Gaming Law 2020

Last Updated November 24, 2020

Germany

Law and Practice

Authors



MELCHERS is a law firm with offices in Heidelberg, Frankfurt am Main and Berlin that has been advising companies in the gaming and betting industry for over 30 years. The Gaming & Betting Law Practice Group consists of specialised regulatory and commercial lawyers and, being a full-service law firm, its advice in gambling-related matters also includes all corresponding areas of law, such as competition, company and administrative law. The firm advises national and international clients, has developed an excellent global network and pays attention to elaborate communication with regulators, which in many cases may be helpful in avoiding litigation. It also has considerable experience in lobbying.

German gambling regulation, particularly its online gambling regulation, has become known for being a constant “work in progress” in desperate need of reform. It has faced criticism for years, particularly with regard to its questionable compatibility with EU law, and some discussions are yet to be concluded. The main legal framework, the Interstate Treaty on Gambling (the “Interstate Treaty 2020”), which came into force on 1 January 2020, enabled a new sports betting licensing process. It had temporarily been stopped by the Administrative Court of Darmstadt, but was recently continued. 

The Interstate Treaty 2020 seeks to address the failures of the 2012 sports betting licensing process. In this process, only 20 licences were available but ultimately none of these licences could be issued due to the process having been unlawfully conducted. The limitation to the number of 20 licences for sports betting has been abolished under the Interstate Treaty 2020, but the ban on online gambling that predominantly affects online casino, slots and poker games remained in the law. Those games were also excluded from licensing.

On 1 July 2021 the new Interstate Treaty on Gambling 2021 (the “Interstate Treaty 2021”) is expected to enter into force. It is intended to open the market for virtual slot-machine games and online poker. However, it restricts operating “online casino” products (in terms of table games) to licensed land-based casino operators. 

The most recent development is the introduction of a transitional regime for operating virtual slots and online poker on 15 October 2020 until a new licensing system takes effect under the Interstate Treaty 2021. Requirements under the transitional regime have been published in the so-called Joint Guidelines of the Supreme Gambling Supervisory Authorities of Federal States (the “Joint Guidelines”). Regulators have announced by way of the Joint Guidelines that operators that comply with the conditions of the transitional regime will not be subject to enforcement. However, the transitional regime only applies to the offer of virtual slot-machine games and online poker. Table games such as blackjack, roulette or baccarat are not permitted under the transitional regime.

From a legal point of view, it is noteworthy that the transitional regime is neither a law nor an ordinance, but rather enforcement guidelines for the administration. Even more remarkable is the fact that the regulations of the transitional regime are taken from a law that in fact has not yet entered into force. Ratification of the Interstate Treaty 2021 is not expected to be completed until the end of March 2021. 

The transitional regime is also of particular importance with regard to future licensing procedures. Regulators have announced that they would consider operators that do not comply with the Joint Guidelines to be “unreliable” in future licensing proceedings, which would result in exclusion from those proceedings. With regard to the Interstate Treaty 2021 and the new licensing procedures, this implies that the operator's behaviour may already be relevant before the Interstate Treaty on Gambling enters into force.

Betting

Under the Interstate Treaty 2020, only online sports and horse race betting are licensable. All other forms of online betting are considered to be games of chance that are still not licensable. If offered online, such betting offerings would normally be affected by the Interstate Treaty’s total ban on online games of chance.

Bingo

Bingo is considered to be a lottery product. Lotteries in general are subject to a state monopoly.

Online Casino, Virtual Slots and Online Poker

Since the start of the transitional regime on 15 October 2020, it is possible for operators to offer virtual slots and online poker without risking regulatory enforcement against them. Operators must meet the requirements detailed in the Joint Guidelines.

Other forms of online casino games – in particular, table and bank-holder games – are still prohibited according to the regulations and excluded from licensing at this stage. The state of Schleswig-Holstein is an exception: during 2012-13, this state pursued its own state gambling regulation. Unlike the Interstate Treaty, this state’s gambling regulation allowed online casino licensing. In 2013, Schleswig-Holstein, however, joined the other 15 states in the Interstate Treaty. Due to a transitional regulation that was introduced in May 2019, formerly issued online casino licences have been reinstated and still allow Schleswig-Holstein licensees to offer licensed online casino within the state of Schleswig-Holstein. The transitional arrangement shall remain valid until 30 June 2021.

