Another year has passed without the enactment of a comprehensive new gambling regulation in Germany. However, there has been some movement by the legislator, and a major high court decision had significant impact on the interpretation of Germany’s strict gambling prohibitions.
A litigation to keep track with – Judgment of the German Federal Administrative Court on the German Interstate Treaty on Gambling
In October 2017, the German Federal Administrative Court confirmed two administrative prohibition orders against foreign non-licensed operators of online sports betting, poker and casino (decisions of 26 October 2017 - 8 C 18.16 and 8 C 14.16).
While the preceding lower court had dismissed the orders which prohibited the provision of online casino games and sports betting offers as unlawful, the German Federal Administrative Court upheld the respective prohibition orders, laying down low requirements with respect to the wording and reasoning of such orders. A great deal of attention was attracted by the court’s finding that the prohibition of internet gambling under the current German gambling regime is constitutional and compliant with EU law. According to the court, the prohibition of online gambling under current German gambling law lawfully constrains the EU Freedom of Services because, in the sense of EU law, it is proportionate and, in particular, capable of contributing to the achievement of the public interests in a systematic and coherent manner.
The decision has been heavily criticised, and it has been questioned whether it has sufficiently considered the case law of the Court of Justice of the European Union, in particular in the matter INCE in this regard. In any case, the matter will continue since one of the plaintiffs submitted a constitutional complaint to the German Federal Constitutional Court.
Legislative process in Germany
At the beginning of 2017 the Prime Ministers of the German Federal States had agreed on a new gambling law for Germany which was supposed to enter into force in January 2018. It was designed to uphold the majority of the current legal provisions, particularly the prohibition of online betting, but introduced a new licensing procedure for sports betting operators. However, the ratification by the governments of the German Federal States failed. In May 2017, the federal elections in the Bundesland Schleswig-Holstein led to a government change and gave rise to a new government that was not willing to ratify the amended gambling law. Their withdrawal led to the cancelation of the legislative process. Consequently, the Interstate Treaty on Gambling from 2012 remains in full force and effect for the time being.
Schleswig-Holstein’s government, however, announced that it will liberalize its market as it had already done in the past. Schleswig-Holstein is planning to team up with other German Federal States to liberalize the German gambling regime; still, results of this approach have not become visible, yet.
Law enforcement where the money lies
In connection with the publishing of the so-called “Panama Papers” in November 2017, the media drew attention to the role of various large German banks which were involved in payment transactions for private gambling operators. The payout of winnings arising from supposedly unlawful gambling could be regarded as money laundry and abet to the illegal organisation of gambling. Consequently, the German Federal Financial Supervisory Authority announced that they had reached out to the respective banks.
In addition, German gambling law provides for another enforcement measure which has been subject to public debate – the so-called “financial blocking”. German gambling authorities have the power to prohibit credit and payment service providers to participate in payments or to carry out payments from illegal gambling. In the past the German authorities have been rather reluctant to make use of this power, as the legal basis for financial blocking in Germany has not been considered to be very stable. However, while no official financial blocking orders have been issued, the competent authority has recently approached a number of payment providers worldwide to ask them – on a voluntary basis – to abstain from providing payment services to gambling providers.
The German tax authorities have increased their pressure on online sports betting and casino providers offering their services to German customers, investigating potential tax evasion and even taking criminal action in some cases (please find a more detailed analysis regarding tax requirements for gambling providers here).
Stricter requirements have been applied to arcade operators over the last year. After a transitional period has run out, (i) a minimum distance between arcades must generally be met, (ii) arcades must not provide more than a specified number of slot machines at a time, and (iii) only one arcade may be run in the same building. However, the respective requirements differ among the various Federal States, and a number of court cases against the new requirements are still pending.