Germany: Revised Gambling Regime From 1 January 2012?

Published 13 July 2011

On 6 April 2011, the heads of the federal states (Ministerpräsidenten der Länder) decided that the existing gambling regime in Germany will be revised to admit certain forms of sports bets offered by private operators, as well as certain internet activities. The existing separation between lotteries and sports bets will, however, be maintained. Only the latter will be subject to a system of seven concessions valid nationwide. The revised law (Erster Glücksspieländerungsstaatsvertrag) is intended to become effective on 1 January 2012.

Background

In Germany, gambling is regulated by the State Treaty on Gambling (Glücksspielstaatsvertrag) and the implementing laws of the 16 federal states (Länder) that all entered into force on 1 January 2008. The current law contains a strict state monopoly, a complete ban on all private operators and on all internet activities. Since it entered into force, the law has been challenged in court and has given rise to an increasing number of – often differing – court decisions and therefore a high level of legal uncertainty. The State Treaty, which is due to expire on 31 December 2011, has been evaluated by the federal states in the past months. After having taken a decision in principle to open up the sports betting market in March, the Conference of the Heads of the Federal States (Ministerpräsidentenkonferenz) decided on 6 April 2011 on cornerstones, with a view to redrafting the existing law. They also decided to admit certain forms of sports bets offered by private operators and certain internet activities but, at the same time, strictly to maintain the aims of combating gambling addiction, channelling the passion for gambling, protecting against manipulation and fraud, and protecting minors.

The revised future regime – admitting certain forms of sports bets and internet activities

Separating lotteries and sports bets

The new law will maintain the separation of lotteries (only provided by state-run companies) and sports bets (that can in the future also be offered by a limited number of private operators).


Commercial provision of games
Providing games commercially, in particular lotteries (gewerbliche Spielevermittlung), will be possible on the internet.

Intellectual property and financial blocking
As under the current regime, state gaming authorities are entitled to prohibit financial authorities and internet service providers from co-operating with providers of unauthorised games of chance.


Sports bets
For a trial period of seven years from the revised regime entering into force, seven nationwide concessions will be available to provide (Vermittlung) and organise (Veranstaltung) sports bets. As the draft law stands at the moment, private operators inside or outside Germany, as well as state-run companies, will have to apply for these concessions. Live bets will only be admitted on end results.

Internet activities
Under the revised regime, participating in and arranging games of chance organised by state operators (such as ‘6 aus 49’, Super 6, Spiel 77 and Glücksspirale) as well as TV lotteries, class lotteries and sports bets can be permitted on the internet. Stakes for games on the internet, however, must be limited to €750 per month for each player. Advertising restrictions Jersey and perimeter advertising will be permitted; advertising for sports bets around sports shows on television is not. Apart from this, advertising lotteries and sports bets on the internet and on TV may be permitted.

Casinos
The revised law expressly maintains the limit on the number of land-based casinos. Internet casino offers are only admitted for real games organised in a licensed land-based casino by a licensed casino holder.

Tax and concession fees
Domestic concession holders for sports bets will pay tax, pursuant to the Law on Horse Race Betting and Lotteries (Rennwett- und Lotteriegesetz), at a rate of 16.66 per cent on the stakes (Spieleinsatz), as well as concession fees. To ensure equal treatment of providers located inside and outside Germany, the concession fee (from which a paid tax is deducted) is also 16.66 per cent of the stakes.


Further procedure

On 15 April 2011, the draft of the revised State Treaty was notified to the European Commission under Directive 98/34/EC, laying down a procedure for providing information on technical standards and regulations. This triggered a standstill period until 18 July 2011. In parallel, the revised State Treaty is discussed further by the federal states. At a meeting on 9 June 2011, the heads of states did not reach an agreement on the draft text. They will now wait for comments that are expected from the European Commission in the notification procedure and want to come to a final decision at their next meeting scheduled for October. The new law will subsequently be ratified by the parliaments of the federal states to enter into force on 1 January 2012.


Outlook

Today, it is still unclear what the legal regime for gambling in Germany will look like in the years to come. While, in general, the decision has been taken to open up the market – at least for the sport bets sector – the current draft (in particular due to its prohibitive tax rate) will actually support a de facto monopoly. It will be up to the heads of the federal states to arrive at a model that is competitive in the EU – this is the only way for any activity to be efficiently channelled into the German regulatory regime. Given the ongoing political discussions – as well as the fact that the state of Schleswig-Holstein is in the process of introducing its own law that will liberalise the market – it seems unlikely that the existing monopoly (or the de facto monopoly that is currently being discussed) can be upheld in the long run.

For further information please contact Dr Juliane Hilf, Dr Barbara Ploeckl LLM, Klaus Umbach Environment, Planning and Regulatory T +4922120507240 F +4922120507391 E This email address is being protected from spambots. You need JavaScript enabled to view it. E This email address is being protected from spambots. You need JavaScript enabled to view it. E This email address is being protected from spambots. You need JavaScript enabled to view it.www.freshfields.com