EGR: Breaking news: EC approves Schleswig-Holstein law

By James Bennett, published at egrmagazine.com

The European Commission has ruled Schleswig-Holstein’s draft gambling law as compliant with EU law, giving Germany’s northernmost state the green light to pass a bill this summer and the licensing process to begin as early as this autumn, eGaming Review has learned.

A Betfair spokesman called the Commission’s approval a “decisive step” and told eGaming Review it would apply for a licence there if and when the bill was passed. bwin.party’s co-chief executive Norbert Teufelberger told this publication last month the newly merged business would apply for a licence, while John Shepherd, director of corporate communications, said: “Our position has not changed. If the Schleswig-Holstein law is passed, we will apply for a licence.”

“Betfair welcomes the European Commission’s approval to the Schleswig-Holstein draft gambling law, which is a decisive step forward in the political process to modernise gambling regulation in Germany. Betfair is committed to obtaining a licence in Schleswig-Holstein if the draft gambling law is passed by the Schleswig-Holstein parliament.”

Following the statutory three-month standstill period set aside for review of the draft law, the EC only raised one point of relevance to egaming for the Land’s lawmakers to address ahead of its final passage into law, namely the stipulation that only major banks acting on behalf of operators would be required to give guarantees, and not smaller institutions.
The bill will now return to the Schleswig-Holstein parliament for a second reading and a final vote, which could take place by the end of next month ahead of the summer recess, or when lawmakers return in September.

bwin.party’s Shepherd added: “We are encouraged by the outcome of the EU notification process for Schleswig-Holstein’s proposed law for online gaming. With just two minor points to be addressed, we view the EU’s findings as a clear signal to the other 15 Federal States that Schleswig-Holstein is moving in the right direction.”

Betfair said that in contrast to the draft State Treaty of the 15 other German Lander the Schleswig-Holstein bill has a “more pragmatic approach” to regulate the industry, which includes best-practice examples from other European regions.  The German state would install a 20% gross profits tax, allow all products, an unlimited amount of licences and implement strict consumer player protection.

In an official statement the ruling conservative-liberal coalition in Schleswig-Holstein said that following its approval the EC could scupper the federal draft State Treaty submitted by the 15 other Lander last month.
In mid-April bwin.party’s share price fell 16% as the majority of Germany’s states proposed a restrictive opening for sports betting based on an unworkable 16.66% turnover tax.

The market reacted unfavourably to the German proposals of a five-year “test period” for seven sports betting licences in Germany combined with a 16.66% turnover tax – approximately 23% of the group’s revenue in 2010 was from Germany. Online casino will be restricted to land-based casino operators, again for a five-year test period.

Teufelberger slammed the proposals a day after they were announced saying it “is just as likely to fail as the outgoing monopoly model in Germany”. A week after the company merged and opened for trading he added the proposed tax rate of 16% on the stakes placed in sports betting would “make it impossible to offer a competitive product”.

“Furthermore, excluding poker and casino products from this licensing model will continue to drive consumers into the black market. This would mean that the proposed model would fail to meet its objectives of channelling consumer demand, offering player protection and combating fraud.”

eGaming Review’s exclusive data partner H2 Gambling Capital found that a regulated market in Germany under the proposed State Treaty would capture only 7% of all egaming activity.

Last December German gaming law authority Wulf Hambach, of lawyers Hambach & Hambach, predicted the split between the 16 Länder would mean Germany’s egaming market was likely to regulate on a state-by-state basis, resulting in “a domino effect”.

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