Germany’s new regulations will finally allow online casino licensing
German regulators have struggled for years to craft appropriate laws governing online gambling. Finally, in March of 2020, the new Interstate Treaty on Gambling was approved, which will go into effect in July 2021 and allow the licensing of online casinos. But what are the details of the law? Read below to find out.
The upcoming online casino regulations in Germany will be a sea change for the country’s gambling industry, bringing a massive new opportunity for both start-ups and established companies who want to expand into Europe’s biggest economy. The latest version of the German Interstate Treaty on Gambling, which will come into force on July 1, 2021, will allow licenses to offer online casino games across the entire country for the first time.
Gambling in Germany is regulated at the state and federal level. At the moment, land-based casinos, land-based and online sports betting, and horserace betting are all allowed, but online casino games are only allowed in the state of Schleswig-Holstein. States have a monopoly on the lottery, but can issue licenses to offer state lottery products.
While the new regulations finally allow licensed operators to offer online casino games, they do come with stipulations that some are calling overly restrictive when it comes to deposit limits, product offerings, and other industry aspects like advertising and affiliate marketing. However, Germany still offers a tempting prospect for online gambling business owners.
Details of the new law
On March 12, 2020, the prime ministers of the various states of Germany approved the newest edition of the Interstate Treaty on Gambling, which will allow licensed operators to offer online slots, poker, and other casino games throughout the whole country. Operating a sportsbook had already previously been legalized.
The law recognizes four categories of betting products: online casino table games, virtual (online) slots, online poker, and sports betting. Virtual slots and poker will follow an open licensing model, whereas each state will be able to decide whether to have a monopoly on casino table games like roulette and baccarat or to issue licenses. The number of licenses available will correspond to the number of land-based casino license holders in that state.
Sports betting licenses will still be issued, but sportsbook operators will have to follow new restrictions on in-play betting; players will only be able to bet on the final result, the next goal or score, or a similar element of the game. Unlike slots, poker, and casino games, there is an unlimited number of sports betting licenses available. When first issued, licenses for sports betting, poker, and virtual slot machines will be valid for five years; online casino (table game) licenses will be valid for seven years.
To ensure uniformity across the country, different state regulators will be responsible for different issues. The regulator of North-Rhine Westphalia is responsible for lottery and sports betting advertising, sports betting licenses are the purview of the regulator of Hesse, and the regulator of Lower Saxony is responsible for payment blocking measures for illegal gambling that crosses state lines.
Online slot games must be licensed by the official regulator (as yet unformed) and significant changes to the game cannot be made without the regulator’s permission. Additionally, a new central authority will be established to issue licenses and ensure compliance. As the centralized authority for licensing and regulation has not yet been formed, licensing fees for online casino operators have not yet been announced. When it comes to taxation, Germany’s Value Added Tax applies to online slots and casino games, and sports betting operators are subject to a 5% turnover tax.
The new law has a series of player safety measures in place, with the aim of protecting vulnerable players, preventing underage gambling, and combating problem gambling. When players register on a website for the first time, they will be required to set a monthly deposit limit for themselves, which may not exceed €1000. If a player decides they want to raise their self-imposed limit, the change goes into effect seven days after the request is made. A request to lower a limit is granted immediately. In addition to the deposit limit, there will be a €1-per-spin bet limit on slot machines. Players must also be unable to access multiple gambling sites at the same time, and will be subject to a 5-second wait period between spins of an online slot machine.
Operators will not be permitted to offer both casino games and sports betting from the same domain unless there is an entirely separate area for each of them and cross-selling will be prohibited — for example, they will not be able to advertise sports betting in their casino section. In order to combat problem gambling, a central database of excluded players will also be established.
Advertising and affiliates
The Interstate Treaty on Gambling will have dramatic effects on gambling advertising and affiliate marketing. Advertising for the gambling industry will face certain restrictions, and affiliate marketing payment models will have to be adjusted.
Advertising for sports betting will not be allowed during sporting events, similar to the UKGC’s whistle-to-whistle ban in the UK. However, unlike the UK, sportsbooks operating in Germany will not be allowed to advertise during the run-up to the sporting event to be bet on. Advertisements for online casino, slot, and poker games will be prohibited between 6 a.m. and 9 p.m.
Revenue share payment models, the most common method of rewarding affiliates, will be forbidden. Operators will have to find other means to reward affiliates for directing high-quality traffic to their site, and cost-per-click and сost-per-acquisition will likely take the place of the revenue share model.
In anticipation of the upcoming changes and to provide a roadmap to licensing, a transitional regime was approved on September 9, 2020. During this period, operators could offer their services, providing they had proven to be in compliance with the upcoming regulations.
Operators who were not in compliance but continued to offer their services during the transition period would be ineligible for a license when they are offered in July 2021, and operators who were compliant during the transition period will have a track record proving their reliability. However, the amount of time operators had to prepare for the transition period was not very long; on October 1, it was announced that the transition period would begin on October 15.
By October 15, potential license applicants were expected to have removed roulette, baccarat, and other table games from their platforms. By December 15, operators are expected to have introduced a €1 betting limit on slots and a five-second waiting period between spins, both of which will be permanent fixtures of the law.
However, the rules of the transition period were heavily criticized, as operators were left only two weeks to become fully compliant. Also, during the transition period, advertisements are entirely banned. Further complicating player outreach, the use of the word “casino” for the purposes of marketing online gambling is banned — forcing a number of affiliates with the word in their name to quickly rebrand.
The Secretary General of the European Gaming and Betting Association, Maarten Haijer, has harshly criticized the upcoming regulatory changes. In his opinion, the wagering and time limits, as well as continued restriction of products will severely limit the ability of licensed operators to meet the needs of the market, giving a leg up to black-market operators who aren’t subject to the same limitations.
In addition to the limitations that will be in place, objections have been raised to the licensing process itself. In April, Austrian bookmaker Vierklee brought a lawsuit to the German courts, alleging that the licensing process, in particular the aspects involving the Federal Council on Games of Chance (Glücksspielkollegium), lacked sufficient transparency. The lawsuit froze the licensing process until it was eventually overruled in October, at which time 15 sports betting licenses were immediately issued by the Darmstadt Council in the state of Hesse, Germany’s sports betting regulator.
However, despite the criticism and the short preparation time for the transition period, Germany remains a highly desirable target market. The German gambling market could be worth as much as €3.3 billion by 2024, making Europe’s biggest economy a worthwhile opportunity despite the deposit limits and other restrictions. Several large, international operators, such as GVC, have already snapped up sports betting licenses, with many more on the way.
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