The long-running saga of legalizing online gambling in Germany has finally concluded with the early July launch of nationwide regulations.
The State Treaty on Gambling, which was given the final stamp of approval by lawmakers in Germany last year, came into effect on July 1, 2021. From this date, operators in the German sector will be legally able to offer casino games and slots titles in addition to sports wagering. Our international gambling team at Playright.co.uk brings you the full story of how it will affect the online sports betting and casino market in Germany and beyond.
Following Years of Legal Uncertainty for German Online Gambling
The launch of the newly regulated market in Germany follows the transitional regulatory regime, which was set up last October in an attempt to settle the issue of online gambling legality, which had long been a grey area in Germany. It had been illegal for a German operator to run an online gambling site for many years but not illegal for German players to use overseas sites.
There had been several attempts to resolve the issue. At the start of 2020, German state leaders agreed on a new set of gambling regulations that would legalize slots gaming and online poker, alongside sports wagering. The rules then had to be ratified by each German state parliament and gain approval from the European Commission.
That process was made more complicated by the COVID-19 pandemic and concerns that the pandemic lockdown would increase the risk of online gambling addiction among German players. The result was a transition period, beginning last October. Heavy restrictions were applied to the online gambling sector, with operators warned that transgressions would threaten their prospects of obtaining a license in the newly regulated market.
The ratification stage was essentially complete by the end of April this year, and European Commission approval was also obtained, but the new rules have attracted plenty of controversies.
Some Regulations Causing Controversy
Gambling remains a controversial issue in Germany. In drawing up the regulations for the new markets, politicians were clearly sensitive to concerns about the possible social effects of an expanded and legal gambling sector.
The result is a package of regulations that is one of the toughest in the European sector. Casino operators are required to obtain separate licenses for slot games and casino games. In addition, there are heavy restrictions on slot gameplay.
In an effort to counter the feared addictive properties of online slot gaming, all slot games in the new German market have a €1 stake limit for each spin. In addition, a five-second delay between spins has been imposed, while autoplay and the offering of slot jackpots are also banned.
Sports Betting Rules
Sports betting in Germany was permitted under the transitional arrangements that were put in place last October. Still, companies offering sports betting markets are strictly limited when it comes to live betting. The only live betting markets permitted will be bets on the final score and the next scorer.
This approach to restricting live betting has been heavily criticized, most notably by the Deutscher Sportwettenverband, the German sports wagering association. But those objections have made little impact, with concerns over sports integrity believed to be behind the restrictions.
The process of issuing sports betting licenses has been a difficult one. Back in April 2020, there was a significant delay when an Austrian sportsbook operator objected to the rules. The body that issues licenses for the German sports wagering sector, the Darmstadt Regional Council, has issued a number of warnings to operators during the transitional period.
Nevertheless, the process of licensing has continued, and by the spring, 25 operators had earned a license to provide sports betting. Given the nation’s size and the popularity of sports in the country, the German sports betting sector seems likely to be one of the biggest and most lucrative in Europe.
Turnover Tax Trouble
Perhaps the most controversial aspect of the new regulations, particularly among operators, is the turnover tax applied to online casino games. All poker and slot games are now subject to a 5.3% tax on turnover, a provision that has angered the industry.
In April, leading gambling companies Flutter, Entain and Greentube commissioned a study that found the turnover tax could result in a channelization rate of around 51%, with up to 49% of players opting to gamble through offshore sites.
German and European industry bodies also spoke out against the new tax rate. The Deutscher Sportwettenverband (DSWV) filed a complaint with the EU in June, while the European Gaming and Betting Association (EGBA) also registered a formal complaint with the Commission.
The EGBA argued that the tax rate, which applied only to online gambling, would effectively offer a substantial tax advantage to land-based casino operators and venues in the country while counteracting the stated aim of the Treaty in discouraging players from using unregulated sites.
The German parliament heard a range of evidence on the tax rate subject but decided not to change the rate, approving it in a vote on June 23.
German Gambling Compliance Problems
While the launch of the new regulations will bring clarity to the German gambling market, there are concerns that anti-money laundering (AML) and compliance in the country may need to be boosted, with some calling for the fight against illegal operations to be more sophisticated.
Industry bodies in Germany have been vocal in calling for more action against illegal sites and have been angered by rules on advertising included in the new regulations. Operators of legal gambling sites will not be permitted to advertise their products between 6 am, and 9 pm, which operators warn could make it harder to encourage players to use legal sites.
The German Lottery Controversy
As gambling operators scramble to gain a license to operate in the new legal sector, some companies may find their path to legal operation more challenging than others.
One example is the secondary lottery operator Lottoland, which has reportedly applied for permission to provide its gambling products across Germany through a German license in addition to its existing Malta Gaming Authority (MGA) license. But Lottoland and several other overseas lottery operators have been criticized in the past, most notably by the German lottery organization Deutscher Lotto und Totoblock (DLTB), and are likely to face intense scrutiny.
How Will It Affect the Industry?
Germany has been considered one of the largest European markets for online gambling. According to a study made by research firm Goldmedia, German gambling revenue is on target to surpass the €3.3 billion thresholds by 2024.
Although the new regulations will impose stricter restrictions on both players and operators, the group asked 400 online gaming customers in Germany if they would bet locally after the rules are in place. While 68% said they would rather gamble with a locally-licensed operator, over a third of the punters (38%) said they would prefer to continue betting with their current, unregulated online operator.
There will undoubtedly be a learning curve and adjustment period that may result in a temporary decline. Still, with the right education, licensing, and responsible-gambling system in place, the German legal market is set to take off to great heights and continue to grow.
