The German State Treaty: what’s missing from the current draft?

Online gambling, especially sports betting, is big in Germany. And there’s still plenty of room for growth. According to the German Ministry of Finance, sports fans wagered €9.3bn last year, which was 21% higher than they had done in 2018.

Last week, the leaders of Germany’s 16 Federal States (Länder) approved a unified framework for gambling regulation in Berlin. A new regulatory body, the ‘Glücksspielneuregulierungstaatsvertrag (GlüNeuRStv)’, will also be formed.

The laws must now be ratified by each state parliament, as well as the European Commission.

In terms of rules, the ‘Fourth Interstate Treaty’ hasn’t been amended that much. Many stakeholders argued that those proposals were too restrictive and could empower unregulated operators. Because little has changed, those concerns still exist.

So, what are the critics’ thoughts on things? And how can the legislation be changed so that it’s fit for a modern online gambling market? Let’s take a look.

What’s included in Germany’s new gambling regulations?

Players will be subjected to a cross-vertical deposit limit of €1,000 each month.

Sports betting will remain legal, but there have been changes to existing laws. Most importantly, in-play betting is set to be restricted to just two markets – next goalscorer and final result. Sports betting advertising during events, as well as just before, are also to be banned.

The Fourth Interstate Treaty’s proposed broadcast ad blackout will also be enforced, with operators being forbidden from promoting their offerings between 6am and 9pm each day.

A €1 stake limit will be imposed for online slots, with neither autoplay functions nor jackpots allowed. Each state can choose whether or not they wish to permit table games.

Each state also has the power to give their lottery a monopoly in this vertical.

Who has criticised the Treaty and what have they said?

Dominik Beier, speaker of the board of Interwetten, said that regulating the German market is “of course very welcome”. However, he pointed to multiple flaws in the legislation.

In particular, Beier believes that “some of the restrictions under consideration will be too strict and thus strengthen the black market instead of fighting it”. He also feels that they will “make player protection more difficult and place a heavy burden on the sports and media landscape”.

Maarten Haaijer, secretary general for the European Betting & Gaming Association (EBGA), has also been critical. Prior to regulation being approved within Germany, he said the Fourth Interstate Treaty offered “no change in approach”.

When it comes to the restrictions which haven’t been addressed, comments: “A monopolisation or a strictly limited licensing of online casino games, as proposed in the draft law, raises concerns about the new law’s compliance with EU law, particularly with regard to the consistency of the legal framework.”

Haaijer also referred to how the European Commission has “already criticised Germany’s restrictive and inconsistent approach to gambling regulation”.

What potential problems could the Treaty’s current proposals cause?

As a Tipico spokesman said, a successful Treaty would mean that “there is only a small, manageable black market left”. This should be the Federal States’ main objective, since – according to the Düsseldorf Institute for Competition Economics (DICE) – 98% of online players in Germany wager with unregulated operators.

Does the legislation’s current form encourage the channelisation of players to regulated sources? Well, no. Not really. Germany’s disjointed gambling laws led to the current situation in the first place. If anything, these legislations will continue to empower unregulated operators.

One area we can see this in particular is in-play betting. When speaking about the German market, Haaijer himself mentioned that “63% of the sports bets of our member companies’ customers are in-play”. And, as Beier said, channelling players to regulated betting options is only possible “in a market where the customers are offered the services which they are demanding and used to”.

Stopping regulated brands from offering popular markets won’t make the demand magically disappear. Players in Germany already know that they can get away with wagering on unregulated sites (as long as they’re EU-based). Therefore, they’ll just keep doing so if they can’t get what they want from licensed operators.

More fuel is added to the fire when we look at advertising restrictions. The blackouts stop licensed operators from increasing their visibility at peak times, especially when it comes to sporting events. This makes it more difficult to promote their offerings, meaning that their would-be traffic will go to unregulated sites instead.

Deposit limits are also counterproductive. If players want to bet above the maximum monthly amount, then they’ll just go to unregulated sites and do so on there. If anything, this is more dangerous. Such operators are unlikely to have safety measures in place, meaning that problem gamblers may be unable to seek help when needed.

The combination of restrictions on both operators and players could also lead to competition being stifled. Operators have little incentive to grow, meaning that progress is discouraged. Meanwhile, players don’t have much of a reason to pick them over unregulated sites. And the state misses out on tax revenue, so everybody loses.

What must Germany’s Federal States consider before 2021?

Firstly, to understand the market’s current landscape. According to statistics revealed by the German Center for Addiction (DHS) in 2018, 0.56% of individuals in the country (around 326,000 people) were considered to be problem gamblers. Meanwhile, 0.31% were deemed ‘pathological gamblers’. Having more games to choose from isn’t necessarily the cause of addiction, whereas a lack of awareness for responsible practices can contribute to this.

We should also talk about how, in the words of Haaijer, “many of the proposed restrictions go against the realities of the betting market and shop-around nature of betting odds comparisons”. Online punters want the best odds and offers and, in this sense, Germany is no different. Even by restricting ads and putting a delay on switching in between sites, the accessible nature of almost everything on the internet means that players will always find a way to get what they want.

Secondly, think more carefully about how players can be channelled to regulated sites. Players in Germany have shown that they’ll gamble regardless, so the Treaty’s aim should be to channel traffic to legal websites. Restricting the freedoms of both they and the country’s operators doesn’t do much to encourage that. Rather than excessively controlling what players and operators can do, more viable solutions exist.

Prior to the Länder leaders meeting in the capital, Haaijer said that the EBGA encourages German decision-makers to “reconsider the general restrictions on deposits”, as well as the “numerous product restrictions”. Neither of those have happened.

If regulated operators can provide the offerings that players want, turning to unregulated sites will become less appealing. And for unlicensed brands, obtaining a permit will grow in its appeal.

Strict regulations risk alienating players and operators, which is exactly what this legislation does. Germany’s Länder need to have a serious think about the type of gambling landscape they wish to create. The main reason for unified legislation should be to ensure a fully regulated environment, which is safe for players and attractive to operators. But limiting the freedoms of both operators and players will only ‘achieve’ the opposite.