Legal View: Where next for German regulation?

The conference of the German prime ministers recently agreed on the third amendment of the State Treaty on Gambling (Dritter Glücksspieländerungsstaatsvertrag – 3. GlüÄndStV) in March. This interim amendment is intended to extend the so-called experimental phase that allows private sports betting operators in Germany to compete with the state operator.

Following this, the conference of the German prime ministers has already removed the time limit on the experimental clause with its decision of 18 April 2019. Possible sports betting licences will now not only be valid until 30 June 2019, but until 30 June 2021 – the final day of the State Treaty. In addition, the amendment has been notified to the European Commission under the notification number 2019/187/D and the end of the standstill period is 29 July 2019.

The amendment is supposed to allow issuing new (online and offline) sports betting licences. This includes the possibility to further extend the experimental phase for sports betting up to 30 June 2024. It also includes removing the quota system for sports betting licences to allow issuing more than just 20 licences. Unfortunately, the draft focuses on sports betting only and does not mention online casinos.

Schleswig-Holstein

Schleswig-Holstein is the only German state that has issued online casino licences in the past. The latest licences expired in February 2019. In the negotiations on the third amendment of the State Treaty, Schleswig-Holstein threatened to leave the State Treaty if no agreement on online casinos is found. The prime ministers agreed on a trade-off that allows Schleswig-Holstein to opt for an extension of the online casino licences that have recently expired.

Schleswig-Holstein’s parliament used this opportunity and voted for the revalidation of the online casino licences on 16 May 2019. This allows former Schleswig-Holstein online casino licensees (from entry into force of the law after publication) to continue using their licences until 30 June 2021 for Schleswig-Holstein based customers. It does not allow a new licensing procedure and it also does not allow operating online casino games in other German states.

Michael Stulz-Herrnstadt, DLA Piper

Opening up

The temporary re-regulation is a first step towards creating more legal certainty. However, the amended State Treaty is the lowest common denominator in that it solved the problem of a necessary new regulation only temporarily, placing the emphasis back on the states to negotiate a new treaty by 2021.

The amendment of the State Treaty removes market entry barriers for sports betting operators that want to be licensed in Germany and provides clarity – not only for sports betting operators but also for third parties involved, including payment service providers, the media and sports clubs. It also increases the potential for drawing more operators from the grey market onto the regulated market. But the draft amendments hold on to the restrictions on live betting, the €1,000 monthly limit on stakes per player and the ban on online casino games.

According to current legislator norms, the amendment will enter into force on 1 January 2020. This requires that all participating German states ratify the amendment until 31 December 2019. The gambling authority of Hesse is expected to start the licensing procedure as soon as possible to ensure issuing the licences by January 2020 with further details on the licensing requirements expected to be published this summer.

When issuing new licences, the gambling authorities will be instructed to prohibit unlicensed sports betting and other unlicensed gambling services nationwide. It is relatively certain that Hesse will make the granting of sports-betting licences dependent on no illegal (unlicensed) online casino games being offered at the same time, which will probably also include revoking a licence if the operator does offer these services.

A further amendment of the State Treaty is envisaged for the period after 30 June 2021. This next amendment is intended to set up a new regulatory framework which, according to the wishes of Schleswig-Holstein as well as gambling associations in Germany, will also allow issuing online casino licences in the other German states.

Christoph Engelmann, DLA Piper

Dr. Michael Stulz-Herrnstadt is a partner at DLA Piper while his colleague Christoph Engelmann is a counsel at the law firm’s Hamburg office. They advise and represent various international gambling, media and payment services companies in all aspects of gambling and gaming law.