Gaming in Germany: overview

Legislative framework of gambling regulation

Legislative framework of gambling regulation

◊ Status: Law stated as at 01-Oct-2016 | Jurisdiction: Germany

Contents

♦ Legislative framework of gambling regulation
   ◊ Overview
   ◊ Definitions of gambling
   ◊ Regulatory authorities
   ◊ Gambling products
♦ Land-based gambling
   ◊ Regulation/licensing
♦ Online gambling
   ◊ Regulation/licensing
   ◊ B2B and B2C
   ◊ Technical measures
♦ Mobile gambling and interactive gambling
♦ Social gaming
♦ Gambling debts
♦ Tax
♦ Advertising
♦ Developments and reform
   ◊ Legal development
   ◊ Reform
♦ The regulatory authorities
   ◊ State authorities
   ◊ State Ministries or Senates of the Interior
♦ Online resources
   ◊ German state websites

Overview

images 1. What legislation applies to gambling?

Gambling law falls primarily within the individual competency of each of the 16 German states (Länder). It is only regulated by federal legislation to a limited extent.

Main legislation

Interstate Treaty on Gambling 2012. The main legal framework governing both terrestrial and online gambling is the Interstate Treaty on Gambling 2012, which sets out the main objectives and core elements of German gambling regulation. This was adopted by 15 of the 16 German states in 2012, and by Schleswig-Holstein in 2013 (see below, Schleswig-Holstein).

Core objectives include:

  • Consumer protection (including the prevention of problem gambling and the protection of minors).
  • Fraud prevention.
  • Combatting the black market.

As well as defining the specific types of gambling which are covered under the legislation, the Treaty maintains a state monopoly on the operation of lotteries, stipulates a total ban on online casino operations and limits the availability of sports betting licences.

The Interstate Treaty is implemented into state law by the Transposition Acts and the gambling laws of the individual states.

Sectoral gambling legislation. In addition to the principal Treaty and the respective state laws, the Casino Acts (Spielbankgesetz) and corresponding Casino Ordinances (Spielbankordnung) enacted by individual German states are applicable to gambling.

Slot machine gambling is regulated to a large extent by federal law. The Trade Regulation Act (Gewerbeordnung) and the Gaming Ordinance (Spielverordnung) provide framework regulation in this area with further restrictions on amusement arcades being imposed under the Interstate Treaty and the Gaming Acts/Transposition Acts of each state.

For historical reasons, horse race betting at race tracks is also regulated under federal law, by the Race Betting and Lottery Act of 1922 (last amended 31 August 2016) (Rennwett- und Lotteriegesetz).

Licensing of online horse race betting is subject to the Race Betting and Lottery Act and the Interstate Treaty. The Act also contains provisions on the taxation of lotteries and betting.

Criminal law

Organising, promoting or participating in unauthorised games of chance constitutes a criminal offence under sections 284 and 285 of the German Criminal Code (Strafgesetzbuch)(StGB). The same applies to advertising for unauthorised games of chance.

Schleswig-Holstein

In January 2012, Schleswig-Holstein introduced its own Gambling Act under which 23 online casino licences and 25 sports betting licences were issued. Due to a change in government, which directed Schleswig-Holstein to join the Interstate Treaty, the Gambling Act was repealed in February 2013. The repealed Gambling Act of Schleswig-Holstein continues to apply in relation to these licensees until the licences expire.

Definitions of gambling

images 2. What is the legal definition of gambling in your jurisdiction and what falls within this definition?
General definition

The Interstate Treaty subjects any activity falling under the definition of a “game of chance” to German gambling regulations. A “game of chance” contains three elements which all have to be present (section 3(1), Interstate Treaty):

  • Valuable consideration.
  • Determination of winnings is entirely or predominantly a matter of chance.
  • The consideration is given in exchange for a chance to win.
Online gambling

The Treaty does not include a specific definition of online gambling. Any game of chance operated or promoted on the internet (or via any means of distance communication as defined by section 312b(2) of the Civil Code (BürgerlichesGesetzbuch )(BGB) may therefore be considered online gambling. This includes games offered through mobile devices.

Land-based gambling

There is no specific definition of land-based gambling.

Regulatory authorities

images 3. What are the regulatory or governmental bodies that are responsible for supervising gambling?

Since gambling regulation in Germany is principally a matter of state law, most licensing, supervisory and enforcement powers are executed (and take effect) at state level (see Question 1).

State Ministries or Senates of the Interior

In each state, most of the core responsibilities for gambling-related matters are assigned to the Ministries or Senates of the Interior, although these bodies may appoint lower authorities to act on their behalf. Those responsibilities include the licensing and supervision of land-based casinos and co-ordinating enforcement actions against suspected unlawful gambling operators.

When the former Gambling Act of Schleswig-Holstein (which allowed for online casino and sports betting licences to be issued) was in force, that state’s Ministry of the Interior was responsible for the issue of licences (see Question 1, Schleswig-Holstein). The Ministry continues to be the responsible supervisory authority in relation to licences issued under the repealed Act.

