
The regulation of online gambling (i.a. sportsbook and virtual slot machines (slots)) in Germany is primarily governed by the Interstate Treaty on Gambling 2021 (ISTG 2021), which came into force in July 2021 and has been a significant turning point in Germany’s gambling framework.
This Treaty aims to strike a balance between allowing licensed operators to offer sports betting, as well as protecting players from gambling addiction and fraudulent activities. This article provides detailed insights and discusses the current challenges and trends of Germany’s Online Betting Regulation and Taxation.
Historical development of gambling regulation
Originally state control
Before liberalisation, the sports betting market in Germany was basically a state monopoly. State operators dominated the market. Private operators were largely excluded. The state control served the purpose of combating gambling addiction and using the income from gambling for i.a. charitable purposes. Licenses for online slots were not available.
ECJ (European Court of Justice) ruling on state monopoly
A turning point was the ECJ ruling of 2010. The European Court of Justice found that the German monopoly violated the freedom to provide services because it was not consistently and systematically aimed at protecting consumers. This ruling forced Germany to revise its gambling regulation.
The role of Schleswig-Holstein
The federal state of Schleswig-Holstein played a pioneering role by awarding slots licences to private operators from 2012. Although this liberalisation was of short duration, it provided an important impetus for regulation across Germany. This led to a unified regulation in all federal states in Germany.
Present Legal Framework and Licensing
The ISTG (Interstate Treaty on Gambling) 2021 came into force on 1 July 2021 and brought with it significant changes. The ISTG 2021 is a nationwide legislation to harmonise the regulation of sports betting across all 16 federal states of Germany. Under the ISTG 2021, operators must obtain a licence from the competent gambling authority in Germany, the Joint Gambling Commission of the Federal States (GGL) for i.a. online sports betting, slots or poker. The GGL is responsible for overseeing the licensing process and ensuring that operators comply with the law. The requirements for obtaining a license to offer online sports betting, virtual slot machines and online poker are very similar and only vary in specific topics. The main aspects of the common requirements cover the following:
Security deposit: The applicant must provide a security deposit of at least EUR 5 million. In individual cases, this amount can be increased up to the amount of the expected monthly average turnover (maximum EUR 50 million).
Provision of online gambling offerings: To the extent different online gambling offerings are provided via the same internet domain, the operator must provide an independent and graphically separate area for each form of gambling. The division also prohibits cross-advertising. A player must not play in different areas simultaneously.
Upon registration on a website, the player must set a monthly deposit limit of a maximum of EUR 1,000.00. The limit applies per player and not per provider. This means that, generally, a player may spend EUR 1,000 per month across all gambling platforms.
The competent authority will monitor compliance with the EUR 1,000 limit via a central “limit control database”. Providers must pay a fee to connect to and use the limit control database.
With regard to online sports betting, the authorities allow more flexibility than under the previous regime. Bets will be allowed on the outcome of a game as well as on events during the game or a combination of both. Also, live bets will be allowed under specific requirements.
The application needs to be handed in in writing as well as electronically via mail or electronic upload. It needs to include a declaration about the completeness of the documents as well as about the assumption of any costs for the verification of the safety, social and economic efficiency concept.
Only applicants established within the EU and EEA can apply for a license. If the required documents are not in German, it is necessary to provide a certified copy of the original and a certified translation.
The applicant shall provide the necessary evidence and documents to support his application. Furthermore, they shall include, inter alia, a declaration of completeness.
The application documents shall provide details about the applicant and therefore outline any potential internal or external influences or risks upon the operation of gambling. These details shall include inter alia:
The applicant’s financial and voting rights structure
The applicant’s authorised representatives
A declaration about the commitment not to offer any unlicensed gambling
Administrative records like an extract from commercial register or clearance certificate
Operators must be licensed by the GGL and comply with a range of regulations, including limits on player spending, time restrictions to prevent excessive gambling, and the implementation of player self-exclusion mechanisms.
Technical compliance for operators in Germany includes integration into the technical platforms of the regulatory authorities to ensure transparency, data reporting and compliance with legal standards. The relevant systems include:
- Connection to central files where player data and gaming activities are logged.
- The LUGAS system, which acts as a central data hub and monitors real-time data from operators.
- And the OASIS system, a centralised exclusion system that must be integrated by operators to ensure that banned players are excluded from gambling services.
All operators are obliged to check the status of each player against OASIS before granting them access.
