachsen) has issued an international payment service provider with a blocking order as part of its efforts to drive illegal igaming businesses from the country’s market.

The company has been banned from doing business with operators offering online casino, poker and lottery betting in Germany, with all these products banned under the State Treaty on Gambling.

The supplier, which has not been named, may face further sanctions from the Niedersachsen Ministry of the Interior for failing to comply with the prohibition on working with unlicensed gaming businesses set out in the State Treaty.

The state’s Minister for Home Affairs and Sports Boris Pistorius said he aimed to “send a message” with the ruling.

“[The] pressure is now on other payment providers to reorganise their businesses processes related to illegal gambling, if they have not already done so,” he said.

“Online casino is no trivial matter. [It is] banned by the State Treaty on Gambling and [offering such products is] a criminal offence,” he continued. “In the meantime, however, it remains a billion-Euro market."

While the State Treaty of Gambling prohibits all service providers from working with offshore igaming operators, it was originally left to these companies to comply.

Efforts to ensure compliance have been stepped up, however, with the Niedersachsen Ministry of the Interior handed responsibility for implementing payment blocking controls. Its blocking orders are effective across all German states.

The Ministry noted that aside from issuing the blocking order, it has sent warnings to number of other payment service providers over links to illegal gambling. Some of these companies have already responded by ceasing to power transactions for offshore sites.

“The successful interactions with some payment service providers shows that our approach is quite effective,” Pistorius said.

Further prohibition orders are expected to be issued, as the Ministry looks to stamp out illegal activity, which in 2017 - the most recent figures available - accounted for around 22% of the country’s €14.2bn gambling market.

However, efforts to develop a liberalised regulatory framework for Germany’s igaming market appear to be gaining momentum. While the restrictive State Treaty has been renewed, it will only be in force until June 30, 2021.

This will effectively act as a deadline for a new, overhauled framework, with an increasing number of states increasingly in favour of opening up the market to all product verticals.