A German court has upheld the country’s prohibition against so-called ‘secondary lotteries,’ based on its view that they’re offering online betting in violation of local law.
On Tuesday, the Higher Regional Court of Koblenz in the state of Rhineland-Palatinate issued a ruling originally handed down on July 3, upholding a district court ruling barring an unspecified Gibraltar-licensed online lottery betting operator from offering services to German customers.
A district court in the state issued its original ruling last October in a case that was sparked by a complaint from state lottery and sports betting operator Lotto Rhineland-Pfalz, which said unauthorized competition from such secondary lotteries had trimmed its 2017 sales by nearly 7%.
The Gibraltar firm had argued that Germany’s state lotteries had been found in violation of European Union rules regarding cross-border trade. But the district court rejected this argument, based on its view that the defendant wasn’t a lottery but effectively offered online betting in violation of Germany’s State Treaty on Gambling.
The Higher Court agreed with the district court’s view that ‘secondary lotteries’ are not lotteries under the State Treaty’s definitions. The Higher Court noted that ‘primary’ lotteries have a direct role to play in the outcome of their drawings, while secondary lotteries are passive observers of the primary lottery operators’ drawings.
The Higher Court also rejected the EU trade freedom arguments, noting that the EU permits member states to impose limits on their gambling markets if those limits are intended to minimize problem gambling activity and underage participation.
Crucially, the Higher Court didn’t leave any avenue for the Gibraltar defendant to appeal this ruling. However, that might not be the end of this story, at least, if concerns expressed in the European Commission’s recent ‘blue letter’ prove accurate.
Germany plans to issue new ‘interim’ online sports betting licenses starting in January, but these licenses will only be valid until July 1, 2021, by which time the 16 German states hope to craft a new, permanent State Treaty. But the EC’s view is that this 18-month window of licensing opportunity is too short to convince many unauthorized operators of the benefits of applying for an interim license.
The EC is also concerned that the German plan’s other limitations – no online casino products, no in-play sports betting, a €1k monthly limit on customer spending and a 5% tax on operator turnover – don’t offer the kind of incentives that have seen other regulated markets achieve a sufficient volume of ‘channelization’ to locally licensed sites. So that unnamed Gibraltar operator may simply decide to stick it out and see if the Germans are more bark than bite.