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Germany must set its online gambling sector free

Thursday, 16 November, 2017 - 18:51

Online gambling is growing at a rapid pace across a number of EU countries, thanks in no small part to their favourable regulatory environments. Southern Europe accounts for most of the market expansion, where online casinos have now become a major staple in the local gambling industries due to their rising popularity. However, while lawmakers in Britain, Spain and Italy have passed legislation designed to boost competition and innovation in the sector, German legislators continue to hold on to an out-dated legal framework in blatant violation of EU competition laws.

Germany stands in sharp contrast to the fact that Europe is dominating the international online gambling market. As a result of its generally liberal approach to gambling, it is home to the highest number of online operators compared to other regions, such as North America and the Asia-Pacific. Europe continues to be the largest online gambling market in the world, accounting for nearly 50% of all global online gambling revenues in 2015.

In September, Spain’s gaming regulator revealed an 84% increase in revenue generated by online slots in the country over the course of 2016. That same year, Britain’s Gambling Commission said online betting accounted for 33% of all gambling in the UK, generating a gross gambling yield of £4.5 billion (€5.05 billion). But while the ongoing success of the online betting sector in some EU nations could be taken as evidence that the European Commission (EC) was right to abandon a EU-wide regulatory framework for online gambling, some member states have failed to grasp the opportunity presented by Internet betting.

As the Italian government has sought to award 120 online gaming licences to interested operators, and Spain’s gambling regulator has moved to allow eligible Internet betting firms to apply for an unlimited number of licences, Germany is notably lagging behind. The German government has made repeated attempts to update its gambling laws since 2012. However, all draft bills have been blocked by the EC precisely for failing to accommodate the growing online casino market.

Germany’s gambling law, called the “Interstate Treaty on Gambling”, only contains provisions for the regulation of the country’s online sports betting market, and upholds a ban on Internet casino games. It has also attracted criticism for stifling competition by making too few online gambling licences available. The European Commission scathingly concluded in March that German authorities had failed once again to offer “a workable solution… for the significantly growing online casino market”, leaving German’s gambling landscape mired in incoherencies and discriminatory, if not anti-competitive, measures.

At the core of the regulatory chaos in Germany lies the fact that the state refuses to relinquish its quasi-betting monopoly. This is despite the fact that the monopoly – and its consequences for licencing procedures in other types of online gambling – were ruled to be illegal by the European Court of Justice (ECJ) in 2016. Only a year prior, the Higher Administrative Court in Hesse had reached the same verdict. The licensing procedure for private providers is considered to be non-transparent, discriminating and unconstitutional, yet the state sports betting operator has been able to continue to trade thanks to a transitional provision.

Consequently, Germany has effectively managed to avoid making serious amendments and thereby perpetuate the status quo. In fact, Berlin is seemingly quite content to let the issue play out and let the confusion continue. However, Brussels is clearly fed up with Berlin continually eschewing EU law, and the tone coming from the EC has become notably rougher. In an escalatory move earlier this year, the Commission finally initiated infringement proceedings against Germany for failing to bring the Interstate Treaty on Gambling in line with EU requirements. Continued non-compliance now entail fines of a percentage of Germany’s GDP.

That the EC would go this far aptly illustrates how seriously Germany’s defiance is taken. This should be a wake-up call for the country. Indeed, rather than continuing to dodge EU competition laws, Berlin would now be well advised to reconsider its stubbornness and start afresh. As it turns out, German policy-makers do not need to look too far to find inspiration: Malta, a fellow EU member state, has become a frontrunner in the area of gambling regulation.

The country’s regulator, the Malta Gaming Authority (MGA), has initiated major legislative reforms that focus on improved supervision of gambling licensing and operations. For Germany, adopting a similar objective-based approach could be useful in finding a compromise between giving up its monopoly and progressively awarding more licences to eligible online gaming operators within an adequate legal framework. Malta itself has already begun to facilitate the entire licence-granting process through the introduction of a new online management system. Freely accessible by the public, the mechanism is hoped to increase transparency in how licences are awarded and track operators’ compliance with the law.

Furthermore, Malta’s taxation regime, intended to attract private online gambling operators to the country, could be implemented in Germany in an adapted form. It represents a viable option for Germany to continue to profit from gambling even in the absence of a state monopoly.

Whether Berlin will change its ways remains to be seen, and as Germany’s conduct on the matter so far indicates, serious amendments will only be made when all options of stalling have been exhausted. In doing so, the country’s government is not only doing a disservice to the many Germans fond of a bet, but is also stifling the prospects of an industry whose success could greatly benefit Europe’s economy.


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