Local authorities and state-based regulators

The licensing, supervision and enforcement of slot machine gambling is usually the responsibility of the local authority for the area in which the premises are located, as is the licensing, supervision and enforcement of betting shops once licences have been granted.

There are also some state-based bodies which are assigned wider responsibilities for gambling-related matters nationwide and, as part of this role, act as in the capacity of central regulator on behalf of all German states in relation to these issues. They include the:

  • Hessian Ministry of the Interior and Sports, responsible for issuing sports betting licences.
  • Regional council of Darmstadt (Hesse), responsible for issuing horse race betting operating/brokering licences.
  • Ministry of the Interior of Lower Saxony, responsible for the implementation of payment blocking measures and the issue/supervision of nationwide lottery brokering licences.
  • Regional government of Düsseldorf (North Rhine-Westphalia), responsible for issuing TV and online advertising permits for sports betting and lottery offerings.
  • Authorities of the Hamburg and Rhineland-Palatinate, responsible for specific types of lotteries, that is, the so-called class lotteries (Hamburg) and other, cross-state lotteries (Rhineland-Palatinate).
Gambling Committee of the Interstate Treaty

The Interstate Treaty also provides for a Gambling Committee consisting of representatives from all German states and which was, among other things, involved in the decision-making process during the sports betting licensing process and the drafting of the Advertising Guidelines. The role of this committee has been called into question and its lack of constitutionality has been confirmed by multiple German courts.

State prosecuting authorities

As unauthorised gambling is a criminal offence in Germany, the prosecuting authorities of each state also class as bodies with enforcement powers in gambling matters.

Other

Other relevant bodies include the tax authorities of Frankfurt am Main III, which is responsible for the collection of sports betting taxes, and of Berlin Neukölln, the main authority for collecting VAT on online casino operations in Germany.

Finally, decisions of the Federal Ministry of Finance may also impact on gambling operators.

See box, The regulatory authorities.

Gambling products

images 4. What gambling products have been specifically identified by legislation, and what different requirements have been established for each?

There is no comprehensive list of permissible and non-permissible games or products. Some products have, however, been explicitly identified by legislation as falling under the German gambling regulation.

Poker

Poker, although not specifically mentioned in the Interstate Treaty and not defined by legislation, can be identified as a typical, licensable casino game in most state Casino Acts and Casino Ordinances.

Betting

Bets for money on events or the outcome of events which lie in the future constitute games of chance as defined in the Interstate Treaty (see Question 2, General definition). The Treaty, however, explicitly only provides for the regulation of sports and horse race betting.

Sports betting

Sports bets are defined as “fixed odds bets on the outcome of a sports event or a part of a sports event” (section 3(4), Interstate Treaty) and classed as games of chance if offered for money, since betting will take place on future events.

Horse race betting

Under section 3(1)5, horse race bets are defined as bets placed on public horse races and other public performance testing of horses. Alongside the general provisions in section 3, the Treaty includes specific provisions on horse race betting in section 27. Finally, the federal Race Betting and Lottery Act applies.

Casino games

No particular casino games are specifically identified in the current Treaty, and although each state has passed Casino Acts, they do not generally list or define permissible games see Question 1, Main legislation: Sectoral legislation).

One exception is section 9(1), No. 1 Casino Act of Saxony-Anhalt, which lists the following games as permissible:

  • Casino games.
  • Roulette.
  • Baccarat.
  • Blackjack.
  • Trente et quarante.
  • Poker.
  • Boule.
  • Punto banco.
  • Craps.
  • Wheel of fortune.

Further, all state Casino Ordinances will, to some extent, set out which casino games are permissible for licensing purposes. These will usually include traditional table games, slot machine gambling and games of chance which have been approved by the licensing authority.

Slot and other machine gaming

Slot machine gambling is regulated to a large extent by federal law. The Trade Regulation Act and the Gaming Ordinance provide framework regulation in this area.

The Interstate Treaty and the Gaming Acts or Transposition Acts of each state subject certain gaming machines to gambling regulation. In general, regulations apply to amusement arcades and restaurants (including bars, food restaurants and accommodation establishments) offering amusement with prizes (AWP) slot machines with a random number generator where monetary prizes or prizes of monetary value can be won.

The Gaming Ordinance provides further details on the slot machines that require licensing.

Terminal-based gaming

Whenever monetary prizes can be won at a terminal-based gaming machine and the likelihood of winnings depends on chance rather than skill, the gambling provisions will apply.

Bingo

Bingo is not explicitly identified by legislation. However, since bingo (at least in its classic form) resembles a lottery, the regulations on lotteries will apply.

Horse race betting

Lottery

The Interstate treaty defines a lottery as a particular type of game of chance where “a majority of persons are given the chance to obtain monetary winnings in return for a certain payment according to a specific plan” (section 3(1) in conjunction with section 3(3)).

The key elements which constitute a lottery therefore are:

  • ”Majority of persons”. This means “public” in the sense that the game of chance has to be made available for a larger, non-predetermined number of persons.
  • Certain payment.
  • Specific plan.
  • Chance to obtain monetary prize.

