German Gaming Law – Update 2021 / 2022

The long-awaited (partial) liberalization of German gambling law has taken place. The new German Interstate Treaty on Gambling (ISTG 2021) entered into force in July 2021, allowing private operators to offer their services on the German market to a larger extent. While problems have arisen in the context of the licensing procedure which private operators must undergo, various operators have successfully applied for and received a license. Nevertheless, the courts have been busy over the past year with lawsuits from players who reclaim their stakes from private operators. This article looks at developments over the past year, explains the reasoning of the various courts and current developments.

I. Relevant changes to the structure of German gaming authorities

In the Federal Republic of Germany, gambling law generally falls within the jurisdiction of the 16 federal states, leading to 16 potentially competent gaming authorities. However, the federal states had previously designated two authorities to carry out licensing procedures. The Darmstadt Regional Council (RP Darmstadt) in Hesse is responsible for the online sports betting licensing procedure in Germany. The State Administrative Office of Halle at the river Saale in Saxony-Anhalt is responsible for the licensing procedure for virtual slot machines and online poker. These two authorities will lose their competence on 31 December 2022. 

From 1 January 2023, the responsibility for all online licenses in Germany as well as enforcement measures such as prohibition orders, IP blocking as well as the blocking of payment service providers will be passed from all federal states to the newly formed joint gambling supervisory authority in Halle (GGL). The GGL has been in operation since 1 July 2022 and is currently focusing on legal action against unauthorized gambling offers and unauthorized advertising. In order to enforce prohibition orders, the GGL mainly uses the aforementioned measures of IP blocking and the blocking of payment service providers. Furthermore, the GGL can initiate criminal investigations with the public prosecutor's office.  The GGL should ensure uniform application and enforcement of the law and enable gambling operators to operate under equal and uniform framework conditions.

II. Licensing procedure 

The ISTG 2021 allows private operators to apply for licenses to offer sports betting, virtual slot machines (online simulations of terrestrial slot machine) and online poker. Licenses will be valid for a period of five years. 

1. Online casino games

The regulation does not include online casino games. These are defined as virtual simulations of casino games (such as Black Jack and Roulette) and live broadcasts of a terrestrially conducted casino games with the possibility of participation via the internet. The possibility for obtaining a license for online casino games will be subject to separate laws of the individual federal states. The federal states can decide whether they will grant licenses for online casino games to private operators or only allow state operators. However, unlike the licenses for i.a. virtual slot machines and sports betting, if the federal states decide to grant licenses to private operators, there will only be a limited number of licenses. Not all federal states have yet declared their final decision whether it should be possible for private operators to apply for an online casino games license.  The federal states Schleswig-Holstein and North Rhine-Westphalia have already stated that they are planning to issue licenses to private operators. Schleswig-Holstein intends to issue 4 licenses and North Rhine-Westphalia 5 licenses. Preparations for applying for a license for online casino games are underway.  Likely, the legislators will model the laws on the specifications for a license to operate a land-based casino.

2. Online sports bets, slots and poker

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 most important aspects of the common requirements can be found here.

Existing online sports betting licenses under the previous ISTG expire at the end of 2022. The application process for new online sports betting licenses under ISTG 2021 that apply from 2023 onwards is currently ongoing, and we expect the first licenses to be issued in Q4 2022.

The first licenses for virtual slot machines have already been issued. We expect further licenses to be issued steadily in the coming months. 

The authorities publish an official list on the internet in which the operators and brokers of games of chance are listed who have a license or concession pursuant to ISTG 2021 (so-called white list). This list can be found here.

III. Recovery claims

Recovery claims are not a new phenomenon, but a growing number of players has tried to claim back their stakes from private operators over the last year. Despite the fact that these claims have been occupying courts for several years, no final and binding high court decision has been issued, yet: While some courts have granted payments to players (e.g. LG Köln, AG Essen), others have rejected respective claims (e.g. LG München I; AG Euskirchen, LG Regensburg, LG Dresden – most of them not yet published).  A first trend is emerging with regard to the recovery of sports bets. Here, there are good chances for operators to reject claims for reimbursements in court.

At the core of recovery claims is the fact that players have lost their stakes in online casinos that had not been licensed under German law. The players now argue that the casino operators therefore recovered their stakes without a valid legal basis, whereas the operators, inter alia, bring forward the fact that the players willingly participated in the unlicensed gaming offerings. Some players even target payment service providers through which their payments to casino operators were processed. 

