GOLDEN WEDNESDAY AFTER BLACK FRIDAY? gaming law in Schleswig-Holstein

The passing of new gaming law in Schleswig-Holstein has asked questions of the remaining 15 Laender about whether they continue on a collision course with the European Court of Justice or follow in Schleswig-Holstein's lead.

UNDER THE EXISTING Interstate Gambling Treats-, online gambling is prohibited. All respective activities, inrfoding advertising, are deemed to be unlawful, but despite this rather antiquated law, the German online gaming market has GROWN substantially during recent years.

The prohibitive Interstate Gambling Treaty expires at the end of 2011 and because of this. Germany's 16 federal states laender or Bundeslaender) have been discussing, somewhat controversially, future federal regulations. In the context of these discussions, the news of Germany's nOTthemmost state, Schleswig-Holstein, passing its new gaming law on Wednesday, September 14, 2011, has acted as a slap in the face of the other Laender.

This article will assess gaming law in Germany under consideration of the level contents in Schleswig-Holstein and their impact on the activities of gambling iterators ana their advertising partners in the German market.


Various attempts were made by the legislator to find a valid gambling regulatory system. Whereas previously, different legal bases for the lottery and betting system had existed in the federal states, the State Treaty on Lotteries came into force on July 1, 2004. By this treaty, the Laender created a uniform framework for the organisation of games of chance, excluding casinos and slot machines, which was valid throughout Germany. However, there was controversy from the beginning with regard to European and constitutional law. As a result, in March 2006, the Federal Constitutional Court decided that the Treaty was unconstitutional.

Following this judgment came the arrival of the Interstate Gambling Treaty, which took effect on January 1, 2008, despite the concerns expressed in the legislative procedure. Basically, it states that unauthorised games of chance are prohibited and that gambling may only be offered by the state and/or by state-organised providers, effectively resulting in the creation of a monopoly state. What is more, online gaming is prohibited completely by the Treaty, as is the advertising of public games of chance on TV, the Internet and via 'telecommunications equipment'. The restrictions were justified by the legislator on the grounds that they were a preventative measure to combat gambling addiction, however, this was not a view shared by the European Court of Justice (ECJ), which stated in the autumn of 2010 that the Treaty violated European law.

As the current Treaty expires at the end of this year, the conference of the Laenderministers culminated in the drafting of a revised law, the so called " Glucksspielaenderungs staatsvertrag", in April 2011. This 'E-I5' model includes relatively minor changes to the current Interstate Gambling Treaty.

The 'controversial' discussions that took place between the Laender mainly concentrated on the following points:

• The total number of sportsberting licences is limited, without justification, to seven.
• An excessive tax rate of 16.67 percent of amounts wagered is imposed on all operators.
• Certain casino games may be offered online but only by specified operators that are already operating land-based businesses in Germany.

On Jury 18, 2011, the European Commission issued a detailed opinion against the revised law to German authorities. This letter raised serious concerns about Germany's federal plan for online gambling and confirms that the Cornmission believes the proposed German State Treaty violates EU law. If the draft is not substantially changed, Germany risks formal infringement proceedings.

The Schleswig-Holstein model

On September 14, 2011, the Schleswig-Holstein Parliament passed its own gaming legislation that would lead to an extensive liberalisation

of its gaming marker from a ma. The new law allows operators to offer online betting exchanges and sportsbetting, online poker and online

casinos with the exception of roulette, blaciqack and baccarat games.

The key points of the law, which, unlike the federal Treaty, was approved by the European Commission earlier this year, include:

• that from 2012 onwards, private operators can apply for a licence which will be valid for five years;
• the number of licenses is unlimited;
• licenses issued by the state will be valid from March 1, 2012;
• operators will have to pay a 20 percent tax on gross profit.

However, the receipt of a Schleswig-Holstein licence will not permit operators to offer iGaming services into other Laender.

Advertising under the new Schleswig-Holstein law

In the past, authorities and state operators have tried to prevent private operators and their partners from offering their services to

customers in Germany, often via prohibition orders. However, these orders could only be enforced against entities (including advertising partners/affiliates) that have a corporate (registered) presence in Germany. In addition, the attitudes of the various administrative authorities differed from one Laender to the next, meaning that advertising gambling has meant running something of an unknown gauntlet.

Under the new Schleswig-Holstein regime, advertising is permitted for licensed operators. According to sec. 26, advertising must not contradict the goals of the law as specified in sec. 1. Or, in a nutshell: advertising must not be overly aggressive or misleading and the customer has to be informed about the risks resulting from gambling. The finer details still have to be specified by the legislator.

However, the new law only applies to the territory of Schleswig-Holstein. The legislator of the state, which has a population of less than three million (out of about 80 million in Germany), does not have the scope to regulate other Laender.

The question is whether the new law may influence Germany-wide advertising strategies and whether it will be legal to advertise in other federal states for services which are licensed and, therefore, legal in Schleswig-Holstein. Similar to the advertising-for-free '.net'-sites, it could be argued that the services of licensed operators are lawful in Schleswig-Holstein. They are only offered to citizens who participate from the territory of Schleswig-Holstein. This question is of particular relevance for Internet campaigns since the Internet is not confined by Schleswig-Holstein's borders. Nonetheless, it seems too early for this question to be answered since the other 15 Laender are still discussing their revised draft, the consequences resulting from the Commission's detailed opinion as well as the new law in Schleswig-Holstein. Regardless of any remaining uncertainties, it is probably only a matter of time until respective models are developed.

Glance in the crystal ball

In recent years, there have been many debates and disputes in the media as well as before civil, administrative and criminal courts, as to whether the legal provisions are lawful and whether they can be applied. Many judgments have been passed and, at times, courts have taken radically different positions on gambling cases.

Until now, the German legislators and authorities have ignored one striking fact: while local gambling laws cannot cross borders, the Internet is borderless. A substantial percentage of consumers can be directed to licensed Internet sites and despite the fact gamblers face few problems finding relevant websites to play at, a complete Internet ban remains an unrealistic and unwanted (by the consumer) solution.

The remaining 15 Laender now have to decide whether they are to continue with an approach that has already been disapproved by the European Commission. Alternatively, they could try to modify their draft in order to address the most urgent concerns of the Commission. In both cases, it is not likely that the industry or consumers will adhere to the new law and that everything will change on January 1, 2012. The 15 Laender, or at least some of them, could also follow Schleswig-Holstein. However, this seems rather unlikely.

It is more likely that the current ambiguity will continue in 2012. Germany could end up with different gambling laws in competition with each other, a situation which does not seem to be consistent or coherent under the jurisdiction of the EC J. For operators and their advertising partners, this is both good and bad news. The German market remains attractive with equal amounts of opportunity and risk with any and all gambling activities needing to be adapted to the most recent legal framework.
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