The Race Betting and Lottery Act also contains provisions on the taxation of lotteries and betting.

Licensing of online horse race betting is subject to the Race Betting and Lottery Act and the Interstate Treaty.

Land-based gambling

Regulation/licensing

images 5. What is the licensing regime (if any) for land-based gambling?
Available licences

Licences for the operation of land-based casinos. Typically, casino licences will cover table games (roulette, card games) and slot machine gambling. All German states limit the number of available licences to some extent in their respective Casino Acts and some states exclude private operators from obtaining licences at all.

Licences for land-based sports betting in betting shops. Once sports betting (operating) licences are issued, operators or their respective land-based retail partners (depending on the applicable state law) must generally obtain a betting shop licence authorising bets made on the premises.

The 2012 tendering notice of the sports betting licensing process (Contract notice Services of 8 August 2012 under Directive 2004/18/EC, D-Wiesbaden: sport-related services 2012/S 151-253153) and each state’s own gambling laws provide for limitations on the number of licences issued (see Question 1, Main legislation). They are required to do so by Interstate Treaty (section 10a(5)) to fulfil the objectives set out in section 1.

These limitations vary between the different states and have been criticised as being arbitrary, since they are not based on state population figures, levels of demand for licences or other evidence.

The limitations therefore are legally questionable and unlikely to be enforced by German states successfully, although there have been recent attempts by certain states, for example, Hamburg, to suggest that the limitations on numbers should apply in the context of the so-called “formal tolerations” for betting shops (see Question 17).

The limitations currently provided for in the relevant state legislation are:

  • Baden-Württemberg: 600 shops (section 20(2), State Gambling Act).
  • Bavaria: 400 shops (Article 7(1), Transposition Act to the Interstate Treaty).
  • Berlin: 200, with a maximum of ten per licensee (section 9(7), Transposition Act to the Interstate Treaty).
  • Brandenburg: 18 per licensee (section 4(5), Transposition Act to the Interstate Treaty).
  • Bremen: seven per licensee (section 5(4), No. 2 Gambling Act).
  • Hamburg: 200 (section 8(1), Transposition Act to the Interstate Treaty).
  • Hesse: no specific limitation.
  • Mecklenburg-Western Pomerania: 95 (section 10(2), Transposition Act to the Interstate Treaty).
  • Lower Saxony: 2,400, with a maximum of 500 per licensee (section 8(2), Gambling Act; section 3(1), Gambling Ordinance of Lower Saxony).
  • North Rhine-Westphalia: 920 (section 13, Transposition Act to the Interstate Treaty; section 21(1), Gambling Ordinance of NRW).
  • Rhineland-Palatinate: 400, with a maximum of 20 per licensee (section 7(2), State Gambling Act).
  • Saarland: 60, with a maximum of three per licensee (section 11(1), Transposition Act to the Interstate Treaty).
  • Saxony: 65 per licensee (section 7(3), Transposition Act to the Interstate Treaty).
  • Saxony-Anhalt: three per licensee (section 5(6), State Gambling Act).
  • Schleswig-Holstein: no specific limitation.
  • Thuringia: 100 (section 6(1), State Gambling Act).

Licences for land-based slot machine gambling outside casinos (for example, in amusement arcades, restaurants or bars). The amount of available licences is not limited by law, but amusement arcade licences are subject to such strict conditions that the number of licences issued is effectively restricted.

Conditions include:

  • Only one amusement arcade can be operated in any one building.
  • The Interstate Treaty (section 25(2)) demands that a minimum distance between amusement arcades is to be maintained and that the states determine what this minimum distance is in their Gambling Acts or Transposition Acts. The minimum legally permitted distances between amusement arcades vary depending on various factors and range from a possible 50 metres (Lower Saxony) to 500 metres (Bavaria).
  • In some states, amusement arcades must be located beyond the permitted minimum distance from schools, other child and youth institutions and/or addiction centres.
  • The maximum number of slot machines allowed in amusement arcades is 12, with only one machine permitted for every 12 square metres.
  • In restaurants and bars there is a maximum limit of three slot machines.

Bookmaker or totalisator licences for offering bets on horse racing. These licences are granted under the Race Betting Lottery Act. Although there is technically no legal limit on numbers, totalisator licences (that is, licences allowing for pari-mutuel betting) can only be issued to horse racing or horse breeding associations and only for certain race tracks.

Licences for the operation of small or charitable lotteries. These are regulated by sections 12 to 18 of the Interstate Treaty. There is no legal limit on numbers but the licences are difficult to obtain by private operators and their economic value is limited. Traditional, large-scale lotteries (as well as pool betting) remain subject to the state monopoly (see Question 8).

Licences for the promotion and sale of traditional state lottery products. Under section 10(4), the states limit the number of lottery sales points to achieve the core objectives of the Treaty. In most states, the Ministry of the Interior has the power to issue an ordinance in which the maximum number of sales points is determined in accordance with the legislation, along with other factors such as local population level and the way in which lottery products are presented.

