How could politics help drive regulatory changes in Germany?

Could a New Government in Germany Signal Positive Changes for the Online Gambling Sector? Analyzing the Interstate Treaty’s Evaluation

As Germany gears up for pivotal snap elections on February 23, the country faces significant challenges, from a struggling economy to the dissolution of its previous coalition government. Amid this turbulence, the online gambling industry stands at a crossroads, keenly awaiting potential shifts in policy.

Since the market’s regulation in 2021, licensed operators have found themselves operating under a dense canopy of stringent regulations while concurrently contending with a burgeoning black market. This dynamic raises concerns about the industry’s growth and sustainability in a highly competitive and shifting landscape.

Efforts to amend the Interstate Treaty on Gambling have yet to yield meaningful results, leaving many stakeholders frustrated by the inability to effectively address Germany’s significant channelization issues. With a change in government on the horizon, industry professionals are left wondering whether this year might signal a new era for the German gambling market or merely perpetuate existing challenges. Optimism is tempered by a need for patience as stakeholders wait for signs of meaningful progress.

Prospective Changes to the Interstate Treaty: Scrutinizing the Evaluation

In December 2023, an interim evaluation of the Interstate Treaty on Gambling was initiated to assess the efficacy of existing regulations and recommend necessary improvements. While there is cautious optimism that some of these recommendations will be implemented during upcoming legal amendments, the changes are expected to be more cosmetic than comprehensive.

Concerns have been raised regarding the impartiality of the evaluation led by Dr. Tobias Hayer, a noted critic of the gambling industry, who has been accused of possessing a bias against gambling interests. This skepticism is underscored by a September 2023 investigation by Business Insider, revealing that many of Hayer’s recommendations were adopted by the Gemeinsame Glücksspielbehörde der Länder (GGL) in the tendering process, raising questions about fairness and transparency.

Proposed “Surgical Amendments” to Regulations

As anticipated by many industry figures, the proposed changes from Hayer’s evaluation are expected to be predominantly superficial. Luka Andric, Managing Director at the German Sports Betting Association (DOSW), indicated that the primary alteration could revolve around minor adjustments to IP blocking mechanisms—a necessary improvement given the current ambiguity in the Interstate Treaty’s language regarding illegal websites.

A noted restriction is the outdated process of approving new online slot games, which is currently cumbersome, hoping for a shift to a more efficient supplier-level approval model. Simon Priglinger-Simader, Vice President of the German Online Casino Association (DOCV), expressed optimism that the proposed model would streamline operations and improve the current catalogue of games.

Potential for Relaxation of Casino Restrictions by the GGL

While the interim evaluation did not explicitly address relaxation of stringent product restrictions, industry insiders believe there may be an opportunity to ease some constraints currently imposed on online slots. Presently, regulations enforce a €1 stake limit per spin and a five-second delay between spins, alongside a blanket €1,000 monthly deposit limit that requires extensive personal disclosures for increases.

Priglinger-Simader highlighted that the GGL appears open to reconsidering these limitations, potentially allowing higher stakes and relaxing the mandated spin delays. However, any amendments would necessitate endorsement from the advisory board and subsequent approval from the 16 state interior ministers—a challenging process with uncertain outcomes.

Emerging Markets for Online Casinos in Western Germany

Another significant concern in the casino sector has been the inconsistency surrounding table game regulations, which vary by state. Currently, few regions have opted to regulate table gaming, but a forthcoming tender process for online table games in North Rhine-Westphalia, Germany’s most populous state, could mark a substantial development.

If successful, this initiative could create a lucrative market for four to five operators in a region with a population of 18 million. Operators remain hopeful for national licensing to simplify these complexities currently governed by regional regulations.

Expanding the Betting Catalogue

On the sports betting front, operators have recently made strides in broadening their product offerings, with Andric noting hopes for continued expansion within the existing regulatory framework. However, similar to casinos, betting operators in Germany have grappled with limitations on the sports and leagues available for wagering. Positive momentum exists, yet persistent political opposition—particularly from figures like Bremen’s senator of the interior—remains a considerable hurdle.

The Debate on Amateur Sports Leagues

The landscape of sports betting has been further complicated by political resistance to betting on amateur leagues, with critics arguing that it undermines the integrity of sports. Andric countered by highlighting that numerous illegal operators capitalize on these opportunities, which diminish the competitive landscape for licensed operators who adhere to regulatory constraints.

The Weight of Political Opposition

The political landscape in Germany remains fragmented, with certain state governments staunchly opposing liberal reforms in gambling regulations. This resistance complicates efforts to rally sufficient political support to advance the interests of licensed operators. The GGL has expressed a willingness to engage in dialogue but acknowledges the necessity of political backing to enact substantial changes.

Constitutional Reforms: A Necessity for Gambling Regulation

Many states, particularly with Social Democratic leadership, have historically resisted efforts to liberalize gambling laws, complicating the attainment of the two-thirds majority required for substantial changes. Priglinger-Simader articulates this challenge, likening it to amending constitutional law. The GGL has reiterated that only the states can initiate changes to the Interstate Gambling Treaty, underscoring the complexities inherent in the system.

The Impact of Upcoming Federal Elections

The February elections are anticipated to shift the government towards a pro-business stance, primarily via the Christian Democrats Union (CDU) and the Christian Social Union (CSU). However, the structure of Germany’s federal system means that meaningful changes for licensed operators may not materialize swiftly, as gambling regulations reside firmly with the states.

A Landmark Ruling on the Controversial Stake Tax

In an unexpected turn, the Financial Court in Hesse delivered a significant critique of the 5.3% stake tax, which has hampered the industry since its implementation in 2021. The court highlighted alarming drops in revenue for licensed operators and raised the alarm about an unconscionably high black market share, heralding these as indicators of regulatory failure.

Opening the Door to a New Political Discourse

The court’s ruling may instigate a transformative shift, reinforcing arguments the industry has championed for years. As Wulf Hambach, a gambling lawyer, indicated, such judicial findings could provide new momentum for dialogue concerning the entrenched black market and lead to potential reforms in the near future.

Glimmers of Hope for Gambling Regulation in Germany

While comprehensive reforms may not emerge immediately in 2025, stakeholders are optimistic for more extensive discussions and potential reforms targeted for 2027. As associations like the DSWV prepare for these forthcoming changes, they emphasize the need to remain engaged in political dialogues surrounding the future of gambling regulation in Germany.

With the recent court ruling serving as a critical catalyst, industry representatives believe that undeniable facts from judicial proceedings may compel policymakers to reconsider their positions. As Hambach aptly summarizes, there indeed appears to be a “light at the end of the tunnel” for the future of gambling regulation in Germany.