Lotteries

Operating lotteries are subject to a state monopoly on lotteries. Private operators may only obtain licences to allow them to sell lottery tickets on behalf of the state lottery companies.

Fantasy Sports

There are no specific rules under gambling law with respect to fantasy sports and whether a fantasy sports offering qualifies as a game of chance or falls outside the scope of German gambling regulation needs to be assessed on a case-by-case basis.

Social Gaming

It will need to be assessed on a case-by-case basis as to whether a social gaming offering qualifies as a game of chance or falls outside the scope of German gambling regulation.

Betting

Land-based sports betting is permitted in various points of sale operated by the state lottery companies as well as in betting shops operated by licensed private operators. As the licensing procedure for sports betting was carried out unlawfully in 2012, operators were left without licences at first. Now that the sports betting licensing process is continuing and the first licences have been granted, betting operators are expected to implement further requirements to their retail business.

Poker

Poker is generally considered to be a game of chance and as such will be defined as a licensable product in most state casino acts and ordinances. It forms an integral part of land-based casino offerings. Under exceptional circumstances and only when adhering to strict requirements, cash poker tournaments may be offered outside of licensed casinos.

Bingo

Bingo is classified as a form of lottery, and the regulations on lotteries apply accordingly.

Casino

The ban on online casino is not relevant to operating land-based casinos. The casino regulation is a matter of state law and, accordingly, regulatory requirements and licensing differ from state to state. It will depend on the state in question as to whether licences are only available for state-owned companies or private operators as well.

Slot Machines

Slot machines outside casinos are restricted at federal level under the Trade Regulation Act and the Gaming Ordinance. In addition, the Interstate Treaty and the gaming acts/transposition acts of each state include further restrictions. These concern slot machines that may be set up in restaurants and bars but also those set up in gaming halls. The relevant laws, eg, restrict the maximum spin amount and maximum winnings, and they define the minimum spin duration as well as the maximum number of machines that may be set up in any one gaming hall.

Lotteries

Operating lotteries is subject to state monopoly. Sales of state lottery products may be licensed to private companies.

The Interstate Treaty on Gambling that entered into force on 1 January 2020 is the main legal framework for online and land-based gambling in Germany.

Beyond the Interstate Treaty 2020 and the gambling acts transposing it into state law, the casino acts and casino ordinances of each German state constitute the main gambling legislation. These, however, only affect bricks-and-mortar casinos.

At federal level, slot-machine gambling is regulated under the Trade Regulation Act and the Gaming Ordinance. Horse race betting at racetracks is also regulated at federal level. The relevant law is the Race Betting and Lottery Act of 1922 (Rennwett- und Lotteriegesetz), which is also relevant from a tax perspective as it includes the tax base for a variety of gambling taxes, such as the lottery tax and sports betting tax. Other federal laws impacting on gambling are the German Criminal Code, the Anti Money-Laundering Act, the Act Against Unfair Competition, youth protection laws and regulations on advertising including sweepstakes.

Schleswig-Holstein sports betting and online casino licensees further have to comply with the Schleswig-Holstein Gaming Act and Ordinance.

As per the legal definition of a game of chance, a game of chance consists of three elements that have to be met collectively in order to subject an activity to German gambling regulations:

  • valuable consideration;
  • the valuable consideration is given in exchange for a chance to win; and
  • determination of winnings is entirely or predominantly a matter of chance.

A game of chance is defined in Section 3 of the Interstate Treaty.

The Interstate Treaty does not include an express definition of land-based gambling. It merely defines what classifies as a game of chance. In general, any game of chance offered in a land-based premises and not remotely may be considered to be land-based gambling.

The Interstate Treaty only defines what constitutes a game of chance. Online gambling must be assumed whenever games of chance are offered via the internet or by any means of remote communication within the meaning of Section 312c (2) of the German Civil Code. This includes games offered via mobile devices.

It depends on the gambling sector and how this sector is specifically regulated as to what constitutes a “key” offence. In relation to licensed operations, key offences will mainly be licence violations. Operations that are affected by the Interstate Treaty’s total ban on online gambling or product or marketing restrictions may be confronted with other allegations; particularly, alleged unlawful operations and/or advertising. Enforcement in this context will mostly be under administrative law based on the practice applied by German authorities. There are provisions in the law, however, that theoretically would allow enforcement under administrative offence law or criminal law.