Eligibility

Licences can only be issued to operators or promoters of games of chance who can demonstrate that they are reliable. This includes demonstrating compliance with certain business standards, local laws and tax obligations. Operators and brokers must:

  • Not have a criminal record or have been declared bankrupt.
  • Provide evidence of their financial stability.
  • Demonstrate an acceptable level of expertise.
  • Show detailed descriptions of their company policies on responsible gambling, security, anti-money laundering, marketing and so on.

Licences for operating traditional, large-scale lotteries are reserved for the state monopoly, although the legality of this monopoly has been called into question.

In certain states, such as Bavaria or North Rhine-Westphalia, private operators are also excluded from obtaining a licence for operating land-based casinos.

Application procedure

The applicable procedure and its respective duration depend heavily on the type of gambling operation. There are no general application procedures or timelines.Casino licences are subject to a public tender, open for applicants across the EU, and the licensing process takes between six and 18 months.Licences to operate amusement arcades, on the other hand, can usually be processed a lot quicker, generally within a matter of weeks or a few months.

Duration of licence and cost

Casino licences are usually granted for a term of ten years with an option to extend the licence for a further five years. The costs for the licence will usually be calculated on the estimated gross gaming revenue of the licence term. In general, five to six digit sums can be expected as the overall amount of costs for casino licences. For example, in the recent 2016 tender for the casino in Berlin, a fee of 0.01% of the expected gross gaming revenue and a further EUR20,000 for the auditing/accounting fees were determined as costs. Assuming a gross gaming revenue of an estimated EUR50 million over a ten-year licence term, this makes for costs of approximately EUR70,000.Amusement arcade licences cannot be granted for an indefinite period, but must be limited in duration (section 24(2), Interstate Treaty). Specifics are laid out in the Gambling and/or Transposition Acts of the respective states.Licence fees for the operation of amusement arcades vary between the states but usually range between about EUR150 and EUR3,000. Typically, the costs correlate to the size of the arcade and the workload involved in processing the application.

images 6. What are the limitations or requirements imposed on land-based gambling operators?
Prohibitions

There is a general prohibition on offering unauthorised games of chance (section 4(1) , Interstate Treaty). Casinos or any other land-based gambling establishments therefore can only offer those products which are covered by their licence.

The minimum legal age for gambling in Germany is 18. Minors are not allowed to participate in any form of gambling. For historical reasons, land-based casinos in Baden-Württemberg and Bavaria do not allow under 21-year-olds to enter (section 29, Gambling Act of Baden-Württemberg) or participate (section 3, Casino Ordinance of Bavaria) in gambling. In Baden-Württemberg, subject to sufficient supervision being guaranteed, exceptions may apply in relation to casino staff under the age of 21.

Barred players may not enter the gaming area or play in casinos. Strict entrance controls must be in place to ensure that neither minors nor barred players can participate in gambling.

Barred players are usually players who have excluded themselves due to a gambling problem (self-exclusion) or have been determined by casino staff or others to have a gambling problem (third-party-exclusion).

Controls include age verification checks and matching players’ data with a nationwide database.

Although alcohol is generally allowed in casinos, it is prohibited in amusement arcades. In restaurants and bars which operate slot machines, alcohol may be consumed.

With the exception of gambling premises which may be exempted by the applicable state legislation, smoking is banned in most gambling establishments.

All land-based gambling establishments must adhere to defined opening hours and holidays, both of which will be set out in the relevant state laws or determined by the responsible authority.

Restrictions

Casinos. State law sets out how many casinos can be operated and their locations. In Baden-Württemberg, for example, the law allows for three casinos in the cities of Baden-Baden, Konstanz and Stuttgart.

Additional casinos can only be operated if the Government allows for further casinos to be operated by passing an ordinance and/or amending the law (see Question 1, Main legislation: Sectoral legislation).

Land-based casinos no longer ban local residents from gambling or, as also used to be the case in some states, bankers.

Some federal states limit the number of tables and slots allowed in casinos but there are no restrictions on payouts, maximum wins or losses or the duration of games.

Other gaming premises. Slot machine gambling offered on premises other than casinos (amusement arcades, restaurants and bars, for example) is also subject to multiple restrictions. The Gaming Ordinance (Spielverordnung) determines how many machines are allowed in any one set of premises:

  • Amusement arcades: maximum of 12 (one per 12 square metres).
  • Restaurants and bars: maximum of three.

The Ordinance also sets out game restrictions, including minimum and maximum stakes, payout ratios, and limits on the duration of games.

In addition, amusement arcades are subject to the minimum distance requirements, among other restrictions. Most states also include explicit provisions prohibiting betting shops and amusement arcades from being operated on the same premises or building (see Question 5, Available licences).

Horse-racing. Bookmakers operating on racecourses cannot accept stakes of less than EUR15.

Sports betting. Land-based sport betting licensees, in addition to the restrictions on the number of licences available, are subject to restrictions on the kind of games on offer. Certain forms of in-play betting are prohibited.

Social responsibility requirements. Operators are expected to be familiar with the impact of games of chance and the inherent risk of addiction and must show this in their social responsibility evidence, which forms part of any licensing application.

