As Germany prepares to head to the polls in snap elections on 23 February, the nation is in a state of flux. Within the past four months alone, the country has battled numerous crises, from a sluggish economy to the collapse of its former coalition government.
For those in the gambling industry, however, the state of inertia is palpable. Since the market was first regulated back in 2021, licensed operators have been battling against a tide of strict regulations and an ever more bullish black market.
So far, attempts to drive changes to the Interstate Treaty on Gambling have been unsuccessful and the industry has struggled to communicate the full scale of Germany’s channelisation problem.
With a new government likely to take the reins after February, is it possible that this year could usher in a new phase for the German gambling market? Will there be movement in a positive direction, or just more of the same? So far, there are some hopeful signs – and some signs that patience is needed.
Changes to the Interstate Treaty and raised eyebrows
Back in December 2023, an interim evaluation of the Interstate Treaty on Gambling was launched, it aimed to assess the effectiveness of current regulations and make recommendations for improvements. Some – if not all – of these suggestions are likely to be adopted by the federal states when they amend the law this year.
However, the changes are likely far from the sweeping overhaul that the industry has been pushing for. This, sceptics believe, is because the interim evaluation was carried out by a well-known industry critic – gambling researcher Dr Tobias Hayer – who has been labelled an anti-gambling “hardliner”.
This has led to questions about the fairness of the report and its recommendations.
According to a September 2023 investigation by Business Insider, the Gemeinsame Glücksspielbehörde der Länder (GGL) regulator adopted many of Hayer’s own recommendations when designing the tender process. Potential bidders were also given just 30 days to design the three-year study – a deadline only Hayer met.
The fact that the psychologist sits on the advisory board that works closely with the GGL has also led to raised eyebrows. One academic researcher, who was quoted anonymously, said the process looked like a “planned lottery win”.
“Surgical amendments”
As many industry stakeholders expected, the changes proposed in Hayer’s evaluation were largely cosmetic.
According to Luka Andric, managing director at the German Sports Betting Association (DOSW), the main change will likely be a “minor surgical amendment” on IP blocking.
Due to the current wording of the Interstate Treaty, regulators at the GGL stand on shaky ground when trying to block the IP addresses of illegal websites. Following the evaluation, this is one issue state ministers are looking to fix.
Another potential change to regulations relates to the process of approving new online slot games. This is currently done on a cumbersome game-by-game basis, leading to a games catalogue that ranges into the hundreds rather than the thousands. Simon Priglinger-Simader, vice president of the German Online Casino Association (DOCV), is hopeful there could soon be a shift to approvals at the supplier level instead.
“They mentioned in the interim evaluation that the games suppliers should be checked,” he says. “That would mean that operators could just input a game’s certification number, like they do in the UK and other markets. That would be an easier process.”
Could the GGL be considering relaxing casino restrictions?
Although not mentioned explicitly in the evaluation, the DOCV also sees the potential to make some headway on loosening tough product restrictions.
Currently, online slots from regulated operators are subject to a €1 stake limit per spin, as well as a mandated five-second delay between spins. Players also face a blanket €1,000 per month deposit limit across all operators, which can only be lifted if customers submit personal information on income and spending capacity, as well as setting personal loss and stake limits.
“There’s a pretty annoying process to be able to get higher limits,” explains Priglinger-Simader. “That’s probably an issue for those customers who are able to afford and spend more money because they don’t want to share so much data and that drives them straight into black market.”
Apparently, the GGL has been receptive to increasing stake limits and could also be prepared to look at the five-second spin rule. In order to get this changed, however, their recommendation would have to be taken up by the regulator’s advisory board and implemented by the 16 state interior ministers. This is far from guaranteed.
If things move in the industry’s favour, an increase in the deposit limit could also be on the cards, Priglinger-Simader says. For now, however, a decision on lifting the limit has been pushed back by several months.
New market in western Germany for online casino
Another frustration in the casino sector has been the inconsistent regulations on table games. These effectively regulate products like online roulette and blackjack on a state-by-state basis.
At present, few states have opted to regulate these verticals, including Schleswig-Holstein in September 2024, but a new addition could change the landscape later this year.
North Rhine-Westphalia, Germany’s most populous state, is due to start the tender process for online table games in mid-2025. According to Priglinger-Simader, this would open up a new market for four to five operators in a state with a population of 18 million people.
Nevertheless, igaming operators are still frustrated with the principle of regulating table games on a regional level and are pushing for national licensing.
Expansion of the betting catalogue
On the sports betting side, the industry has had some recent success in broadening its product and wants to continue in the same vein this year.
“We’ve expanded the betting catalogue quite significantly last year and we’re hoping to continue that work,” says DSWV director Andric. “So we’re still within the existing framework, but there are tweaks and knobs which can be adjusted to offer more products under the current state treaty.”
Much like the casino operators with a limited roster of games, betting operators in Germany have struggled with a limited catalogue of sports and leagues they are allowed to accept wagers on. However, this is slowly being rectified.
That said, betting operators in Germany are still facing strong opposition in the political sphere – not least from Bremen’s senator of the interior, Ulrich Mäurer, who is chairing the conference of interior ministers this year in June.
Amateur sports leagues debate
In November Mäuer hit out at sports betting on amateur leagues and companies who offer these markets – even in other jurisdictions.
“Betting on amateur leagues is rightly banned in Germany,” the senator declared. “This is because they are particularly susceptible to manipulation and therefore jeopardise the integrity of the sport.”
