In March this year, the German Conference of Ministers-President agreed on the third amendment of the State Treaty on Gambling (Dritter Glücksspieländerungsstaatsvertrag – 3. GlüÄndStV). This interim amendment is intended to extend the so-called experimental phase that allows private sports betting companies to operate in Germany alongside the state operator.

Legal background

In 2012 the German Conference of Ministers-President decided for the first time to suspend the state monopoly on sports betting for a period of seven years and to allow a limited number of 20 private sports betting companies to operate. However, court proceedings stopped the licensing procedure, and therefore not a single license has been granted since the opening up of the sports betting market.

The third amendment of the State Treaty on Gambling

With the newest re-regulation of the State Treaty on Gambling, the German Conference of Ministers-President is trying to create more legal certainty for private sports betting companies. For this reason, the conference has already removed the time limit on the experimental clause with its decision of April 18, 2019. Possible sports betting licenses will now not only be valid until June 30, 2019, but until June 30, 2021 – the final day of the State Treaty. In addition, the amendment has been notified to the European Commission under the notification number 2019/187/D with the end of the standstill period being July 29, 2019.

The amendment is supposed to authorize the granting of new (online and offline) sports betting licenses. This includes the possibility to further extend the experimental phase for sports betting up to June 30, 2024. It also includes the removal of the quota system that limited the number of sports betting licenses to 20. Unfortunately, the draft focuses on sports betting only and does not mention online casinos.

Online casinos

Offering online casino services is only legal in the German state of Schleswig-Holstein. Schleswig-Holstein has issued 20 online casino licenses in the past. The latest licenses expired in February 2019. In the negotiations on the third amendment of the State Treaty, Schleswig-Holstein threatened to leave the State Treaty if no agreement on online casinos is found. The German Minister Presidents agreed on a trade-off that allows Schleswig-Holstein to opt for an extension of the online casino licenses that have recently expired.

Schleswig-Holstein’s parliament used this opportunity and voted for the revalidation of the online casino licenses on May 16, 2019. This allows former Schleswig-Holstein online casino licensees to continue using their licenses from June 28, 2019 until June 30, 2021 for Schleswig-Holstein-based customers. It does not allow for a new licensing procedure and it also does not permit companies to operate online casino games in other German states.

Evaluation and outlook

The third amendment of the State Treaty on Gambling aims to create more legal certainty for all parties concerned. However, the amended State Treaty is the lowest common denominator in that it solved the problem of a necessary new regulation only temporarily, placing the emphasis back on the states to negotiate a new treaty by 2021. Furthermore, the German legislator has missed its chance to legalize online casino services nationwide and to harmonize the State Treaty with the regulations of Schleswig-Holstein.

On a positive note, the amendment of the State Treaty removes market entry barriers for sports betting operators that want to be licensed in Germany and provides some clarity, not only for sports betting operators but also for third parties involved, including payment service providers, the media and sports clubs. It also increases the potential to draw more operators from the grey market onto the regulated market.

But the draft amendments hold on to the restrictions on live betting and the EUR 1,000 monthly limit on stakes per player. Because of the continued adherence to these restrictions and the missed chance of legalizing online casino services, the amendment can be considered as only a partly satisfying solution for private sports betting operators.

According to the current status, the amendment will enter into force on January 1, 2020. This requires all participating German states to ratify the amendment by December 31, 2019. The national competent gambling authority of Hesse is expected to issue the licenses as soon as possible starting January 2, 2020. The minimum licensing requirements have already been published in July and it is now the time to prepare the licensing application.

With issuing the new licenses, the gambling authorities will be instructed to prohibit unlicensed sports betting and other unlicensed gambling services nationwide. It is relatively certain that Hesse will make the granting of sports-betting licenses dependent on no illegal (unlicensed) online casino games being offered at the same time. This will probably also include revoking a license if the operator does offer these services.

A further amendment of the State Treaty is envisaged for the period after June 30, 2021. This next amendment is intended to set up a new regulatory framework which, according to the wishes of Schleswig-Holstein as well as gambling associations in Germany, will also mean online casino licenses can be issued in other German states. The negotiations for this are already on the way and the further development needs to be monitored.