Operators must train their staff in monitoring gambling behaviour and on the responsible operation, execution and commercial promotion of public games of chance, including making players aware of the risks of addiction.

Anti-money laundering legislation

Online operators of games of chance must comply with extensive regulations on customer due diligence obligations under the current German Anti-Money Laundering Act (Geldwäschegesetz).

The Act only subjects land-based casinos to specified due diligence checks if the gambling transactions exceed the threshold of EUR2,000.

Other land-based gambling establishments so far have not been subject to anti-money laundering regulations under German law. This is, however, expected to change in the course of the implementation of Directive 2015/849/EU on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (Fourth EU Anti-Money Laundering Directive).

Online gambling

Regulation/licensing

images 7. What is the licensing regime (if any) for online gambling?
Available licences

Licences for online casinos. The Interstate Treaty does not provide a licensing regime for online casinos but imposes a total ban on them. The European Commission considers that the ban has so far been ineffective in achieving the goals set out by the Treaty and is expected to follow up with formal infringement proceedings unless the German states reform the law or provide evidence showing that such a ban is in fact effective.

Licences for the operation of online casinos were only available in Schleswig-Holstein during the time when the Gambling Act of Schleswig-Holstein, repealed in 2013, was in force (see Question 1, Schleswig-Holstein).

Licences for the online operation and promotion of sports betting. The Treaty only allows for 20 sports betting licences to be issued. However, this limitation has been found to be incompatible with EU law. In fact, the entire sports betting regime is currently under review as a result of its multiple flaws. The sports betting licensing process was initiated in August 2012, but has been found to be unlawful in national court decisions, and also by the European Court of Justice (ECJ) in its decision of 4 February 2016 in the Ince case (Case C-336/14) (see Question 16, Online gambling: Sports betting). As a result, no licences have yet been issued.

The German states have agreed to notify a draft for an Amended Treaty to the European Commission in which the number limit is abolished altogether during an experimental phase. The 35 operators that in the sports betting licensing process have already been confirmed to have qualified for a licence are to receive provisional licences from the date of entry into force of an amended Interstate Treaty.

Online horse race betting operating/promotion licence pursuant to section 27(2) of the Interstate Treaty. There is no limit on the number of licences which can be issued. According to the official website of the body nationally responsible for issuing these licences, the Regional Council of Darmstadt in Hesse, four such licences have been issued (see https://rp-darmstadt.hessen.de/irj/RPDA_Internet?cid=91226b219b8b8d9efb9d1b85a063e704)

Licence for the online promotion and sale of state lottery products. A licence to promote lottery products in a single state is usually obtained from the relevant Ministry of the Interior. If licensing is needed for multiple or all German states, the regulator is the Ministry of the Interior of Lower Saxony.

Eligibility

Applicants must demonstrate that they:

  • Are reliable.
  • Have the necessary expertise.
  • Are financially competent.
  • Meet the social responsibility standards.

In addition, they must ensure that they can guarantee the required level of IT security and technical standards which allow for safe and transparent gambling, provide marketing concepts, proof of economic stability and other evidence, depending on the specific licensing process in question.

Application procedure

There is no general application procedure or a general rule on how long the process takes, the sports betting licensing process being the best and most extreme example for this. After more than four years, the licensing process has still not been finalised and, given its multiple flaws and confirmed incompatibility with EU law, never will be finalised in its current format.

Duration of licence and cost

Duration. Sports betting licences under the Treaty are supposed to be valid until 30 June 2019, that is until the end of the experimental phase, which is supposed to end seven years after the entry into force of the Treaty.

The experimental phase is intended to provide the basis for an evaluation of whether opening the sports betting market to private operators is effective in combatting the black market and ensuring consumer protection.

The German states have agreed to notify a draft for an Amended Treaty to the European Commission in which the experimental phase is to be extended until 30 June 2021, with an option to further extend it until 30 June 2024.

In an attempt to solve the licensing dilemma and enable a fresh start, preliminary licences are supposed to be being issued to the 35 applicants who have already fulfilled the minimum licensing conditions in the failed sports betting process. Details of the conditions of these preliminary licences or what a fresh start would look like at the moment remain unclear.

Cost. The cost of a sports betting licence is based on anticipated betting turnover. The minimum cost is 0.01% for an annual turnover up to EUR30 million, with a minimum fee of EUR50 (section 9a(4), Interstate Treaty).

The fees increase on a sliding scale. For example, an anticipated betting amount between EUR30 and EUR50 million per year requires the licensee to pay a fee of EUR30,000 plus 0.08% of any amount exceeding EUR30 million. The maximum fee charged, for an anticipated turnover amount exceeding EUR100 million, is EUR71,000, plus 0.03% of the amount exceeding EUR100 million.

Administrative fees will still be charged for applications that have been rejected.

images 8. What are the limitations or requirements imposed on online gambling operators?
Prohibitions

The Interstate Treaty prohibits the operation and promotion of online casino games (section 4(4)) as well as advertising of unauthorised games of chance (section 5(5)).