Mäuer is concerned that customers could use a VPN to place a bet on an amateur sports league in another jurisdiction – a debate Andric deems “misguided”.
“It’s so easy to just use illegal operators who have none of these restrictions,” he said. “It wouldn’t be worth a customer’s time to sign up to VPN and go through all these hoops with a regulated operator if they can very easily do it on the black market.”
In his most recent statements, the Bremen senator has called for companies who offer betting on amateur sports in other jurisdictions to be barred from obtaining a licence in Germany.
Political opposition has weight
Although Mäuer apparently stands alone in his proposed policy changes, the debate speaks to a wider problem the industry faces in Germany.
Like the widely criticised interim evaluation, key decisions on gambling tend to be based on the ideological positions of certain politicians and states. In particular, states like Bremen, Hamburg and Lower Saxony have often been a thorn in the side of the industry.
According to the DOCV, this has led to a situation where the GGL is open to change but is reluctant to act without enough political will behind them.
“The GGL is receptive and we are in constant contact and communicating with them in a very positive manner,” says Priglinger-Simader. “At the same time, the problem we have with the GGL is that they are not brave enough to decide on the main issues because they always want political support from the 16 states. And that’s the biggest problem for the industry.”
Constitutional changes needed to drive gambling reform
A number of states – and particularly those with Social Democratic leadership – were originally opposed to reforming gambling laws and continue to block liberalisations of any kind. This makes it difficult to obtain the two-thirds majority needed to push through the changes the industry is hoping for.
“It’s like trying to change the constitution,” Priglinger-Simader explains.
When iGB contacted the GGL to ask about prospective changes to the Interstate Treaty, the regulator confirmed that the law could only be changed by the states.
“The federal states are responsible for legal changes to the Interstate Gambling Treaty,” a spokesperson explains. “GGL advises them with its expertise.”
Instead, the regulator said it wanted to continue cracking down on illegal operators, while making the legal market more attractive.
“Our experience to date shows that channelling has been successful to a large extent and that the economic framework conditions are working,” the spokesperson tells iGB.
“We are in close dialogue with all stakeholders, including gambling providers and their associations, in order to obtain a comprehensive perspective and be able to react flexibly to developments.”
Impact of federal elections
Germany is widely tipped to be heading for a change of government after the February elections, with pro-business Christian Democrats Union (CDU) party and its Bavarian sister party, the Christian Social Union (CSU), most likely to take the reins.
But despite the CDU and CSU’s pro-business policies, the election is unlikely to change much for Germany’s licensed operators.
That’s because, under Germany’s federal system, gambling is in the hands of the states. Even the proceeds from gambling taxation – which the central government technically controls – are paid out to state governments.
“The federal government just has a formal role and usually they do whatever the states ask them to do,” says Andric. This means that even the debate on the controversial stake tax would have to start on the regional level, rather than in the finance ministry.
Landmark court ruling
In its battle to reform the controversial 5.3% stake tax, the industry has recently received some unexpected – but highly welcome – support. The tax was voted on in June 2021 and taxes operators on online slots and poker stakes.
In October last year, the Financial Court in Hesse issued a damning indictment of the stake tax and the current levels of channelisation in the gambling industry. In its ruling, the court noted that tax revenues from virtual slots had fallen by a third since the market had been regulated and that legal operators had seen revenues drop dramatically.
“These findings reflect a dramatic regulatory failure,” the judges ruled. “The black market share is in an unacceptable range of at least more than 80 per cent and proves the failure of taxing the gaming stake.”
According to the court, stake taxation “leads to a doubling or tripling of the ‘price’ of legal operators and a switch to the black market”.
A new political discussion
Industry experts say this ruling could herald a sea change in Germany, bolstering arguments that associations have been making for several years.
“More facts are coming to the surface that even the states are not able to negotiate away, because these facts are now coming from neutral parties like the courts,” explains gambling lawyer Wulf Hambach of Munich-based law firm Hambach & Hambach.
“It may not directly lead to regulatory changes in 2025. But from my perspective, it will prompt a different political discussion, especially with regard to these figures on the black market in online casino, which highlights a really big failure.”
A similar view is expressed by the DOCV’s Priglinger-Simader. “It wouldn’t mean they would have to change the tax law immediately, but if the Federal Financial Court agrees, then the fact that the stake tax leads to low channelisation would be a binding statement,” he adds.
“Light at the end of the tunnel”
Although they don’t hold much hope of sweeping reforms in 2025, industry stakeholders in Germany are looking forward to 2027, when the states could make much broader changes to the Interstate Treaty.
Given the glacial pace of change in Germany’s gambling market, associations like the DSWV are commencing those efforts now.
“We are about to embark on that political process where we are already looking towards the new future state treaty – and that conversation is starting now,” says Andric. “This political debate about gambling, that’s what we need to focus on as an industry, and these are long processes.”
For those taking the long view, the Hesse court ruling is a major win for the industry and could slowly lead to a change in perspectives among politicians. The hope is that this will feed into next year’s evaluation and the changes recommended for the following year.
“It’s going to be a big problem for people to deny these facts going forward – especially when they’re court driven,” Hambach explains. “That’s why I see some light at the end of the tunnel for gambling regulation in Germany.”
Original article: https://igamingbusiness.com/legal-compliance/regulation/germany-politics-gambling-reform/
