GamblingCompliance: European Commission Challenges German Gambling Model

By David Altaner, published on GamblingCompliance

Germany has not answered the European Commission’s concerns on the country’s sports-betting monopoly and its ban on online casino and poker, the commission said in an “EU Pilot” approach.

The approach is a structured dialogue that is the first step toward possible infringement proceedings that could culminate in litigation in the European Court of Justice.

The commission wants to know what steps will be taken to end Germany’s sports-betting monopoly, which is held by the state-owned Oddset, “without delay”.

It also asks whether Germany might want to reconsider its ban on online casino and poker, given that a black market is “rapidly growing” and may be unenforceable.

Illegal online gambling has reached an estimated €17bn (£12.1bn) in stakes, according to the request.

The communication challenges Germany’s three-year-old state treaty and licensing system, a regime which has yet to take effect due to court challenges.

Germany has not yet shown that there is an “appropriateness and proportionality” to its ban on online casino and poker, and that the ban would meet goals of reducing gambling addiction, match-fixing and money laundering, according to the commission.

It is “unclear” how its system will curb fraudulent activities and crime, given the growth in illegal online gambling, according to the pilot document.

The commission also questions limiting the number of sports-betting licences to 20.

In a further question, it says: „Will the German authorities continue with the sports-betting licensing procedure despite the delay and give out licences with a duration of seven years?“

On lotteries, the commission questions why private brokers are restricted and points out that lotto, the least dangerous product, is under a monopoly when the riskiest product, gaming machines, are run by commercial operators.

„The creators of the gambling treaty have failed in the past four years to answer the questions of the commission positively, now an infringement is threatened,“ said Norman Faber, president of Germany’s private lottery association.

„It is high time that the State Treaty on Gambling be revised,“ he added.

The document, issued by the DG GROW department, invites German officials to submit evidence of successful enforcement measures taken against illegal gambling, and to offer data on any reduction in problem gambling.

It also asks authorities to show that its land-based and online gambling rules are “coherent”; that is, consistent and can be shown to meet their stated goals.

„The clear and explicit criticism of the EU Commission will definitely raise the pressure on German authorities as well as politicians,“ said Wulf Hambach, partner at Hambach & Hambach law firm.

The tight deadline of September 7, 2015, combined with the commission’s criticism of the interstate treaty on gambling (ITG), makes sudden enforcement against online operators in Germany unlikely, he said.

„It is unlikely that the German authorities are actually able to pull a white rabbit out of the hat and suddenly start to enforce the ITG regime successfully,“ said Hambach.

The “EU Pilot” system is one set up in 2008 in which the commission contacts a member state to query problems related to whether the national law conforms with European Union law.

Usually member states have ten weeks to respond, then the commission has ten weeks to assess the response.

If the response is inadequate, the commission may launch infringement proceedings, a formal notice that the commission believes the country’s laws violate EU law.

Infringement proceedings can lead to the member state being referred to the European Court of Justice to consider whether it should be assessed fines or other penalties.

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