Taxation
The tax is regulated by the German Racing and Lottery Betting Act (RennwLottG). In Germany, online gambling is subject to an unusual tax structure. Instead of taxing the net revenue, the legally required tax of 5.3% is based on the stakes. This results in a relatively high effective tax rate for operators. All operators are required to register with the competent German tax authority. After registration, operators are required to submit tax returns monthly.
Advertising and Responsible Gambling
Advertising for online gambling in Germany is also regulated under the ISTG 2021. Operators are required to comply with the advertising guidelines, which are aimed at protecting especially minors and vulnerable individuals. The focus is on responsible gambling, and all operators are required to display responsible gambling messages prominently on their platforms and during advertising campaigns.
Furthermore, advertising must not create the impression that betting is a risk-free activity, a reliable source of income or a solution to financial problems. It must avoid misleading language, the glorification of gambling or the suggestion of a guaranteed win. Additionally, advertising must not be directed at minors (under 18 years of age) or other vulnerable people. Furthermore, advertising must not appear on websites that are primarily aimed at minors. Any promotional content involving influencers (if allowed in the respective setting) must also comply with regulations and responsible gambling guidelines.
Also, sponsorships of sports teams or events are permitted, provided the sponsorship agreements align with advertising requirements, including clear messages about responsible gaming.
In addition to these principles, there are additional restrictions on specific gambling services or forms of advertising:
Advertising via telephone calls, SMS or similar messaging services is generally prohibited unless there is an active contact by the player or there is communication within an ongoing active contractual relationship.
Advertising addressed to an individual recipient requires the prior consent of the recipient (i) to receive the advertising as well as (ii) to the prior consultation of the exclusion system by the advertiser.
Revenue share model advertising, such as with affiliate links, is prohibited.
Immediately before or during the live broadcast of sports events, advertising for sports betting on this sports event is prohibited on the same broadcasting channel.
Live coverage of sporting events must not be combined with advertising for sports betting on this sporting event. An exception is the display of live scores on the website of a betting provider.
Furthermore, under the ISTG 2021 active athletes or sports officials may no longer be used to advertise sports betting.
General sponsorship of sports teams (e.g. on jerseys) will remain permissible.
No advertising for slots, online poker and online casino games may be carried out on the radio or the Internet between 6 a.m. and 9 p.m.
In addition to these rules, the licensing authority may include additional requirements regarding the type and scope of advertising in the license. This approach is intended to enable individual risk-based regulation. The GGL has the authority to impose penalties on operators that breach these advertising regulations.
Anti-Money Laundering (AML) and Fraud Prevention
As part of Germany's commitment to preventing financial crime, operators are subject to strict anti-money laundering (AML) regulations. Operators are required to implement substantial AML systems, including customer due diligence, monitoring of transactions, and reporting of suspicious activities. These systems are designed to detect and prevent illegal activities, such as money laundering and terrorist financing.
Operators must also conduct enhanced due diligence on players involved in high-value transactions or who demonstrate other risk factors associated with money laundering. This may include verifying the source of a player's funds or conducting additional background checks. All relevant customer data, transactions and communications must be recorded and securely stored for at least five years. The documentation must be verifiable by the GG at all times. Employees must receive regular training on the prevention of money laundering and terrorist financing.
Every operator must appoint an anti-money laundering officer (MLRO) who is responsible for ensuring compliance with AML regulations. This person must report directly to senior management and the relevant authorities. Furthermore, the MLRO must be able to communicate directly with the GGL in German.
Operators are obliged to identify and report suspicious transactions (e.g. unusually large deposits or unusual betting patterns) to the FIU (Financial Intelligence Unit). There must be clear guidelines and processes for reporting suspicious activities.
Failure to comply with these AML requirements may result in significant penalties for operators, including fines and suspension or revocation of their licences.
Future Outlook
Although the ISTG 2021 has created a regulated online gambling framework in Germany, the industry still faces challenges. One of the main issues remains the black market, where unlicensed operators offer online gambling such as sportsbook or slots without complying with the German legal framework. These operators can create risks for consumers as they often do not adhere to the same standards of inter alia responsible gambling or anti-money laundering compliance.
The GGL has increased its efforts to fight illegal operators. In doing so, the GGL relies mostly on prohibition orders and payment blocking.
The online gambling market in Germany is expected to continue growing in the future. As the market develops, a focus on responsible gambling and compliance with anti-money laundering regulations will remain key to the industry's long-term success.
By: Dr. Fabian Masurat and Jan Feuerhake, Taylor Wessing, Hamburg, Germany
The Authors may be contacted by e-mail at ‘F.Masurat@taylorwessing.com’ and ‘J.Feuerhake@taylorwessing.com’ respectively
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