Germany validates 3rd State Convention on Gambling

The Minister-Presidents of Germany’s 16 federal states has validated the third amended State Treaty on Gambling. In this way, they open the path for operators to apply for sports betting licences in the market. At the same time, Schleswig-Holstein will be allowed to run its own, liberal regulatory regime.

At the Minister-Presidents’ Conference on 21st of March, the lawmakers agreed to sign the Treaty. The licences will come into force from January 1, 2020, and run until June 30, 2021. This will effectively act as a placeholder, with a view to a complete overhaul of Germany’s gambling regulations by 2021.

The European Commission and the changes

The Treaty will also be submitted to the European Commission to be ratified. That is expected to take place in April this year, with a view to beginning the licensing process later in 2019.

The third amended State Treaty has changed from the 2012 edition, though the controversial 20-licence limit has been removed. While there is no limit on the number of operators that can be licensed, licensees will be taxed on 5% of turnover, in-play betting is prohibited. Players will not be allowed to spend more than €1,000 (£868/$1,137) each month. As before, sports betting is the only vertical permitted.

Schleswig-Holstein operations

Schleswig-Holstein will be permitted to continue with its liberal regulatory model until 2021. First introduced in 2011, the state has does not impose any restrictions on product verticals. The state also sets a 20% gross revenue tax. Steps towards renewing licences issued in 2012 began last week, with a view to having these run until June 30, 2021. The state will effectively act as a testing ground for a more liberal model. From 2021 this model could be rolled out across the rest of the country.

DrDr Wulf Hambach’s suggestion

Dr Wulf Hambach of leading German law firm Hambach & Hambach suggested that it would be difficult to enforce the prohibition on live betting. That happens, due to the short-term nature of the amended Treaty. He said: “There is also big question over whether the online casino ban will be obeyed from January 1, 2020, onwards,” Hambach added. “If, for instance, other federal states are in favour of online casino regulation, they are unlikely to enforce the ban.”

Hambach also predicted a more liberal framework: “I think it’s likely that after 2021 you will see a fully regulated market, so this one step in the right direction, and there are already a lot of discussions between states, but I think these talks are very fruitful. If you look back two or three years, there have never really been serious discussions about major reforms [to gambling regulation. This is the first time that it feels like a major step forward has been taken.”

Christian Democratic Union

Hans-Jörn Arp, parliamentary leader of the Christian Democratic Union in Schleswig-Holstein and one of the State Treaty’s most vocal opponents, described today’s agreement as a “breakthrough”.

“Today’s decision of the Minister President Conference to present the foundations for follow-up regulations to the State Treaty on Gambling means we have finally achieved a breakthrough after ten years and gained recognition from the other federal states. For Schleswig-Holstein, this is a great success, after the state had long met with resistance to its forward-looking solution in the field of gambling. Now the other federal states are pulling in the same direction. That happens after they were finally convinced that the Schleswig-Holstein model is desirable.”

Deutscher Sportwettenverband

However German operator association the Deutscher Sportwettenverband took a less positive approach. President Mathias Dahms describes the Treaty’s ratification as an insufficient first step towards regulating the country’s sports betting market. “The third amendment to the State Treaty on Gaming is only a temporary measure for the short transitional period until 2021,” Dahms said. “It does not solve the structural deficits of the State Treaty but gives the countries time to continue negotiating the urgently needed modernisation of German gambling law. In Germany, there is a strong sport betting market. Customers have clear expectations of their sports betting product. If states completely ignore social realities and customer demand, they run the risk of failing again with their regulation. Unattractive conditions threaten to marginalise the licensed offerings in Germany compared to the black market. Since then, the Treaty has only been developed behind closed doors”

Deutsche Automatenwirtschaft

Deutsche Automatenwirtschaft is the German association of slot machine manufacturers. They also urged states to use the time before the expiry of the Treaty in 2021 to develop new regulations. Deutsche Automatenwirtschaft chief executive Georg Stecker said: “The consensus that has been reached is the first step. However, the main goal, namely the much-needed, coherent regulation of all forms of gambling, is still pending. Only when all forms of gambling are regulated according to quality standards, can the black market be contained. That is also including commercial slot machines. So, consumers will be sustainably protected, and legal businesses will be strengthened.”

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