German Gambling Law – Update 2018/2019

The past year has seen a number of changes in the online gambling regulation in Germany. Although, following the German Federal Administrative Judgement on the lawfulness of the prohibitive German gambling regime, several lower courts dismissed appeals against prohibition orders, there have also been positive developments for online gambling providers. Schleswig-Holstein, once again, proved to be a pioneer of a more liberalised regulation. In addition to the introduction of a quasi-license for online sports betting, the Schleswig-Holstein legislator passed a law that allows for the extension of previously issued licenses for online casino games. But also the remaining German federal states agreed on an amendment to the current legal landscape, reviving the application process for Germany-wide online sports betting licenses. These developments make it likely that in the next two years further liberalisation will take place.

1. Judicial decisions after the judgement of the German Federal Administrative Court

After the Federal Administrative Court had ruled that the prohibition orders which had been issued against unlicensed online gambling offerings were lawful, courts of lower instance followed this judgement. The Higher Administrative Court of Lüneburg, for example, considered the strict German gambling prohibitions to be constitutional and compliant with EU law (decision of 28 February 2019 – 11 LC 242/16). The Higher Administrative Court of Schleswig was more cautious in its position, but still denied that there was an obvious illegality of the German provisions under EU law (decision of 03 July 2019 – 4 MB 14/19).

A constitutional complaint pending against the Federal Administrative Court’s judgement before the German Constitutional Court is pending. The decision of the Constitutional Court will have an impact on future case law. Nevertheless, appeals against prohibition orders are not a priori unsuccessful. As lower instance courts are not legally bound to the decision of the Federal Administrative Court there is a chance that individual courts may depart from that judgement.

2. Schleswig-Holstein: “Quasi-license” for online sports betting and extension of online casino licenses

The federal state of Schleswig-Holstein continues to play a pioneering role in the liberalisation of the online gambling market. Besides new approaches in the online sports betting sector, online casino games will remain lawful (only) for some operators in Schleswig-Holstein.

Due to the fact that the sports betting German wide application process was stopped by the courts, the competent authority in Hessen was forced to not issue licenses in the past years. Schleswig-Holstein realised that this results in an unacceptable situation and created a quasi-licensing procedure for sport betting offerings in Schleswig-Holstein on its own in mid-July 2018. The so-called “transitional arrangement” is limited to online sports betting and offerings in Schleswig-Holstein. Nevertheless, for the time being, it is the only option for private online gambling providers to obtain a new sports betting permission of any kind.

In addition, the Schleswig-Holstein legislator passed a law on the preliminary regulation for online casino games. The law provides for an extension of online casino licenses that had been granted under the former Schleswig-Holstein gambling law. Generally, these license would have expired at the beginning of 2019. Pursuant to the new law, however, the licenses remain valid until a new license is granted – at the latest until 30 June 2021 (expiration of the current Germany-wide Interstate Treaty on Gambling). The new law does not enable online gambling providers to apply for a new online casino license in Schleswig-Holstein but only applies to providers have already obtained a respective license in the past.

3. Revival of the online sports betting application process under the Interstate Treaty on Gambling

Following the liberalisation attempts for online sports betting in Schleswig-Holstein, in March 2019, the state legislators of the German federal states agreed upon an amendment to the Interstate Treaty on Gambling. The new provisions include changes to the existing application process laid out in the current Interstate Treaty on Gambling. Particularly, the limitation of licenses and the provisions on the selection of successful applications will be waived as this was one of the main reasons why the German courts found the application process to be unlawful. Instead, the competent Regional Council Darmstadt will be able to issue an unlimited number of online sports betting licenses. The licenses initially remain valid until the expiration of the Interstate Treaty on Gambling on 30 June 2021. Afterwards, the continuation of the licenses will depend on whether and in what manner the federal states agree on a new gambling law. However, it is to be expected that a new regulation would allow for a prolongation of the new sports betting licenses.

The amendment to the Interstate Treaty on Gambling must still be ratified by the state parliaments until 31 December 2019. However, the competent authority stated that applications may be submitted before that date to allow for timely grant of the license (earliest validity date would be 2 January 2020).

4. Financial blocking: German authority sends first prohibition order to payment provider

Despite the very strict regulation of online gambling in Germany, enforcement of these provisions remains difficult. In response, the German authorities started to approach the payment providers that process the payment transactions in relation to online gambling offerings. First, the German authorities sent so-called “information letters” to the payment providers, informing them about allegedly unlawful online gambling offerings and the prohibition to participate. Those letters were not legally binding. In 2019, however, the competent authority in Saxony issued an actual prohibition order against a large, internationally active payment service provider, banning the provider from participating in payment transactions in connection with online gambling in Germany. Respective orders to prevent payment processing may indirectly also substantially affect gambling providers, which is likely intended by the authority. Thus, gambling providers may be entitled to directly take actions against the order that was issued against the payment provider.

5. A new gambling law in 2021?

As the current Interstate Treaty on Gambling will expire on 30 June 2021, the state legislators have to pass a new German gambling law until mid-2021. Such new regulation will potentially provide for more liberalisation of the online gambling sector. If a liberalisation cannot be agreed upon on a Germany-wide level, some German states have already announced that they will no longer participate in a unified regulation but introduce individual laws.