A German’s state’s efforts to offer a stopgap online sports betting licensing regime has been struck down a local court.
Last September, the German state of Hesse announced that it would allow online betting operators to apply for Duldungsverfügungen aka “temporary toleration dispositions.” These pseudo licenses would only apply within Hesse, offering no legal cover for operators who took wagers from punters in the other 15 German länder.
But the Administrative Court of Kassel issued a ruling on Monday that undermined Hesse’s plans. Responding to an appeal filed by a Malta-licensed operator, the Court ruled that the state had no authority to compel internationally licensed online operators to participate in the so-called ‘toleration’ scheme.
The Court cited a number of factors in arriving at its conclusion, including the fact that the application process wasn’t entirely transparent, and that Hesse’s scheme was less about opening up its market and more about imposing penalties on unauthorized operators. The Court also determined that online sports betting was a transnational issue, and thus beyond the scope of an individual state to dictate rules to international companies.
Germany’s online gambling market has been a legal minefield ever since the 16 states approved a new federal State Treaty on Gambling in 2012. That treaty was deemed illegal by numerous domestic and European Union court rulings, leading to the states agreeing on a new treaty in March.
However, this new treaty, which is set to take effect on January 1, 2018, has already been deemed unviable by the European Commission, which wants Germany to remove all artificial caps on the number of available sports betting licenses and to expand the treaty’s scope to include other verticals such as poker and casino.
CHANGING THE CHANNEL
The same day that the Hessian court ruling was issued, the German Sports Betting Association (DSWV) issued a statement praising a new study by the Düsseldorf Institute for Competition Economics (DICE) that slammed the new German treaty’s “numerous prohibitions and restrictions,” including limitations on in-play wagering, which DICE claims “do not have any empirical basis.”
The DICE study addressed the concept of channeling, i.e. the ability of governments to convince a sufficient percentage of punters currently playing on grey-market sites to switch to locally regulated operators. Insufficient channeling prevents governments from achieving their stated aims of protecting consumers from potential gambling harms (not to mention boosting government tax revenue).
The DICE study said the German market ranked “particularly bad” on the DICE Channeling Index, which compared the German proposal to markets in Denmark, France, Poland, Spain and the UK. The study estimates that only around 3% of German online gambling activity is conducted with locally-licensed operators.
DSWV president Mathias Dahms said the only way forward was for German politicians to craft a regulatory environment that was “attractive for consumers. This is not achieved by prohibitions and restrictions. Only providers that offer their bets from Asia and the Caribbean will benefit from this.”