Schleswig-Holstein Pushes For German Gambling Re-Think

28 Sep, 2010 / GamblingCompliance / Daniel Macadam

Parliamentary discussions are underway in Schleswig-Holstein regarding online gambling reforms as the Lander looks to implement them quickly, before the controversial Interstate Treaty expires.

Its two ruling parties are working towards a revision of the treaty that would amend the current state lottery monopolies, open up the sports betting market and end the blanket ban on internet gambling.

They aim to present their lottery reforms to the 15 other German states, or Lander, by the end of this year, and their plans for the controlled liberalisation of sports betting and internet gambling by mid-2011.

Schleswig-Holstein announced last year that it would opt-out of the current regional gambling treaty, signed by all 16 Lander, when it comes up for re-negotiation at the end of 2011, and has been spurred on by the recent European Court of Justice rulings.

“The judgment by the ECJ requires fast and at the same time well co-ordinated measures,” Christian von Boetticher, head of the Christian Democratic Union parliamentary party in Schleswig-Holstein, said.

“Otherwise, the courts will no longer be able to prosecute illegal gambling,” he added. “Therefore, we need a new regulation as quickly as possible.”

The CDU and its coalition partner the Free Democratic Party held day-long discussions with other politicians and industry stakeholders on Wednesday.

Wulf Hambach, a gaming law expert who spoke at the meetings, told GamblingCompliance that the mood was optimistic after the unexpected tailwind provided by the ECJ rulings.

He said that while the Deutscher Lotto- und Totoblock lottery grouping were “trying to keep the old monopolies living like a nearly dying patient”, at least two others had been persuaded to the Schleswig-Holstein model.

The ECJ found earlier this month that certain German state lotteries, and the Interstate Treaty that codifies them, were unjustifiable under EU law because they do not tackle gambling-related problems, particularly addiction, consistently.

Martin Arendts, gambling law expert at Arendts Anwalte, told GamblingCompliance that the region’s plans to keep lottery monopolies but liberalise other areas could breach the ECJ rulings, as sports betting has a higher potential for gambling addiction.

But he added that the state lottery monopolies could instead be justified on the basis that they provide better protection against fraud.

Hambach said that Schleswig-Holstein was likely to adopt this approach. He conceded that it was “not a 100 percent crystal clear solution”, but added that it had been adopted in Denmark, France and Italy without any queries from the EU.

How Schleswig-Holstein will crackdown on unlicensed operators has not been decided, but the coalition said that their reforms would come with more effective sanctions than the current Interstate Treaty.

The black market is estimated to be particularly strong in sports betting, with illegal operators accounting for 94 percent of the market and official, state monopolies just 6 percent.

Schleswig-Holstein also calculates that tax revenue from its lottery monopoly fell from €144.4m in 2007 to €126.3m last year due to the current ban on online gambling and the restrictions on marketing.

Christoph Enaux, a regulation specialist and associate at Olswang’s Berlin office, told GamblingCompliance that tax was an important reason behind Schleswig-Holstein’s plans and that it clearly felt strengthened after the ECJ rulings.

He added that most of the other Lander had not made their minds up yet how to accommodate the ECJ findings, and that the upcoming months would be filled with intense lobbying.

On the day of the ECJ judgments Schleswig-Holstein said it was looking for “at least three other federal states which support our cause”, but so far only Lower Saxony, where there is also a CDU – FDP coalition, has publically stated it is pursuing a similar model.

Germany’s second largest party across regional parliaments, the Social Democratic Party (SPD), announced last week that it supports a strict monopolistic approach to gambling.

“The issue is not so much Schleswig-Holstein but all the other states,” Arendts said.

Schleswig-Holstein will have its first full parliamentary hearing on the draft gambling legislation before the end of 2010, and a second hearing before the summer recess next year.

The government needs to persuade three or more regions to follow its gambling reforms to deprive the remaining Lander of enough signatures for the Interstate Treaty to be effectively passed.

If it does not secure these, according to von Boetticher, the state “will go it alone”.

Hambach argues that Schleswig-Holstein’s sports betting and online casino licences can be valid throughout Germany, under similar mutual recognition rules used for dangerous dog licences.