While 2013 was somewhat uneventful in terms of developments in gambling law in Germany, things took a more interesting turn last year.

Court of Justice of the European Union ruling on German gambling legal framework

Of utmost importance was the decision in Digibet and Albers, C-156/13 by the Court of Justice of the European Union (CJEU) on a key question of the compliance of German gambling law with the EU freedoms. In 2012, the small Federal State of Schleswig Holstein introduced a very liberal Gambling Act under which more than 50 licences for the provision of online casino games and sports betting had been granted. The Act was withdrawn in 2013, but the granted licences are valid until 2019 at least. It was widely presumed that that this deviation by Schleswig Holstein from the strict requirements established by the Interstate Treaty on Gambling 2012 (ISTG) would, in itself, make the Schleswig Holstein licences unlawful under German law but the CJEU did not share this view.

The CJEU refrained from considering the legality of the German gambling regime as a whole, looking instead at the issue of whether it was lawful for Schleswig Holstein to diverge from the ISTG. According to the CJEU, the existence of two different gambling law systems for a short period of time alone did not affect the applicability of the strict German regulations on the prohibition of gambling. The CJEU explicitly instructed local courts to look at whether German gambling law complies with European law. The Digibet and Albers matter has been referred back to the German Federal Supreme Court which will now have to decide the case based on the CJEU ruling.

Sports betting licensing issues

The Digibet and Albers decision will not be the last CJEU decision on the legality of German gambling law. The Criminal Court of Sonthofen has made a reference to the CJEU (Ince, C-336/14) in relation to the sports betting licensing procedure introduced into German law in 2012 (which enables up to twenty private providers to obtain a licence to offer online and offline sports betting).

The court’s view (which appears to be shared by the European Commission), was that the licensing process is badly organised and not transparent. Licences have, theoretically, been available since 2012 but none have been issued to date. Even the finalisation of the administrative procedure and the publication in September 2014 of a list with twenty providers deemed able to receive a licence did not lead to further progress as a number of interim proceedings prevent the regulator from actually granting them. When exactly the licences will finally be granted is uncertain. It is highly unlikely to be before autumn 2015 and more probable that providers will have to wait until 2016.

Court victories of private providers

While administrative courts have tended to uphold prohibition orders issued against private providers of online casino games and sports betting, 2014 saw quite a number of court decisions which favoured private providers. According to these decisions, a number of prohibition orders that were issued under the old Interstate Treaty on Gambling of 2008, can no longer be considered enforceable for a variety of reasons. The courts did not primarily focus on possible non-compliance with European law, but rather on the breach of very basic principles of German administrative laws which made the orders unlawful.

New VAT provisions

Since 1 January 2015, eGaming providers in EU Member States which provide services in Germany are required to pay German VAT in relation to those services as a result of significant changes to the European VAT regime. The previous position was that Member States only had to pay VAT in their country of establishment. This is likely to lead to significantly raised costs for European eGaming providers.

Taxation of poker players

With respect to poker, the Financial Court of Muenster issued an interesting decision on 15 July 2014 (which is in line with previous decisions of other financial courts), as a result of which professional Poker players will be liable to income tax on any winnings. This is a controversial decision as income tax may only be levied if the financial authorities deem that Poker is a game  of skill rather than a game of chance, something the gambling authorities strenuously resist. This means that while the gambling authorities and administrative courts generally regard Poker as a (prohibited) game of chance, the tax authorities and financial courts consider – at least with respect to experienced players – Poker is a game of skill and tax can be collected on any winnings.

Criminal conviction of a player

Another controversial decision was issued by the Criminal Court of Munich on 26 September 2014. The Munich court fined a player (not a provider!) for participating in an unlicensed game of chance (in this case, online Black Jack games). Strictly speaking, it is an offence to take part in unlicensed games of chance but this appears to be the first time that a player has actually been convicted for such participation. The court ruling is not, however, likely to start a new wave of player convictions as it came about not as a result of prosecution for that particular offence, but when the player was initially charged with social security fraud and defended himself by claiming that he had gained the money from playing Black Jack online.

The decision has been appealed and it is uncertain whether it will stand given it includes a number of legal inaccuracies. Other criminal courts do not seem to take the same approach as of the court of Munich. With respect to the services of online sports betting providers, for instance, the Criminal Court of Kempten judged on 28 April 2014, that the brokering of sports betting cannot be punished at the moment due to legal uncertainties from a European law point of view.