Gaming & Betting in Germany

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1 Gaming & Betting in Germany Summer 2012 A guide to Germany s gambling law and current legal trends provided by The Task Force Gaming and Betting Law of Heuking Kühn Lüer Wojtek Summer 2012

2 Dear Reader, Since September 2010 when the European Court of Justice declared the German Inter-State Treaty on Gambling as incompatible with the European Union law, the country has seen breath-taking political and legal changes. Instead of shaping one nation-wide set of rules opening the market for transfrontier European service provider on the one side and keeping an eye on the interests of the traditional state monopoly enterprises on the other side, the Federal States continued to defend historical patterns of legislation. However, to a certain degree competition is reopened. In this edition of our Guide we give you a legal update with an outlook for the next months status of summer Germany is still and more than ever an attractive market with opportunities challenges are there as well but we help you to circumvent them. Enjoy reading this Guide and come back to us with questions, criticism or proposals. Our team will be happy to assist in your next projects. Best regards, (Astrid Luedtke) (Michael Schmittmann)

3 Gaming in Germany: Flashback and Background German gambling law is traditionally characterized by a byzantine system of different regulations and responsibilities. Since 2008 games of chance not specifically regulated elsewhere fell under the scope of the Glücksspielstaatsvertrag (Inter-State Treaty on Gambling = GlüStV) a regulation enacted on the level of the German States (Länder). This applied to lotteries, bets, online casinos and game of cards (poker). Lotteries (mostly) and sports bets were monopolized by state operators. Online games of chance were prohibited outright. Other games of chance were regulated on Federal level (horse racing bets, automated machines) or under a different Länder law regime (traditional casinos). In September 2010 the European Court of Justice found the legal core of the GlüStV the sports bets and lottery monopoly inapplicable, though the judgements were adopted only hesitantly by German courts. The GlüStV, which was slated to expire in 2012 anyway, came to its end after more than a year of almost weekly court decisions and rear guard actions which saw particularly the online ban develop into the German monopoly operators last line of defence against competition. Meanwhile, the Länder developed a successor Inter-State Treaty under heavy political hand wringing. Due to the total practical failure of the old Inter-State Treaty, at least a limited opening of the market to private operators in the sports bets sector was deemed to be unavoidable. Plans for a wider opening of the market were discussed but ultimately shelved as the Länder in the spring of 2011 opted for maintaining the lottery monopoly while introducing a system of limited licences for sports bets both in terms of the number of licensees as well as bets allowed (the Glücksspieländerungsstaatsvertrag, more commonly known as E15- Model). On the other hand, the now famous German State of Schleswig-Holstein took a different approach, basically opening the market for bets and online casino operators in its own Gambling Act. Currently, licensing in Schleswig-Holstein is in full swing despite the new government s openly stated intentions to lift the Gambling Act as soon as possible. Thus, 2012 sees the fascinating and unprecedented drama of two different acts regulating cross border services within a single member state of the European Union.

4 Two different approaches: Concession model and full fledged liberalization After prolonged discussions the Länder mostly opted for a regime of limited market deregulation in the sports bets sector while upholding the lottery monopoly. The Inter-State Treaty went into force on 1 July 2012 in 14 out of 16 German Länder. Schleswig-Holstein (green) opted out of the Inter-State Treaty System and passed its own Gambling Act in September The GlüG S.H. establishes a licensing system for bets, online casinos. The act went into force on 1 January Licences are being granted since 1 March sports bets licences have been issued so far. The new government intends to join the Inter- State Treaty. Licences will be granted until the Gambling Act S.H. is lifted. North-Rhine Westphalia (red) intends to join the new Inter-State Treaty but still operates under the old one as intra state law. A new act implementing the Inter-State Treaty should be passed in autumn Source for the map: Portal der statistischen Ämter des Bundes und der Länder (DeStatis); David Liuzzo.