The operation, promotion or advertising of unauthorised games of chance further constitutes a criminal offence (section 284, German Criminal Code (Strafgesetzbuch)), as does participation in such games (section 285, German Criminal Code).

Betting on any events other than sports or horse racing is prohibited.

Private operators cannot operate traditional, large-scale lotteries. The operation of lotteries is reserved for the monopoly, the 16 state-controlled lottery companies that together form the State Lottery and Tote Association (Deutscher Lotto und Totoblock).

Restrictions

The Treaty sets out certain restrictions and requirements which need to be complied with in relation to all online licences. These include:

  • Excluding minors and barred players by applying identification and authentication methods.
  • Providing for self-limitation measures (the Interstate Treaty suggests a stake limit of EUR1,000 for online betting) and prohibiting players from taking loans from the gambling operators.
  • Refraining from specific “addiction stimuli”, such as fast repetitions.
  • Tailoring their “social concept” (responsible gambling guidelines) to the online environment for example, by demonstrating awareness towards online-specific risks and providing for mitigation measures accordingly.
  • Ensuring that betting and lottery products are offered from separate internet domains.

In relation to the sports betting product range, specific in-play betting types are supposed to be banned but neither the Treaty nor subsequent guidance manages to clearly identify which forms of in-play betting are considered illegal.

Anti-money laundering legislation

Online gambling operators are subject to rather strict ant-money laundering requirements in Germany. As part of their customer due diligence, operators must:

  • See evidence of the player’s identity and ensure that it is subsequently verified by approved means before allowing participation in games.
  • Provide risk mitigation measures, including restricting payouts and banning anonymous payment methods such as cash vouchers.
  • Only allow players to use transparent payment methods to deposit funds into their account.

Online gaming businesses must also adopt appropriate and extensive risk management systems to combat money-laundering, including appropriate staff training, internal audit systems, and data processing, management and storage systems.

Due to the tumultuous legal situation pertaining to online gambling, responsibilities for the prevention of money laundering have not yet been clearly assigned. However, anti-money laundering matters concerning Schleswig-Holstein licensees are dealt with by its Ministry of the Interior.

B2B and B2C

images 9. Is there a distinction between the law applicable between B2B operations and B2C operations in online gambling?

Under German law, B2C operators are online gambling operators who have a website and contract directly with customers. B2C operators are required to obtain a licence.

The same applies to B2B operators who contract with the player through a “white label” site run by a third party. This kind of arrangement involves a product or service being produced by one company and then rebranded by another.

Such operators must provide details about the third party site and its operator as part of their licence application in order to obtain approval for the third-party products or services used.

B2B operators who provide gambling services and license the products to gambling operators without directly contracting with the customers do not require their own licence as in other jurisdictions.

Technical measures

images 10. What technical measures are in place (if any) to protect consumers from unlicensed operators, such as ISP blocking and payment blocking?

 The Interstate Treaty does not explicitly regulate domain or ISP blocking, but provides for a legal basis for payment blocking (section 9(1), Interstate Treaty No. 4). The responsible authority, the Ministry of the Interior of Lower Saxony, may ban banks and other financial institutions from processing payments relating to unauthorised gambling and some have agreed not to process certain payments on request by that body. No legal payment blocking measures have been enforced to date, however, probably due to data protection or other technical issues.

Mobile gambling and interactive gambling

images 11. What differences (if any) are there between the regulation of mobile gambling and interactive gambling on television?

Regulations on online gambling apply equally to gambling via the use of mobile devices, such as phones and tablets. Mobile gambling is not currently defined in German law as a separate gambling entity. A draft version of the Interstate Treaty 2012 included a prohibition on gambling via text messages, however, this was removed from the final version.

Call-In games, also referred to as quiz-TV or quiz-radio, do not fall under the scope of the Interstate Treaty. German courts have ruled that the remuneration requested in exchange for obtaining a chance of winning a prize, that is, the call charges, are too marginal to consider those games as illegal gambling.

Social gaming

images 12. How is social gaming regulated in your jurisdiction?

Although social gaming is considered to be a growth sector in the industry, German gaming law does not contain specific regulations for social gaming, and so the general provisions apply.

Social games, or free-to-play games, generally do not fall under the definition of a game of chance. They may be operated without a licence, yet restrictions may apply based on consumer or minor protection laws. Games which are not free to play may be subject to gambling regulations, if prizes have a monetary value (for example, game points which can be exchanged for real money or goods).

The use of a virtual currency does not automatically change the nature of a game from social to gambling, as long as the virtual currency is of no monetary value and part of a “closed loop”.

There are no proposals to change the existing regulation to include social gaming.

Gambling debts

images 13. Are gambling debts enforceable in your jurisdiction?

Gambling debts are not enforceable in Germany since they are considered “debts of honour” (section 762(1), Civil Code (BGB)). However, once gaming debts are settled, they are not reclaimable (section 762(2)). State-approved lotteries or raffles are excepted from this (section 763). This exception will presumably also apply to sports betting debts from a licensed operation when licences will have been granted.

