Europe’s largest economy has taken a similarly draconian standpoint to the issue of online gambling to that of the United States. In 2007, all forms of internet gambling, advertising and related payments were prohibited for private operators as a result of the controversial Interstate Gambling Treaty. This Treaty came into effect in 2009 and introduced strict criminal punishments for the unauthorised organisation of “games of chance”.
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“Gambling” is defined in the Interstate Treaty as “payment for the acquisition of a chance in the course of a game”. Despite the blanket ban, the courts in different Länder (Germany is made up of 16 federal states or Länder, each has a separate constitution) have not taken a uniform attitude to enforcing the prohibition against both illegal land-based and online operators. Indeed, the fact that the vast majority of remote operators are based offshore means that regulators have an almost impossible task to enforce the ban, even with IP and payment blocking powers. Regulators have been more successful at prosecuting illegal land-based betting shops.
Predictably, in January 2008, a letter of formal notice was issued and infringement proceedings were initiated by the European Commission on the grounds that the blanket ban was disproportionate, unjustified and that Germany was not applying its gambling policy in a “consistent and systematic manner” across all its sectors. The prohibition did not apply to
unviaBle Rate of 16.7 peR cent tax on tuRnoveR.
monopoly-operated horse racing, sports betting or slot machines businesses, but slot machines operators were singled out as carrying out expansionist policies. The German government stubbornly argued that the monopoly system and blanket ban were necessary to provide consumers with a high level of protection against gambling addiction.
Recent European Court of Justice (ECJ, or as it is now referred as the Court of Justice of the European Union - CJEU) decisions in the cases of Carmen Media (C-409/06) and Markus Stob (C-358/07), have turned the German gaming market on its head by challenging the validity of the ban under European law. The claim was that the current national monopoly regime was “not suitable for ensuring legitimate interests that may justify restrictions to the freedom of establishment (Article 49) and the freedom of services (Article 56) granted in the European
The Federal make-up of Germany is heavily influencing its stance towards online gaming. The break-up of the interstate ban and lack of uniform agreement between the Länder could create a fractured and disjointed market.
Treaties”. As a result of the rulings, amendments are being made to reform the system via a lengthy political process, including notifying drafts to the European Commission, and engaging in negotiations on the details of the future regulatory regime. Only once a new Treaty is in place, which is compliant with European law, will the Commission drop infringement proceedings dating from 2008.
The Interstate Treaty expires on New Year’s day, and there are no intentions to maintain it in its current form due to its overwhelming unpopularity and contravention of European law. Therefore, private operators will soon be able to enter the German gaming market but may face substantial challenges, outlined below. Under current proposals, licences are expected to be issued by early 2012.
The following is a breakdown of the main talking points of the fresh draft Treaty that was notified to the European Commission in April:
• Online Operators would be entitled to bid for one of seven sports betting licences.
• Only one online casino licensee per state to offer casino games and poker.
• Licences would be valid for a seven year experimental phase.
• 16.7 per cent tax on turnover.
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