5 German gambling law under the new Inter-State Treaty: Key facts for private providers The new Inter-State Treaty s scope is expanded. In order to strengthen the overall consistency of Germany s regulation, additional rules for horse racing bets and gaming machines are included in the new Inter-State Treaty. Not regulated by the Inter-State Treaty remain games of skill, games of chance with no monetary stakes or games or non-public games of chance. Traditional Casinos remain primarily regulated in the Länder s casino acts with certain sections of the new Inter-State Treaty being applicable. Online casino and poker games remain prohibited. Offline Poker, Blackjack or comparable games remain banned as well as outside casinos. The sports bets market is opened but in a still very restrictive way. The number of licences for private operators is limited to 20. The Inter-State treaty is slated to expire at the end of The licensing system for sports bets is introduced as experimental clause and limited in time until July Concessions are granted in an EU-wide tender organised by the State of Hesse. A new inter-state Gambling Commission (Glücksspielkollegium) is established as regulator. In order to complement the new Inter-State Treaty, the Rennwett- und Lotteriegesetz (Horse Racing Bets and Lotteries Act of 1922) is amended for the first time establishing a general tax of 5% of the total turnover for bets across. The tax is also applicable to non-licensed and/or EU based companies with turnover in Germany.

6 Overview (I): Games of chance under the new regime Horse racing bets (see also RWLG) Bets Sports bets (20 licences) Online/ offline Other bets banned Lotteries (partly state monopoly) Private brokers permitted Online/ offline Online Casino Games (incl. Poker) Banned Customers in Germany Offline public games of chance - Poker, Blackjack etc. Banned Gaming Machines and Arcade Halls Offline Casinos Only in some Länder licences available Offline

7 Overview (II): Sports bets and casino games Under the so-called Experimental Clause of sec. 10a of the New Inter-State Treaty, up to 20 licences may be granted to private operators. The number of licences was deliberately chosen to reflect the actual market conditions and to channel the relevant operators into the legalised market. Concessions are granted both online as well as for offline distribution. Licensing procedure and requirements are detailed in sec. 4a-e of the new Inter-State Treaty. Licences will be granted after a Europe wide tender which started early August Applicants have to submit inter alia: Information on corporate background, ownership and control Security Concept (IT security, prevention of fraud) Social Concept (prevention of addiction, ensuring exclusion of minors) Business Plan A bank guarantee of EUR 5m-25m Further implementing orders detailing the general criteria mentioned in the New Inter-State Treaty (e.g. the technical regulation) have not yet been published. The proposals have to be submitted by 12 September The public procurement notice was published in the Supplement to the Official Journal of the European Union dedicated to European public procurement on 8 August The proposals have to include information on the applicant s company structure, personnel and background. Forms for the application can be requested under sportwettenkonzessionen@cbh.de. The regulative regime for sports bets is restrictive. Stakes per customer are limited to EUR 1000 per month, though exemptions are possible. Live (In-play) bets are allowed, but all bets are restricted to results. Bets on individual actions (e.g. next corner kick etc.) are not allowed. Online-Casino-Games (including Poker, Blackjack etc.) remain prohibited and non-licensable. Operators who provide these games in addition to sports bets may have to make their sites unavailable to German customers: The overall legality of operations is one of the licensing requirements.

8 Overview (III): New rules on Taxation At the end of June 2012, Germany introduced a new Act on the Taxation of Sports Bets amending the time-honoured Horse Racing Bets and Lotteries Act (RWLG) of Tax duty is expanded to a tax on all sports bets if the customer placing the bet is situated inside Germany (including Schleswig-Holstein). Both licensed as well as unlicensed operators are obliged to pay the tax. The tax amounts to 5% of turnover with a bet and is due basically every month. Operators are obliged to register with the competent German tax authority. The tax does not apply to Online- Casino Games. With regard to sports bets, the new Federal tax supersedes the 20% net gross profit tax of the Gambling Act Schleswig-Holstein which remains applicable for casino games. Current tax duties pursuant to RWLG and Gambling Act S.H. Lotteries Sports RWLG (5% t/over) Bets Horse Racing Other Casino Games S.H. 20% NGP

