Germany sets collision course with EC by ratifying new State Treaty

Published by Gaming Intelligence

The Minister-Presidents of Germany’s 16 federal states have ratified the country’s amended State Treaty on Gambling, setting up a showdown with the European Commission which has already criticised the legislation.

The Minister-President Conference held on Thursday (March 16th) saw the heads of each state sign the amended Treaty, which removes a number of controversial provisions that derailed the 2012 Treaty.

The twenty-licence cap on sports betting concessions has been removed, with the 35 operators that passed the first stage of the 2012 licensing process  given ‘provisional permits’ to either continue or begin operating in the country.

Other controls, such as payment blocking to tackle unlicensed casino and poker sites, have been retained in the newly-approved legislation, which is set to come into force on January 1st, 2018.

However the Treaty has already been criticised by the EC, which offered a damning assessment of the legislation just days before the conference was due to start.

It is seen as continuing to push an unenforceable ban on online casino and poker, as well as giving those with a provisional permit an unfair advantage over new  market entrants. The EC noted that it had also fundamentally changed the economic terms of operating in Germany without updating the legislation accordingly.

This means the EC could launch infringement proceedings against Germany as soon as the Treaty comes into effect.

The newly ratified Treaty has also been attacked by two of Germany’s most vocal advocates of liberalised gambling legislation. Wolfgang Kubicki of the Schleswig-Holstein Free Democratic Party and his colleague Hans-Jörn Arp, parliamentary director of the Christian Democratic Union, have both said that the Treaty simply will not make it into law.

“For five years we have not made any progress towards sensibly regulating gambling in Germany,” Kubicki said. “The State Treaty, which has now been agreed by the Länder, will not secure a majority in the state parliament of Schleswig-Holstein, because the Greens and the [Danish minority] Südschleswigsche Wählerverband now also understood that we can only guarantee the protection of gamblers and minors when we erase the grey market with sensible regulations.”

Arp added that Schleswig-Holstein’s existing legislation, that sets a 20 per cent GGR tax and no product restrictions, is the “very simple” solution to the regulatory impasse.

“[Schleswig Holstein’s system is] practical, corresponds to international standards and has been approved by the EU,” he said.

Operator association the Deutsche Sportwettenverband (DSWV), meanwhile, offered a more cautiously optimistic assessment, focusing on a clause in the Treaty that offers scope for exploring ways to expand regulation. DSWV president Mathias Dahms described the ratification of the Treaty as progress, but progress that had to be followed by an extensive overhaul of the legislation rather than simply allowing the market to open.

“The minor changes to the Treaty is a small step in the right direction, but it is not enough,” Dahms explained. “The restrictive regulations for sports betting are based on an out-of-date monopoly system and are not yet suitable to create an attractive, regulated market.

“If the majority of consumers continue to gamble via black market sites the goals of addiction prevention, youth and consumer protection will not be achieved.”

Dahms argues that with the market now progressing towards an opening, legislation must be adapted to reflect technical and social realities, with pragmatism replacing dogmatism.

“We are only at the beginning of an urgently needed reform process,” he explained. “Today’s regulations are already out-of-date in many areas. The audit mandates adopted by the Minister-Presidents regarding further development of regulations mean change is possible but needs the cooperation of all industry stakeholders.”

Any further changes, however, are likely to be opposed by the association of state lottery operators DLTB.

“Online casino games are a high-risk form of gambling,” DLTB co-chair Torsten Meinberg said. “They must therefore remain banned. A liberalization of this segment can also lead to major economic problems: the risk of fraud, manipulation and money laundering is high.”

Instead of regulating casino, Meinberg said that more effort should be taken to stamp out the existing unlicensed online casino market. “The black market of online casinos and illegal online lotteries must now be addressed,” Meinberg added. “It is important that the gambling supervisory bodies of the states are given sufficient funding and personnel capable of curbing the wild growth of this market in the future.”

Source: Gaming Intelligence