Legal Expert Discusses Challenges Facing Germany's Legal Gambling Industry
In an interview with Gambling.Re, Dennis Hillemann, Partner at Fieldfisher, discusses the impact of the Fourth State Treaty on Gambling on the legal gambling market in Germany
In 2022, the betting industry in Germany experienced a notable downturn, which is attributed to excessively stringent regulations and the prevalent black market. To gain further insight into the matter, Gambling.Re interviewed Dennis Hillemann, a Partner at Fieldfisher with great knowledge and expertise on German gambling law.
Regarding the factors hindering the growth of the legal gambling market in Germany, Hillemann pointed out that the strict regulations of the new State Treaty 2021 posed challenges to the industry's growth. The Fourth State Treaty on Gambling 2021 (in German: "GlüStV"), which came into force on July 1, 2021, introduced various measures to protect consumers and prevent addiction. However, according to Hillemann, these regulations have also hindered the expansion of the legal gambling industry in the country. Some of the specific regulations that have hindered growth are:
Prohibition of certain games: The new treaty bans certain types of games, which limits the variety of gambling options available to consumers. This restriction may discourage potential players from participating in legal gambling and drive them to unregulated platforms.
Deposit restrictions: The treaty imposes deposit limits on players that may restrict the amount of money they can spend on gambling (1.000,00 Euro/month). While this measure is intended to prevent excessive gambling and gambling addiction, it may also discourage high-spending players from engaging with legal operators, limiting the industry's revenue potential.
Hillemann also discussed the new State Treaty on Gambling, which established a unified gambling authority in Saxony-Anhalt. According to him, a license issued there was legitimate across the entire nation. Unfortunately, the organization was not set up when it should have been at the start of July 2021, so another department had to take its place. This created an issue that caused delays in permitting processes. Currently, procedures remain slow, even though there is now a central governing body.
Regarding the impact of the decline in the gambling market on state revenues and the actions that could be taken to boost state revenues from gambling taxes, Hillemann noted that gambling taxation accounts for a portion of state tax revenues. As a result, any decline in gambling activity directly affects state funding. With the introduction of new gambling regulations nationwide, including deposit limits, restrictions on casino table games, and advertising restrictions, Hillemann expects the profits of major gambling companies to decline significantly, further impacting state revenues.
To address the decline in the gaming market and increase state gaming tax revenues, policymakers may consider several measures, including:
Review and adjust tax rates: Policymakers can directly increase revenue by raising gaming tax rates to ensure that the state receives a greater share of the profits generated by gaming operators. However, this would make Germany even more unattractive as a market.
Better enforcement: Stronger enforcement of existing gambling regulations can help ensure that all gambling operators comply with their tax obligations, maximizing government revenues from the sector.
Promote responsible gambling: Implementing policies to promote responsible gambling can help mitigate the negative social and economic impact of problem gambling, which can indirectly lead to increased state revenues by reducing the costs associated with addressing these problems.
Regarding the efforts underway to expand the legal framework for gambling in Germany and the proposed changes, Hillemann highlighted that one of the most notable changes envisioned by the new regulatory framework is the introduction of licensing regulations for virtual slot machines, online poker, and even "online casino" games such as roulette, blackjack, and baccarat. This represents a significant departure from Germany's traditionally restrictive stance on gambling and opens up the market to private operators.
According to Hillemann, another important change is the transfer of responsibility for all online licensing and enforcement measures, such as prohibition orders, IP blocking, and the blocking of payment service providers, from the individual German states to the newly established joint gambling supervisory authority in Halle (GGL).
In addition, Hillemann noted that the new legal framework clarifies that in-play betting is permissible, although the regulatory discussion on the scope of permissible sports events on which betting is allowed has not yet concluded.
In anticipation of the Interstate Treaty 2021, a transitional arrangement has been introduced to permit virtual slot machine and online poker offerings by operators who were already operating in Germany before the Interstate Treaty came into force.
The State Treaty on Gambling has been active for only a short while, and it took an extended amount of resources to bring it into effect. Consequently, there is hardly any expectation that the document will undergo another transformation in the near future unless there are threats to public safety. There isn't much indication right now that there will be any significant steps to modify it.