Tax

images 14. What are the applicable tax regimes for land-based and online gambling?
Land-based gambling

The following tax regime applies:

  • Land-based casino operators. These operators usually pay taxes on gross gaming revenue (GGR). Some federal states have incorporated a system that combines gross gaming revenue and profit taxation. The tax rates derive from each state’s Casino Act and range from about 20% to 80%.

Some states impose additional levies or apply progressive tax rates, depending on the economic capability of the casino operator. In Hesse, for instance, a levy of 60% of the GGR must be paid if the annual GGR exceeds EUR50 million. However, casinos are exempt from corporate taxation.

  • Sports betting operators. These operators are subject to a 5% federal tax on stakes on bets offered in Germany (land-based or online). This also applies to betting on horse racing. The Race Betting Lottery Act forms the legal basis for thesports betting tax and the horse race betting tax.
  • Betting shop owners. Betting shop owners may be subject to local betting shop taxes. There has been a noticeable increase in the number of local authorities introducing such taxes, in particular in the state of North Rhine-Westphalia. The taxes are determined locally and therefore vary throughout Germany. A monthly rate of approximately EUR200 per 20 square metres of betting shop space seems to be typical.
  • Operators of slot machines outside casinos. These operators pay an amusement tax of 12% to 20% based on the gross income generated from the amusement with prizes (AWPs). Additionally, they are subject to regular corporate taxes.
  • Lotteries. These are subject to a 16.66% lottery tax on stakes under the Race Betting Lottery Act.
Online gambling

Since 1 January 2015, all online casino operators offering their products to customers based in Germany are subject to VAT at a tax rate of 19%.

With regard to certain live online casino products exceptions apply, provided that they include a sufficient level of human intervention. The VAT Committee of the European Commission has provided guidelines in this respect.

It is as yet unclear whether the tax will be levied on gross gaming revenue or on stakes, though arguably a 19% tax on the latter would be financially detrimental to online casino businesses and the more convincing legal arguments support GGR taxation.

The Schleswig-Holstein gaming levy (20% on GGR) no longer applies because it was superseded by liability for VAT (section 35 (3) No. 4 Gambling Act of Schleswig-Holstein).

Advertising

images 15. To what extent is the advertising of gambling permitted in your jurisdiction? To the extent that advertising is permitted, how is it regulated?

Advertising of games of chance is regulated restrictively in Germany. As a general rule, only licensed games of chance may be advertised (section 5(5), Interstate Treaty).

All advertising measures have to comply with the objectives of the Treaty (see Question 1, Main legislation). This means they must not (section 5(1) and (2), Interstate Treaty):

  • Be directed at minors or other vulnerable target groups.
  • Be misleading, in particular in relation to the chances of winning and the amount to be won.

Further guidance is provided in the:

  • Advertising Guidelines, although the validity of these has been called into question since they were drafted by the Gambling Committee which has been declared unconstitutional.
  • Act Against Unfair Competition.
  • Code of Practice of the German Advertising Council.
  • German Law for the Protection of the Children and the Young.
  • Interstate Treaty on the Protection of Children and Minors in the Media.
  • Interstate Treaty on Broadcasting.

Advertising of games of chance on TV, the internet or other forms of telecommunications is generally prohibited but exceptions can be made with regard to licensed lottery, sports-betting and horse race betting operators subject to them obtaining a permit from the regional government in Düsseldorf prior to launching any advertising measures.

Developments and reform

Legal development

images 16. Has the legal status of land-based and online gambling changed significantly in recent years, and if so how?
Land-based gambling

Casinos. The introduction of a smoking ban in casinos as well as the duty to perform entrance controls in every casino premises in 2007/2008 led to a drop of around 50% in revenues for the casino industry but revenue is now slightly increasing again.

Amusement arcades. The current Treaty subjected amusement arcades to specific gambling regulation for the first time. Operators now require, in addition to the licences granted under the Trade Regulation Act, a gambling licence under the Treaty in conjunction with the respective state regulations (see Question 5, Available licences).

The introduction of these strict regulations on amusement arcades has been challenged in the courts and they continue to be the subject of debate.

Online gambling

Sports betting. The legal status of sports betting changed dramatically in 2010 when the former Interstate Treaty of 2008 and its sports betting monopoly were held to be incompatible with EU law in the Carmen Media decision (Case C-46/08 Carmen Media Group [2010] ECR I-8149), as a result of which the German states incorporated a licensing process for such betting in their new Interstate Treaty of 2012.

The new process, however, was criticised as being flawed from the start and in September 2014, the Hessian Ministry was prevented from issuing 20 licences by multiple court decisions which confirmed that the licensing process violated both EU and national law. The fact that no licences can be issued also affects land-based betting shops since the issuance of betting shop licences and/or approval of betting shops requires an operator to have a sports betting licence.

The Court of Justice of the European Union’s (CJEU’s) decision in the Ince case of February 2016 (C-335/14 – Ince) decided that the current regulation of sports betting in Germany violates EU law. The Court found that there was an unlawful monopoly on sports betting and confirmed that key elements of the sports betting licensing process were unlawful.

