Introduction
Online-gambling is becoming increasingly popular in Germany. Ten per cent of all online-gamblers worldwide are German. It is estimated that the annual turnover of online-gambling in Germany will increase to EUR 1.8 billion in 2015. It is therefore not surprising that the winner of the World Series of Poker in Las Vegas in November 2011, Pius Heinz, is a German college student who learned to play poker mainly online.
In 2012, we are facing major changes in German online-gambling legislation. Whereas until the end of 2011 online-gambling was strictly prohibited in Germany, the online-gambling market is now liberalised to a certain extent: As of 1 January 2012, Schleswig-Holstein, one of the 16 German federal states, enacted its own Gambling Act. The new Gambling Act opens up the online-gambling market in Schleswig-Holstein and enables private companies to provide online-gambling services. In the other 15 German federal states, the online-gambling market was also liberalised as of 1 July 2012, however only to a limited extent. Under certain circumstances private companies may now obtain licences to offer and broker online sports betting as well as lotteries.
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Interstate treaty on gambling
On 1 January 2008, an interstate treaty on gambling, entered into by 15 German federal states (i.e. those states other than Schleswig-Holstein) took effect. The interstate treaty was limited to four years, i.e. until 31 December 2011, but remained in effect until the end of June 2012. According to this treaty, online-gambling was strictly prohibited. Foreign providers that tailored their online-gambling services to German users, e.g., by using the German language, German bank accounts and German advertisements, were subject to this strict prohibition.
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European Court of Justice ruling against the interstate treaty
On 8 September 2010, the European Court of Justice held in its “Carmen Media Group” decision that the interstate treaty on gambling violated European law because it failed to establish consistent legislation with regard to all kinds of gambling (i.e. whereas online-gambling is prohibited, other types of gambling are allowed (e.g. offline-gambling) which leads to inconsistent legislation). Furthermore, the interstate treaty was not compliant with the freedom of services that is guaranteed as one of the fundamental freedoms within the European Union. As a consequence, the 15 federal states of Germany were forced to substantially revise their interstate treaty in order to implement a consistent and coherent gambling law.
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New revised interstate treaty regarding online-gambling in Germany
In December 2011, the 15 German federal states concluded the revised version of the interstate treaty on gambling. Following this new interstate treaty, which came into effect on 1 July 2012, the gambling market has been partly liberalised for private enterprises. Private companies can now apply for licences to offer and broker sports betting as well as lotteries in all 15 German federal states. Further, private companies may also apply for a licence to advertise their services online, however the number of licenses is currently limited to twenty. In addition, a five per cent state tax will be levied on the wager. In fact, the revised interstate treaty maintains the state monopoly to provide online-gambling services. Online casinos and online poker remain prohibited according to this revised interstate treaty.
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New gambling legislation in Schleswig-Holstein
In contrast to the 15 member states, Schleswig-Holstein passed its own gambling law on 1 January 2012 and opened its online-gambling market to a broad extent. Accordingly, private companies may offer and broker to gamblers residing in Schleswig-Holstein an even broader scope of services, including online casinos and online poker. The main legal requirement for these activities is a licence from the competent regulatory authority in Schleswig-Holstein. So far already seven sports betting providers have obtained such licenses.
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Withdrawal of Gambling Act due to change of government
The government of Schleswig-Holstein, however, recently changed from the conservative to the socialist party. With a resolution dated 24 July 2012, the new socialist government decided to withdraw the new Gambling Act and to accede to the interstate treaty of the other 15 German states. This in fact means a throwback in the ambitious liberalisation of the online gambling market in Schleswig-Holstein. The European Commission and the German Monopolies Commission (among others) have, however, stated that the revised interstate treaty is still not in compliance with European law requirements. Therefore, we assume that the European Commission will initiate EU treaty violation proceedings (Vertragsverletzungsverfahren) against the Republic of Germany in order to push the government to enact a consistent gambling law throughout the country leading to a broad liberalisation of the market.
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Outlook
The German online-gambling legislation is currently in a state of upheaval. Schleswig-Holstein has already liberalised its online-gambling market to a great extent, however the new government is currently turning back the proactive approach of the previous conservative government. In the rest of Germany, private companies are able to obtain licences for certain types of online-gambling such as online sports betting but not online casinos/poker. The fact that the EU Commission approved the new gambling law in Schleswig-Holstein but criticised the revised interstate treaty on gambling of the other 15 federal states of Germany clearly demonstrates that the EU Commission is in favour of a broad liberalisation of the online-gambling market in Germany. How the law will develop in this area remains to be seen. In any event, businesses should not hesitate to take advantage of the already existing business opportunities.
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