Economic Summit on the Island of Sylt: Gaming law still is a legislative patchwork

Published by Ansgar Lange, source: www.gaminglaw.eu

Expert panel: Financial Blocking collides with data protection – Kiel gaming act stands for sustainable security in online gaming

Sylt, May 2014 – Games are a fundamental element of our culture. Human beings are players – and without their desire and ability to play, large parts of our culture could not have developed. However: “Homo ludens”, i.e. “Man the Player”, has a hard time in 2014 if he wants to take part in attractive and legal games in Germany. Responsibility for this lies with the German federal states, with their First Treaty Amending the Inter-State Treaty on Gambling (GlüÄndStV) from 2012, which provides for the licensing of a total of 20 providers on the German betting market. Up to now, no licenses have been issued, parts of a market which is worth billions continues to be unregulated, and there is an alternative in the Schleswig-Holstein Gambling Act which has received high praise internationally whilst being fought within the country itself.

Top-class panels during the economic summit

Sustainability was the issue in focus at the economic summit of the CRM series of events on the island of Sylt http://www.wirtschaftsgipfel.com, which once more featured prominent panel members: FDP leader Wolfgang Kubicki, former Minister President Peter Harry Carstensen, “Mr Dax” Dirk Müller, SPD budget expert Bettina Hagedorn, member of the federal parliament, Dr. Thilo Weichert, data protection supervisor for the federal state of Schleswig-Holstein, and Professor Michael Rotert, President of the eco association of the German internet economy, were among the participants in the discussion rounds. The panel “How can safe controls of online gaming be guaranteed sustainably?” not only required a comprehensive introduction in order to create an understanding for the mesh of problems in a complex market. The expert round, which had been scheduled to last one hour and was presented by Dr Wulf Hambach from the Munich law firm Hambach & Hambach Rechtsanwälte https://www.timelaw.dewho is among the leading experts in the area of Sports & Entertainment Law, could probably have filled an entire day of the event. The need for information and discussion was clearly huge.

Under the CDU/FDP government, Schleswig-Holstein passed a Gambling Act which – as a further development of the so-called Danish model – is considered to be one of the most progressive laws of its type in Europe: It regulates the online betting market, the poker and casino sector, and brings into accord tax revenue, player protection and prevention of abuse. The change of government in Kiel put an end to this Act. On Sylt, Guido Schlütz from the Schleswig-Holstein gambling supervisory authority – who received the Gaming Regulator of the Year award from the association International Masters of Gaming Law (IMGL) in 2012 – found strong words when he described the deadlock, talking about a “chaotic or even bizarre situation” due to two regulatory regimes within Germany. He showed the economic significance of the market, which parts of the legislature ignore, by looking at the sales figures: Lotteries have a turnover of approximately 5 billion Euro annually, 4 to 6 billion are to be attributed to the online poker sector, and a further amount of 6.5 billion to the sports betting market – online and terrestrial. Online poker, and thus millions of German players, are pushed into the unregulated (black) market by the Inter-State Treaty.

Licensing creates security for online gaming 

“The standards are high, this has also been approved by the European Union”, the licensees of the Kiel model must create comprehensive conditions in order to be licensed, in view of youth and player protection as well as the prevention of money laundering and manipulation, Hans-Jörn Arp, the manager of the CDU parliamentary party in Schleswig-Holstein said.

He said that the fact that licensing and control ensure safety for players, providers and the state is the reason why the companies obtained a license in Schleswig-Holstein – a statement confirmed by Kevin O’Neal. He is the Director of Business Development at Rational Group, who hold all required licenses for their PokerStars brand in Europe, including a license in Schleswig-Holstein. According to O’Neal, the licensing is in the interest of the players, the providers, and ultimately also of the state, as it is the only way to guarantee responsible gaming. “It is our task to offer our players a safe and fraud-free poker platform at all times, where they can play poker in a monitored environment. At the same time, we must prevent fraud against us as the providers.” Also, players cannot play anonymously and cannot pay anonymously. “We have to know at all times who we are dealing with.” Rational Group employs more than 100 experts who deal exclusively with security issues and ensure that the licensing requirements are fulfilled on a permanent basis. Gaming officer Guido Schlütz furthermore pointed out that each poker game and each bet is recorded in an encrypted form which allows subsequent access should corresponding suspicions arise.

Incorrect approach – blocking financial transactions cannot be reconciled with data protection

Even though fraud mechanisms accompany technical progress, Michael Rotert, President of the eco association of the German internet industryhttp://www.eco.de and professor for informatics at the University of Karlsruhe, also considers the provisions of the Kiel Act to be pioneering in order to guarantee security in online gaming. He is of the opinion that financial blocking, which currently is continuously introduced into the debate and which the Inter-State Treaty provides for, is the wrong way, as this would mean that data protection supervisors such as Thilo Weichert would have to take action. “This is because, for this purpose, the payment processors would have to collect more data, and use the collected data in other ways, than would be required for the payment function as such. This already leads to a data protection problem.” Vice versa, this also means that the processing of this data will concern all German customers of payment providers, irrespective of the actual purpose of the payment. Furthermore, practical implementation would almost be impossible: For instance, the payment processor would have to be able to verify in each individual case whether the offer actually is a gaming offer and where the player was located when the game took place – i.e. in a federal state where the used offer is licensed, or in a state where this is not the case. The potential consequence: Special national characteristics such as the German gaming legislation interfere with the internet as a medium which is available world-wide. The example of Denmark shows that one can do without Financial Blocking: In Denmark, licensed providers cover 95 per cent of the market. “Ensuring a maximum of safety is only possible through the cooperation of all market participants – regulators, payment providers, internet industry and customers – and can in particular not be achieved in the online area by imposing national bans”, is Rotert’s conviction.

Financial blocking and internet blocking, which have repeatedly been requested in the past, are therefore anything but conducive to reaching the objectives pursued. Instructions how to circumvent such blocking are available – naturally – online. In Italy, for instance, a YouTube video explaining just these possibilities is among the most frequently used videos. Another reason for the responsible parties to finally get round a table for cross-party negotiations and to create uniform regulations which do justice to the realities of the online market. Peter Harry Carstensen, the former Kiel Minister President, had earlier discovered light at the end of the tunnel: He referred to the coalition agreement in Hesse, in which the CDU and the Green Party expressly acknowledge that there is a need for action – also against the background of European legislation and of the consistency demanded by the European Court of Justice.