Germany: Still waiting for the “Big Bang”

Four years ago, I compared the situation in Germany with Waiting for Godot, the absurdist play by Samuel Beckett. Nothing substantial has changed since then. The sports betting licensing process, which began 2012, is still a never-ending saga, and one can now imagine Vladimir and Estragon discussing how perfect the situation might be if betting licences had finally arrived (or at least interim permits, as proposed in the Second Amendment to the Interstate Treaty, which never became effective).

Twelve years ago, the German Federal Constitutional Court held the state monopoly with regard to sports betting as incoherent with constitutional law. In 2010, the CJEU followed that up with decisions on several referral cases from Germany (Markus Stoss et al.). The CJEU held the sports betting monopoly to be inconsistent with EU law. In 2012, Germany finally decided to abandon its strict state monopoly system with regard to sports betting. The German states (Länder) amended the Interstate Treaty with an experimentation clause in section 10a and started a licensing procedure to grant up to 20 licences. None of these licenses will be granted in the foreseeable future, as the procedure has been stopped by several court decisions.

Status quo

However, most operators, already active in the German market, do not seem to be so unhappy with the grey legal situation.  Even most of the applicants in the current licensing process, which would have been granted a license, are reluctant to obey the strict terms and conditions of this (still virtual) license. Over the last few years, almost no prohibition orders have been served on operators and betting shops. As long as the operators are paying VAT for casino games and betting tax for their sports betting offers, everything seems to be just fine at the moment.

On the other hand, the state operators also want the current status quo to remain, as long as the income from lotteries is not touched. They gave up on the sports betting market a few years ago, with market share currently below 5%.

The recent decision of the Federal Administrative Court against a subsidiary of 888 Holding Ltd has not brought any further clarity. 888 announced it had filed a constitutional complaint against this decision. In the decision, the court did not scrutinise the licensing procedure, arguing that the plaintiff did not apply for a license (although the procedure was held to be against EU law; the court obviously disregarded the Ince decision of the CJEU). The Federal Administrative Court also was reluctant to support its line of arguments with traceable facts. Under EU law, the burden of proof is on the member state. The state has to prove that the infringement of the freedom to provide services (here the internet ban) is indeed adequate and that there are no less restrictive means. Contrary to the assumption of the court, player protection can more easily be satisfied online.

State monopoly

Another court, which reviewed the facts presented by the plaintiff clearly did not agree that the gambling regulations in German law were coherent and consistent. Just recently, a German court has judged the lottery monopoly claimed by the German states to be unlawful. The Administrative Court of Munich, in a judgment reached by our law firm, concludes that the German lottery monopoly in its current form violates both the freedom to provide services guaranteed under EU law (Art. 56 et seq TFEU), as well as the constitutionally guaranteed freedom of choice. The court argued with the advertising practice of the state gambling operators.  It referred to the improper advertising with specifically advertised high jackpot sums in radio and television spots. In addition, unlawful jackpot advertising can be found in newsletters and in customer magazines of the state gambling operators, on social network sites and in banner advertising on news sites on the internet, as well as on the homepages of state gambling websites.

Mistakes were made

In my view, the German states, and then the federal parliament, are now called upon to finally create a coherent and consistent gambling regulation. We definitely need a quantum leap. It was a gross tactical mistake in 2016 when state Prime Ministers only decided on minimally invasive amendments to the existing regulations of the Interstate Treaty on Gambling in a formulaic compromise. After the 2012 sports betting licensing procedure ended in a dead-end due to several court decisions, the state of Hesse had submitted a draft for the fundamental revision of the gambling system. This could be the starting point for proper regulation. Otherwise, the billions in revenue from games of chance offered by the 16 German states are clearly endangered.

Martin Arendts of ARENDTS ANWÄLTE is one of the leading gaming lawyers in Germany. He is a General Member of the International Masters of Gaming Law and regularly writes for national and international legal publications. Martin Arendts represented Ms. Ince in the referral case before the CJEU (decision of 4 February 2016, C-336/14).