The public organisation of “unauthorised” gambling – ie, without a licence – may incur criminal liability. Enforcement has mainly focused on regulatory measures. Criminal proceedings against operators have only become publicly known in a few high-profile cases. These are usually aimed at major operators; it is reasonable to assume that the public authorities also use such cases to deter unregulated operators. However, there are also clear tendencies for public authorities to significantly increase the number of enforcement measures, including those against payment service providers.

Penalties vary between the states as they are defined in state legislation. In administrative proceedings, interdiction letters will be issued on pain of fine in the range of approximately EUR10,000.00 to 50,000.00 per infringement, depending on the relevant state law. Penalties under an administrative offence law would be higher (up to EUR500,000.00/proceeds of crime) but, again, depend on state law. The sanctions set out under criminal law range from monetary fines to imprisonment for up to five years (Section 284 (1), (2) of the German Penal Code).

The new Interstate Treaty on Gambling 2021 is expected to enter into force on 1 July 2021. Ratification is expected to be completed by the end of March 2021.

Since the states are primarily responsible for regulating gambling, the majority of licensing, supervisory and enforcement powers are vested in regulatory authorities at state level. Most key responsibilities are assigned to the Ministries or Senates of the Interior, which may employ lower authorities to act on their behalf. Those responsibilities comprise the licensing and supervision of land-based casinos, and co-ordinating enforcement actions against suspected unlawful gambling operators.

Additionally, certain states have assumed the role of a centrally responsible regulator for clearly defined areas of the law. The Regional Council of Darmstadt (state of Hesse), for example, is competent for issuing sports betting and horse race betting operating/brokering licences. The licences it issues cover all German states. The Ministry of the Interior of Lower Saxony is competent for implementing payment-blocking measures and issuing/supervising nationwide lottery brokering licences. For issuing TV and online advertisement permits for licensed sports betting, horse race betting and lottery offerings, the regional government of Düsseldorf (state of North Rhine-Westphalia) is responsible. The states of Hamburg, Rhineland-Palatinate and Baden-Wuerttemberg each have central competences for certain forms of lotteries. Finally, the Ministry of the Interior of Schleswig-Holstein is responsible for supervising its licensees under the former Schleswig-Holstein Gaming Act and/or transitional arrangements.

The regulatory approach in Germany aims to prevent gambling addiction, ensure the protection of minors and players as well as fairness, channel players to licensed offerings to combat the black market and crimes related to gambling, and ensure the integrity of sport. The means envisaged by the Interstate Treaty to achieve these objectives are a state monopoly on lotteries, licensing opportunities in selected areas such as sports betting and a total ban on games of chance offered online that are not licensable.

However, the written law has been questioned for years as it arguably violates EU law, particularly in an online gaming context. In 2010, the CJEU decided that the state monopoly on sports betting and lotteries (as it was included in the 2008 version of the Interstate Treaty) infringes EU law. This was confirmed in the landmark case Carmen Media (C-46/08), which led to the 2012 version of the Interstate Treaty being introduced. The 2012 Interstate Treaty allowed for a partial opening of the sports betting market during an experimental phase, which was supposed to end on 30 June 2019. The licensing process that was introduced, however, failed and on 4 February 2016 the CJEU confirmed in case Ince (C-336/14) that the unlawful monopoly de facto persisted in relation to sports betting. Not a single licence was issued. The CJEU further clarified that operators, who can rely on the European fundamental freedoms, cannot be blamed for operating without a German sports betting licence.

The licensing process for sports betting under the current Interstate Treaty, which entered into force on 1 January 2020, has also been criticised as being non-transparent and discriminatory, and was stopped on 1 April 2020 by the Administrative Court of Darmstadt. After the withdrawal of a legal challenge of the licensing process, the regulator started issuing sports betting licences in October 2020. Accordingly, gambling regulation in Germany now seems to be taking shape and it seems possible that, after many years of regulatory failures, the first online casino licences (mainly virtual slot-machine games and online poker) could be granted in 2021.

In the land-based sector, the situation is more settled, although many land-based casinos remain state-owned and only a few states allow for private companies to obtain casino licences. The gaming hall sector has also seen rather turbulent times in recent years. These were only made subject to gambling regulation under Interstate Treaty in 2012 and certain restrictions being imposed, such as minimum distance requirements between licensed premises, led to a wave of local regulation. Reforms, nevertheless, are unlikely to affect the land-based sector much as the focus in the discussions currently is on online gaming.

