Jan Feuerhake, Salary Partner, Taylor Wessing
Until now, it was not possible under German law to obtain a license for the legal organisation of online gambling. The operators in the German market therefore faced backlash from German authorities although the legality of the strict regulation in Germany was questionable. However, this should change with the ratification of the new “Glücksspielstaatsvertrag” (Interstate Treaty on Gambling). Even before the new Interstate Treaty on Gambling comes into force, operators will be able to offer online slot machines, online poker and online sports betting without a valid license without any risk of clashing with German authorities if the games meet certain requirements.
The new Interstate Treaty on Gambling
The new Interstate Treaty on Gambling is expected to come into force throughout Germany in July 2021. This brings significant legal innovations for online sports betting and online casinos. The new Interstate Treaty on Gambling will finally officially allow online poker and online slot machines in Germany. Also, advertisement for these services, including TV ads, will be possible.
The aim of this new regulation is to regulate online gambling and, above all, to curb “grey market” offers that currently exist.
The upcoming licenses can be issued for five years for the first application and for seven years for repeated applications. For the issuing of licenses and for monitoring compliance with the regulations of the new Interstate Treaty on Gambling a central authority will be created. This authority is tasked to create a central register of all players for monitoring purposes. Therefore, gaming behaviour can be monitored and problematic gambling addressed. The regulation calls for a limit of stakes in virtual slot machines of EUR 1 per game, five-second game intervals, and an overall limit on monthly deposits. The authority can impose a fine of up to € 500.000 for violations of the provisions of the new Interstate Treaty on Gambling. While some of the exact requirements of the license are unclear as of yet, the federal states in Germany are drafting “enforcement guidelines” which will give further guidance.
The terms of the license have been heavily criticised in industry circles as being “very harsh” and “hardly economically workable”. However, operators will also gain a legitimised entry to one of the biggest gambling markets in the world.
The federal states of Germany have negotiated a transitional regime until the ratification of the Interstate Treaty on Gambling. There will be no possibility to acquire a license until the new Interstate Treaty on Gambling comes into force. Nevertheless, with the help of the transitional regime, it will be possible to offer online gambling under certain conditions even before the State Treaty on Gambling comes into force, without having to fear sanctions. This will offer online gaming operators more economic security and entice them to already comply with new rules before a license application.
The federal states declared that action against the current “grey market” operators should be limited to those operators who will probably not comply with the newly created regulations of the new Interstate Treaty on Gambling. Gaming operators who do not adapt their services in line with the transitional regime may be banned from the future official licensing procedure as they may be regarded as unreliable. Additionally, non-compliance with the requirements will likely mean strengthened enforcement by the regulators, including administrative action and payment blocking. Operators planning to enter the German market or stay there in the long-term should therefore implement the new regulations as far as they are already evident.
Requirements likely to apply to the interim period
The requirements during the interim period to offer online sports betting, virtual slot machines and online poker are quite similar and only vary in details.
Advertisement will become generally legal with only restrictive limitations. Nevertheless, advertisements should still not target children directly and not state that online gambling can solve financial problems or is a quick and easy way to earn money. It is forbidden to create “cross advertising” as well. This means for example, that there is an advertisement for online poker in the area of sports betting. There will also be time restrictions. There may be no advertising for online gambling between 6 a.m. and 7 p.m. on television or on the internet. Additionally, online gaming operators have certain obligations to notify in advance of placing advertisements.
Every user must create an individual account for each operator separately. The users must provide their correct personal information. The operator is obligated to verify the user’s information. This verification must be carried out by appropriate and reliable procedures. These are quite vague, which is why it is expected that the authorities will provide further guidance.
It is possible that an operator offers different types of games using the same internet domain. For this, the operator needs to offer separated and independent areas for each form of gaming (e.g. one for sports betting, one for online casino and one for online poker).
At registration on a website, every player must set a cross-supplier deposit limit of a maximum of EUR 1.000 per month. Furthermore, operators can offer lower deposit limits to which users can agree voluntarily if they wish to.
Moreover, there are certain requirements for the different forms of online gambling.
A game with a virtual slot machine must at least last five seconds and the maximum stake is EUR 1.00 per game. Besides that, the user cannot use stakes and wins to build up a jackpot.
For sports betting, it will be allowed to place a bet on the outcome of the game as well as on events during the game or on a combination of both. For live bets within the game time, there will be further special restrictions.
Finally, there are special conditions for online casinos, too. Online casinos are virtual simulations of casino games and live broadcast of terrestrial casino games with the possibility of participation via the internet according to the Interstate Treaty on Gambling. The federal law does not regulate licenses for online casino games but there is still the opportunity for the states to provide regulations in their local law. It is likely that the same requirements for offline casinos will apply to online casinos. This could lead to a restriction on the number of licenses because the authorities will not issue more online casino licenses than licences available for offline casinos.
The new regulation as well as the transitional regime have requirements that will be difficult to work for operators. Operators in the market will likely challenge these terms in court. However, the transitional regime and the new regulation in 2021 represent a unique opportunity to enter into, or further establish, a foothold in one of the biggest gaming markets in the world. The regulations that have now been adopted are an important signal for online gambling operators that more is to come. The regulatory and political landscape is changing to a more liberal regime albeit in a painfully slow way.