WOGLR: Germany: Schleswig-Holstein ready for change in gambling policy
The northern German State of Schleswig-Holstein has recently announced it plans to abandon Germany’s Interstate Treaty on Gambling, which bans online gambling nationwide. Dr. Wulf Hambach, a Partner at Hambach & Hambach, examines the possible effect of the state’s move and discusses the current (and future) state of the online gambling ban.
In a press release issued at the beginning of September 2009, the parliamentary leaders of the German Liberal Party, the FDP, called for a reform of the Interstate Treaty on Gambling (ITG), and stressed that experts in the fields of addiction, economics and law were all opposed to a ban on internet gambling as a suitable tool for regulating online gambling. In particular, Detlef Parr, former Member of the Bundestag and FDP expert for sports affairs, addiction and illegal drugs, stressed the need for reform and called for the ITG to be terminated by the federal states ahead of schedule, so that suitable reform measures can be brought in without delay. This would thus decriminalise internet games such as sports betting and online poker for players and organisers, whilst continuing to protect players and simultaneously securing funding for charities. Jörg Bode, the new Minister of Economy of the Federal State of Lower Saxony, and expert for gambling issues in the FDP, opposes the current ITG and, in view of its ongoing evaluation, has demanded an in-depth study into the impact of the Treaty. These calls have been heard and have recently led to real measures against the current ITG.
Termination of the Treaty
Now, less than three months after the FDP press release, such a reform might become a reality sooner than expected, as Schleswig-Holstein officially announced its intention to terminate the ITG at the end of 2011. “This means that the Treaty will expire with effect as of the end of 2011”, Christian von Boetticher, Leader of the CDU parliamentary party in the Kiel Parliament told the newspaper Frankfurter Allgemeine Zeitung (FAZ) in mid-November 2009. “The decision is the consequence of the coalition agreement between the CDU and the FDP parties in Kiel.” According to newspaper reports, it is therefore unlikely that the German Federal States will agree on a new ITG for 2012. In order to combat addiction dangers, the Treaty, among other things, prohibits online games of chance in Germany. However, Boetticher said, in the FAZ interview, that the prohibition is not a suitable measure to achieve this objective.
Rather, providers will relocate their business to other countries, resulting in loss of jobs and revenue for the federal states. “This is something our country cannot afford”, Boetticher told the FAZ. He also said that there are approximately 3000 websites offering games of chance on the internet, being used by an increasing number of people. Schleswig-Holstein strives to privatise games of chance and, at the same time, to cooperate with the providers to ‘agree on sensible prevention measures’.
Looking at the recent revenue figures of the state operators, it is apparent that Boetticher’s frustration regarding the economic impact of the ITG is justified. Since the introduction of the ITG in 2008, the federal states’ revenue from gambling has dropped by an unbelievable 30%, according to the Deutsche Lottoverband, the Association of German Lotteries. Until the end of phase one of the Treaty (end of 2011), the loss of turnover will add up to €13.8 billion.
The obvious consequence is the following: the respective taxes and earmarked funds which the gambling operators pay to the federal states will continue to decline dramatically, hurting the fiscal interests of the German Federal States and reducing support for charitable projects.
One example was recently described in the article ‘Hoher Einsatz, maximaler Schaden’ (High stakes, maximum damage), published on 7 September 2009 in the German newspaper Die Welt: ‘Christian Kipper is usually a calm, level-headed man. However, when talking about his business in the last few days, his voice has revealed an undertone of deep anger. The silver-haired man has been the head of the ARD television lottery, ‘Ein Platz an der Sonne’ , for years. Almost half of its revenue goes towards charitable projects. Since its foundation 53 years ago, more than €1.3 billion has been raised by Germany’s oldest lottery, for women’s refuges, hospices and similar institutions. But for some months now, the business has not been running as smoothly: Kipper complains that fewer and fewer tickets are being sold. The sum which he distributes amongst social projects, could therefore fall, in the medium term, up to 30 percent.’
What has really caused Kipper’s mood to darken is the so-called Interstate Treaty on Gambling, which has protected the state monopoly on operating games of chance since the beginning of 2008. “The regulations make it extremely difficult for us to reach the public”, complains ARD lottery chief Kipper. It is allegedly the charities, which suffer most. The smaller the number of tickets sold, the more funds are lost which would otherwise have been allocated to charitable projects. Such comments from German charity gambling operators can be found more often in the recent past and endanger what could be called the ‘Achilles heel’ of the ITG, as one of the main motives for upholding the partial German gambling monopoly is that it is in the interest of the German public that charitable projects are financed and secured by strong state gambling providers.
However, yet another main argument used to justify the existence of a German sport (soccer) betting monopoly seems to be falling apart the combat of accompanying crime (Article 1 §4 of the ITG). Newspapers, not only in Germany, are full of the betting mafia scandals, which seems to be turning out to be the continent’s worst-ever case of match fixing in soccer. German prosecutors revealed last Friday that as many as 200 games across Europe are thought to have been rigged. Around 200 games, played this season in Germany, Belgium, Switzerland, Croatia, Slovenia, Turkey, Hungary, Bosnia-Herzegovina and Austria, are now under suspicion.
It is believed that none of the 200 suspicious games involves any of Europe’s top leagues, such as those in Italy, Spain and England. The 32 German matches involve clubs extending from regional leagues up to the country’s second division. Just four years after the big ‘Hoyzer betting scandal’ – named after the referee Robert Hoyzer – this is the next major organised criminal activity on Germany’s black (betting) market. As if he saw it coming, Friedrich Schneider, Professor for Black Market Issues, undertook research on the topic ‘What is the impact of banning private betting from the German betting market on the growth of the black market?’. Schneider presented his findings during a speech in Berlin on 3 September and stressed that the drop in turnover in the public gambling sector in 2008 (between 12% and 30%) was accompanied by a simultaneous growth of the black market. He pointed out that those who intend to gamble on the internet will not be deterred by a written ban, but will continue to do so. The associated loss of jobs, tax revenue and added value for the German economy due to lack of advertising proceeds led him to urgently recommend at least a partial liberalisation.
‘Yes we can’ it is not only the political decision makers of the small but brave Federal State of Schleswig-Holstein who announced the end of Germany’s gambling monopoly. Also, representatives of NordrheinWestfale, Rhineland-Palatinate and Baden-Württemberg have announced even though behind closed doors as yet to follow the example of Schleswig-Holstein. Apart from legal reasoning being on their side, the growth in (fiscal) revenue might help their ‘outing’. The German soccer league would, for instance, see an annual increase in its advertising revenue of approximately €100 million through a liberalisation. Money that should partly be invested in a more efficient system for combatting betting manipulation, in order to prevent major betting scandals which seem to be unknown in liberal sports betting countries, such as the UK.