Licences are only available for certain products, such as sports betting; other licences, including the licence to operate lotteries, may not be issued to private operators. Unless a licence is issued by a centrally responsible regulator such as the Regional Council of Darmstadt is in respect of sports betting, licences will be issued on a state-by-state basis and will only take effect in the state or in relation to the premises for which it is issued. German licences will always be issued to B2C companies. There is no B2B licensing system.

The following licences are available for private operators:

  • online/land-based sports betting;
  • land-based casino gaming, including poker (but only in certain states);
  • land-based and online horse race betting bookmaker licences/licences pursuant to Section 27(2) of the Interstate Treaty;
  • land-based slot-machine gaming in gaming halls or restaurants and bars;
  • land-based and online brokerage of state lottery products; and
  • small-scale/charitable lotteries (traditional lotteries are subject to a state monopoly).

The state of Schleswig-Holstein has issued online gambling licences; however, they can no longer be applied for.

With regard to the transitional regime, which will apply until the new Interstate Treaty 2021 enters into force, it is important to note that no licences will be issued for online poker and virtual slot-machine games. Operators that wish to continue to offer these products from 1 July 2021 must apply for such a licence next year.

The duration of available licences varies depending on the product in question and the licence conditions, which often are determined by state laws.

In the land-based casino sector the average licence term is 10-15 years. Often there will be an option to extend licences for another five years.

Schleswig-Holstein online gaming licences (online sports betting and online casino) had a licence term of six years and were supposed to be extendable for another four years. Instead of simply extending the licences, the Schleswig-Holstein Ministry of the Interior, however, introduced transitional arrangements for online sports betting and reinstated the online casino licences in 2019. The transitional arrangements are supposed to stay in place until a new regulation is enacted, until 30 June 2021 at the latest.

Sports betting licences that are issued under the current Interstate Treaty shall have a licence term until 30 June 2021. The Interstate Treaty 2021 stipulates that these licences will further be extended by virtue of the law until 31 December 2022.

An overarching requirement is that the applicant entity and its representatives are “reliable”, meaning that they are expected to demonstrate that they will be capable of operating a licensed business in compliance with the regulations. Certain documentation – eg, criminal records, certificates of good conduct, confirmations regarding tax compliance and other commercial records – will need to be provided for that purpose. This includes excerpts from corporate registers and disclosing relevant shareholders. Disclosure thresholds, however, are not always clearly defined and vary depending on the specific licensing process. Certain key staff will further need to prove their expertise in the respective field by submitting CVs, certificates and other qualifications.

Another common aspect in all German licence application procedures is that operators will be asked to submit so-called concepts. Concepts essentially are company policies describing how the applicant intends to conduct its future business under the licence. Key policies include details on how to ensure responsible gambling and IT security, but also a business and marketing plan and payment processing concept.

The application timing varies depending on the licensing process in question, the number of staff available to review applications and other factors. The issuance of licences will, for example, be delayed or even prevented if the licensing process is not designed and conducted in a lawful manner. This occurred in relation to the sports betting licensing process that was initiated under the Interstate Treaty in 2012. Under the current Interstate Treaty on Gambling, the granting of licences has also been delayed as it has been suspended. 

Based on experience, land-based casino application proceedings tend to take between six and 18 months. The duration of the licensing process for gaming halls/amusement arcades generally is a matter of weeks or a few months.

Application, or rather licensing, fees vary depending on the licensing process in question, but usually will depend on projected turnover. In addition, certain state laws on fee calculations can apply.

Ongoing annual fees vary depending on the licence in question as well as the state laws on the calculation of administrative fees applicable in the state issuing the licence. There will usually be different types of administrative actions that take into account the time spent on the side of the authority to undertake the supervision. 

Land-based gambling includes slot machines in gaming halls, bars and restaurants, gambling in land-based casinos, horse race betting at racecourses and sports betting in local premises, as well as lottery brokers.

Requirements for retail outlets for lottery brokers are regulated by the local gambling acts of each German state.

In relation to gaming halls, certain minimum distance requirements apply, which are specified in state legislation. They vary between 250 and 500 metres between licensed premises. In some German states, gaming halls must further respect a minimum distance from schools, other child and youth institutions and/or addiction centres. The number of slot machines allowed in a certain premises is also regulated and depends on the type of premises (gaming hall, restaurant or bar) and, in relation to gaming halls, the size of the premises. In general, a maximum of 12 slot machines per gaming hall licence are permissible, and a maximum of two slot machines in restaurants or bars.