9 Advertisement Advertisement is regulated primarily in sec. 5 new Inter-State Treaty. Overall, previous restrictions are lessened. Advertisement no longer has to be restricted to pure information purposes. The Länder plan to further detail the restrictions in a special advertisement guideline which was circulated as draft on 21 August Comments on the draft are accepted by the Ministry of the Interior of North-Rhine Westphalia. Advertisement for sports bets just before or during a live broadcast remains prohibited and is not licensable. This wording would still allow advertisement for the respective gaming companies without mentioning a specific product. Perimeter advertising and advertising on jerseys is now possible. Advertisement under the new Inter-State Treaty Gaming company Licensed operator Adults Nonmisleading Unlicensed operator Minors/ addicts Misleading (Guidelines) Offline Customer Special licence for TV/Internet required: - Sports - Horse Racing - Lotteries Internet TV

10 Combating the black market 1 Enforcement of the new Inter-State Treaty System Private enforcement - Competitors Public enforcement - Gambling Authorities Criminal enforcement - State Attorney Tax enforcement - Tax Fraud Investigation Civil Court Cease-and- Desist-Orders -Operators -Media Cease-and- Desist-Orders -Operators -Media Administrative penalties (up to EUR 500k) Interruption of payment transactions Provision and illegal advertising as criminal offence Imposing tax duties; tax fraud as criminal offence Enforcement fines Enforcement fines Gambling companies outside Germany and their executives, representatives The number of licences available under the new GlüStV was chosen to draw the relevant market participants into the licensing regime. Unlike in the past, German gambling authorities are likely to coordinate enforcement actions through a single authority. Both the competent gambling authority as well as the state owned monopoly operators are expected to aggressively enforce the new Inter- State Treaty starting in autumn Further, expanded taxation duties under the RWLG will let tax authorities focus on gambling companies. The Federal Ministry of Finance already announced that it is stepping up its combating of money laundering in the gambling sector. 1 In colour potential risks of enforcement. Red = high risks, yellow = medium risks, green = at the moment relatively low risk.

11 For further advice please contact: Astrid Luedtke Head of Task Force Gaming and Betting Law Certified Specialist Lawyer in Intellectual Property Law Regulatory, Unfair Competition, IT Georg-Glock-Straße Düsseldorf GERMANY Phone a.luedtke@heuking.de Michael Schmittmann Head of the Firm s Practice Group IP, Media & Technology Regulatory, EU, Business Structure, Transactions Georg-Glock-Straße Düsseldorf GERMANY Phone m.schmittmann@heuking.de Marc Oliver Brock Regulatory, Competition, Litigation (administrative law) Georg-Glock-Straße Düsseldorf GERMANY Phone o.brock@heuking.de

12 Prof. Dr. Rainer Jacobs Unfair Competition, IP, Litigation (civil law) Georg-Glock-Straße Düsseldorf GERMANY Phone r.jacobs@heuking.de Dr. Georg Jacobs, LL.M. Unfair Competition, IP, Litigation (civil law) Georg-Glock-Straße Düsseldorf GERMANY Phone g.jacobs@heuking.de Wolfram Meven International and national Tax Law Georg-Glock-Straße Düsseldorf GERMANY Phone w.meven@heuking.de Simon Hirsbrunner EU, Competition Law Avenue Louise Brussels BELGIUM Phone s.hirsbrunner@heuking.de

13 About Heuking Kühn Lüer Wojtek More than 250 specialized lawyers, tax advisors and notaries at Heuking Kühn Lüer Wojtek provide counseling services across nine offices, making it one of the large German commercial law firms. National and international clients include medium-sized and large companies from manufacturing, trade and the service industries as well as associations, public corporations and discerning private clients. Juve, German Commercial Law Firm 2012, writes about us: This recommended firm in media has had a strong focus on media regulation and contract law but has recently become more active in copyrights.. Advice on gambling law has also grown in importance for the practice; Heuking is often consulted by companies from outside Germany due to its expertise gained through advising such clients as Jaxx and Sportingbet. Professor Dr. Rainer Jacobs is chairperson of GiG e.v. GiG is an association of private gambling operators acknowledged by the Federal Court of Justice which enforces its members interests in the field of unfair competition law. Michael Schmittmann is publisher of the series for European Gambling law, Verlag Medien und Recht, Vienna/Munich since 2011 and organizer of the annual Düsseldorf Symposium on Gambling Law. This overview does not contain legal advice. The information included has been carefully researched. However, it only reflects excerpts of case-law and legal/political development and cannot replace individual legal advice taking into account the particularities of the individual case.