Industry reaction: How did German states reach an agreement and what do operators make of the proposals?

Online casino and sports betting operators received a shot in the arm on Wednesday when it was announced that all 16 German states had agreed in principle to a new Interstate Treaty on gambling (IST).

This new treaty is scheduled to replace the current amended treaty in July 2021.

Grabbing the headlines was the authority’s decision to legalise online casino and poker for the first time, ending a ban on the verticals.

Below, Dr. Markus Koerner, partner at international law firm Bird & Bird, and Rainer Lauffs, COO of Veltyco Group Plc, share their thoughts alongside German sports betting operator Tipico.

EGR Intel: German legislators have described this as a “really good result” but does the draft law go far enough?

Markus Koerner (MK): One needs to look at where German legislation is coming from in that regard. We haven‘t had a reliable regulatory system for many years. For the consumer, this has been very negative, which is why the new draft would be a significant improvement. You can always request the draft law to go one step further, but some of the restrictions seem not unreasonable. I think it is an important first step and there might be further developments in the future, depending on our experience with the new model.

Tipico: The upcoming implementation of the draft and the design of the details will decide on the success. Therefore, the regulatory authorities and the operators will have to cooperate closely.

EGR Intel: Do you think operators will welcome the news?

Rainer Lauffs (RL): Yes and no. It is a compromise among states, which have been fighting to keep a gaming monopoly and especially wanted to do anything to prevent online casino from getting regulated, and states like Schleswig-Holstein and Hesse, which pushed for casino and poker games to also be regulated. It is a large step in the right direction but it still contains many pain points for operators.

MK: I think most operators will welcome the general liberalisation. Of course, they will not like some restrictions like the deposit threshold of a maximum €1,000 per month, reporting obligations and advertising restrictions, however, there is more reliability and clarity than there was before.

EGR Intel: A tax rate of 30% has been mooted by some analysts, do you think this is realistic?

RL: It always depends on the basis and what is being taxed on. For me, 30% appears awfully high and you see what is happening in other regulated markets where the tax rate has been set too high. Lots of operators withdraw from the market, which narrows the offer for customers and leads to customers turning to black market offers.

EGR Intel: Germany will now legalise online casino and poker, having previously said it would maintain the ban. What has changed?

RL: I suppose it has been a mixture of two main developments – pressure by several states, which clearly stated they would license online casino and poker games either way, if necessary without the other states, and that has had some effect. Plus, I assume that the so far stricter states have understood that this behaviour would simply push customers into black market offers, which would not help anybody.

EGR Intel: Who do you think should regulate the new market?

Tipico: The states’ intention to set up a central authority is a good way to ensure the implementation of a sustainable and consistent regulatory framework.

RL: My understanding is that there will be a new public institution created, which will represent all 16 states. Two or three states are currently campaigning to host this new institution, which is said to have the power to also make changes in the requirements and details of the new gaming law, without having to get approval by all 16 states. I would expect this to be only relating to minor aspects though.

MK: I think a neutral body as considered by the Federal States would be a good choice.

EGR Intel: Has the inclusion of online casino and poker legalisation within the new IST effectively derailed the current sports betting licensing process?

MK: It’s difficult to say from the outside. From my perspective, the inclusion of online casino and poker legislation has not necessarily had an impact on the sports betting side. It could be expected that online casino would be included in the new IST. The sport betting licensing process began much earlier and the court proceedings were ongoing for a long time.

EGR Intel: Does this effectively invalidate Hesse’s licensing requirement that operators not operate online casino to qualify for a sports betting licence?

MK: If this IST were to become valid from 1 July 2021, I would indeed see a certain contradiction. The new draft would technically not make the requirement in Hesse invalid. The representatives from Hesse were part of the negotiations. Thus, one might expect that Hesse, after a new IST, would adapt their current policy in order to avoid contradictions.

EGR Intel: Does Tipico plan to launch online casino and poker offerings when the market does open up in 2021?

Tipico: We welcome the political decision to regulate the market for online gaming in Germany. We are currently assessing the conditions based on the draft state treaty, as shared by the states in preparation for the public hearing.

EGR Intel: Will Tipico continue with its current sports betting licence application?

Tipico: Yes.

EGR Intel: Any final thoughts on the new Interstate Treaty?

RL: It is a step in the right direction, but there are still various parts unclear, especially the taxation part, which is obviously crucial for evaluation. I understand it is very difficult to find a working compromise if you have to combine attitudes from keeping the monopoly at any cost to regulate all verticals. However, there are still too many points included, which would make the offers for the regular customer very inconvenient and unattractive. Several of the included requirements and limitations also appear to be legally challengeable.  

Picture Credit istock/franckreporter