Online casinos. In relation to online casinos, the current Treaty, like the 2008 Treaty, imposes a total ban. The written law therefore has not materially changed in recent years (with the exception of Schleswig-Holstein).

The status of online casino operators offering their products to German customers is, nevertheless, changing.

There are strong arguments to support the view that the ban goes against the core objectives of the Treaty. In June 2015, the European Commission initiated a pilot process, intended to prepare the ground for future formal infringement proceedings against Germany.

Reform

images 17. What, if any, are the likely short-term and long-term developments/legislative amendments concerning gambling in your jurisdiction? Are there any proposals for reform?
Land-based gambling

At the moment there are no plans to amend the current legislation on land-based offerings.

It is likely, however, that a wave of lawsuits will be filed by operators of amusement arcades once they receive the first closing orders based on them not complying with the restrictions on their licences (see Question 5). Currently, operators of amusement arcades who obtained a licence prior to 28 October 2011 are protected by transitional regulations which suspend the applicability of these restrictions until the end of June 2017. Once this transitional period ends, all operators of amusement arcades will be expected to adhere to the restrictions, meaning that some existing licensees will be forced to close.

It will also be interesting to see how the recent attempts of some German states to create a kind of interim regulation primarily affecting land-based sports betting operations will play out.

At the time of writing, Hamburg, Rhineland-Palatinate, Bavaria and Hesse have proposed ”formal tolerations” which effectively act as a promise of the regulator not to enforce against the offering if the conditions are complied with.

The system does not, however, act as a promise for a future licence and arguably lacks a legal basis, and may be seen as prematurely imposing restrictions (such as the limitation on the number of permissible betting shops or product restrictions) at a time when an unlawful de facto-monopoly persists in Germany.

Online gambling

Most short and long-term reforms or amendments to the existing regulation on gambling will affect the online gambling sector, sports betting being a priority.

At the time of writing, the German states have recently agreed on notifying a draft for an Amended Treaty to the European Commission which provided for only minimally invasive reforms focussed exclusively on sports betting. The “minimalist reforms” ignore the fact that German online casino regulation is also in urgent need for reform.

All applicants in the failed sports betting licensing process who have already demonstrated that they fulfilled the minimum licensing requirements are to receive a preliminary licence on entry into force of the Amended Treaty (at the time of writing, 1 January 2018). Details about proposed conditions and application process for the preliminary licences at the moment remain unclear.

The German state of Hesse, although having voiced strong criticism against minimalist reforms and promoting comprehensive reform which would have included the establishment of a licensing process for online casino offerings, has meanwhile joined the other German states in their minimalist approach.

Still, some interesting developments may be expected in the online gambling sector, also bearing in mind that the European Commission, which is monitoring the current developments in Germany, may still decide to initiate formal infringement proceedings against Germany given the continuing legal uncertainty.

These are likely also to affect the online casino sector.

Social gaming

Due to the more pressing issues of solving the licensing dilemma and establishing a regulation which is compatible with EU law, there are currently no plans to specifically regulate social gaming in Germany.

The regulatory authorities

State authorities

State Ministries or Senates of the Interior

Description In Germany, regulation and enforcement of gambling is primarily a matter of state law. There are 16 states in Germany. In each state, most of the core responsibilities for gambling-related matters are assigned to the Ministries or Senates of the Interior. A couple of examples are given below.

W https://english.hessen.de/about-us/state-chancellery-ministries/hessian-ministry-interior-and-sports (Hessian Ministry of Interior and Sports)

www.sachsen-anhalt.de/lang/english/politics/the-ministries-and-ministers/ministry-of-the-interior-and-sports-facilities/ (Sachsen-Anhalt Ministry of the Interior and Sports Facilities)

More state web resources are available in the online resources section (see below, Online resources: German state websites).

Online resources

German state websites

There are no official/unofficial translations of German gambling legislation publically available. Original language texts, however, are available on state websites, examples of which are given below:

W http://www.im.baden-wuerttemberg.de/de/sicherheit/gluecksspielrecht/

Description. The website is maintained by the Ministry of the Interior of Baden Wurttemberg. It contains the full text pdf version of the Interstate Treaty in its current version.

W www.justiz.nrw.de/BS/gesetze_und_verordnungen/index.php

Description. The website is maintained by the Ministry of Justice of North-Rhine Westphalia. It contains the full text-version of almost all German Acts, ordinances, judicial decisions and administrative orders of all German states (Länder). It is very up-to-date.

W www.schleswig-holstein.de/DE/Themen/G/gluecksspiel.html

Description. The website (in German only) is maintained by the Ministry of the Interior of Schleswig-Holstein. It contains the full text-version of the previous and current Gaming Acts of Schleswig-Holstein and other federal legislation on gaming. The website also lists the licensees who were granted a sports betting and online casino licence between 2012 and 2013.

W https://innen.hessen.de/buerger-staat/gemeinsame-geschaeftsstelle-gluecksspiel2/gluecksspielkollegium2

Description. The website lists the tasks of the Gambling Committee and provides an overview of the gaming supervisory authorities of the states.

Source: Practical Law

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