While the decisions mentioned above all refer to the old legal situation before the German market was liberalized under the ISTG 2021, to the extent online casino operators in Germany continue to serve the German market without the necessary license under the new law, similar lawsuits remain possible.

IV. Austrian law

There are also several new developments in gambling law in our neighboring country, which also sees a “tsunami” of recovery claims. Most of these claims are based on offering illegal (non-licensed) online gambling services. 

1. Structure of the Austrian Gambling law landscape and intended changes 

Austria has a gambling monopoly, which is regulated in the Austrian Gaming Act 1989 (Glücksspiel Gesetz - GSpG). The right to carry out games of chance is thus reserved exclusively to the Federal Government (which makes all unlicensed gambling illegal), provided that no exception to the application of the GSpG is made. 

Games of chance may also not be offered online without a license under the GSpG. A license granted in another EU/EEA Member State (such as Malta, Cyprus, or other possible member states) does not entitle the holder to offer games of chance in Austria. 

In the recent government program 2020-2024, it is envisaged that the Austrian federal government will unbundle the various roles of the Federal Ministry of Finance (BMF) in the field of gambling sector. The gambling agendas are to be spun off from the BMF, especially since the federal government benefits from gambling through tax revenues on the one hand but is also responsible for player protection on the other. Both areas, tax collection and player protection, are therefore the responsibility of the BMF. 

The creation of an independent gambling authority is also planned. Specifically, a reform of the entire Austrian gambling system is envisaged. One major change was supposed to be (and still is) the transfer of responsibility for supervision and licensing to an independent, no instructive and newly created supervisory authority or a judicial licensing senate.

In the Austrian government program 2020-2024, a clear commitment to expanding player protection in the gambling sector is apparent.

In principle, the corresponding package of legal measures should have been passed by parliament in the fall of 2021. Although the intention of the Austrian government is clear (strengthening of player protection), a concrete draft bill by the BMF is up to this date not yet available.

Very important points of the government's program (especially for online gambling providers with non-Austrian licenses), which are to have an influence on the draft law, are the regulation of the online sector through DNS blocking and blacklisting of illegal providers, as well as effective protection of minors through re-regulation of loot boxes and gambling-like mechanisms. Improvements are also to be implemented in general regarding player protection (also for concessionaires).

2. Concessioning procedure in Austria

In purely theoretical terms, a company from an EU/EEA member state can obtain a concession if, inter alia, at the time of applying for a concession, its registered office is established in a state of the EU/EEA and if a "comparable lottery concession" exists and a branch in Austria is subject to a "comparable state gaming supervision". 

The theoretical nature of the granting of concessions in Austria is because in the case of several applicants for concessions, the Federal Minister of Finance has discretion. If a concession is upheld in one area, no further concession may be granted. For this reason, there are currently only two concession holders at federal level in Austria: Österreichische Lotterien GmbH with a concession until 30.09.2027 for various games of chance and Casinos Austria AG with a concession until 31.12.2027 and 31.12.2030 respectively for the operation of other games of chance.

3. Recovery claims

The number of players reclaiming their capital losses has increased dramatically over the last two years. The reason for the accumulation of lawsuits is that the Austrian Supreme Court has consistently ruled that Austria's gambling monopoly complies with EU law, basing its decision essentially on the principle of player protection (28 supreme court decisions on this issue have been handed down since 2022 alone). Consequently, all gambling contracts with online gambling providers are to be qualified as null and void and the losses are to be refunded.

A recent decision by the Vienna Higher Regional Court deserves particular attention. It concerns the question of the applicable law: As a rule, due to the orientation of the online casinos’ activity towards a certain market, the law of the state in which the player has his habitual residence as a consumer is to be applied. The purpose of the provision in this regard is consumer protection. In the present case, the player claimed his winnings, hence claims for performance under a null and void gambling contract (according to Austrian case-law), from an online casino that was not licensed under Austrian law. However, the application of Austrian law meant that he could not claim the winnings, as the gaming was considered unlawful under Austrian law. Consumer protection would be reversed. Therefore, the Vienna Higher Regional Court now referred to the Court of Justice of the European Union the question whether the law of the operator’s establishment can apply instead of the law of residence. The answer to the question referred is, thus, likely to be of significance for German law as well.