Since gaming hall regulation became part of the gambling regulation under the Interstate Treaty in 2012, the legal situation for operators of gaming halls has become considerably stricter over the past years. Gaming halls used to be regulated only at local level applying federal trade laws, specifically the Trade Regulation Act. While the Trade Regulation Act provided for licences, these were not gambling licences. Operators of gaming halls now require a gambling licence to conduct their business. Such gambling licences must only be issued if the gaming hall meets the criteria set out in the law. In particular, it must not violate the applicable minimum distance requirements. Due to the number of existing gaming halls in Germany, this is a problem for both newcomers and existing gaming hall operators. It led to a wave of litigation to prevent regulators from closing established premises that could not meet those distance requirements. In parts, lawsuits are still pending.

In a land-based sports betting context, similar problems as in the gaming hall sector are expected to arise because multiple state laws stipulate minimum distance requirements and/or limit the number of available betting shops. Litigation against disproportionate restrictions therefore must be expected.

Under the regulatory framework of the Interstate Treaty 2020, only B2C licences for online sports betting, horse race betting and distribution of state lottery products are available.

Other forms of online gambling – including online casino games in terms of table and bank-holder games, secondary lotteries and other games of chance that are not sports betting – currently cannot be licensed under the Interstate Treaty as the written law stipulates a ban of these operations.

Although the transitional regime tolerates the offer of virtual slot machines and online poker (provided the requirements are complied with by operators), licences for these products are not available yet. Such licences can only be obtained when the new Interstate Treaty on Gambling enters into force on 1 July 2021.

B2B licences do not exist in Germany. Relevant B2B partners will merely need to be included in the B2C operators’ applications.

The use of affiliates is not specifically regulated under the Interstate Treaty 2020. However, there is a far-reaching liability for operators that employ affiliates. Therefore, a gambling operator will want to make sure that its affiliates respect relevant marketing requirements to gambling operators to avoid being held accountable for any infringements.

In the Interstate Treaty 2021 no “variable remuneration” may be paid for advertising on the internet. This includes affiliate links. In particular, revenue-, deposit- or stakes-based remuneration will be prohibited. Regulators aim to prevent risks from players placing the highest possible stakes or making the highest possible deposits and suffering large losses.

Remuneration models in which the advertiser receives from the operator a previously agreed fixed amount per customer to whom an advertisement is displayed and who clicks on the advertisement therefore remain permissible.

German gambling laws do not include specific provisions on white-label constellations. The entity entering into contracts with players will usually be considered to be the operator.

The most recent development is the introduction of a transitional regime that exempts operators from regulatory enforcement. The transitional regime only applies to the offer of virtual slot-machine games and online poker. It requires the operators to comply with general requirements, most of which have been taken from the future Interstate Treaty on Gambling 2021. This includes, for example, that the gambling offer has to be presented in German, that the operator has a registered seat in a member state of the European Union and that the exclusion of minors or blocked players is ensured by identification and authentication through the operator.

Further general requirements include the setting up of an operator-related gaming account and the request to players upon registration to set a domain-related individual monthly deposit limit. The deposit may not exceed EUR1,000 per month, which also anticipates a regulatory requirement under the Interstate Treaty 2021. By comparison, the currently applicable Interstate Treaty 2020 still stipulates a stake limit of EUR1,000 on stakes per month.

In addition to these general requirements, special requirements apply to virtual slot machines; for example, a stake limit of EUR1 per game, a minimum duration of five seconds per spin/game and the prohibition of simultaneous playing of several virtual slot-machine games on one domain. In terms of marketing/branding, in connection with the operation of slot machines, operators must no longer use the terms “casino” or “casino games”. 

In comparison, the Joint Guidelines on online poker provide few specific restrictions. Online poker is only allowed in variants without a banker, where different natural persons play against each other at a virtual table. The player is not allowed to choose a particular table either; the allocation must be random. 

It is important to note that operators not satisfying the requirements of the transitional regime risk being considered unreliable in future licensing procedures and thus being excluded from those procedures. The same risk also arises for sports betting operators that continue to offer sports betting without being in the licensing process or having submitted a licence application.

Further changes are to be expected under the Interstate Treaty 2021. It is intended to open the market for virtual slot-machine games and online poker, albeit with severe restrictions for “online casino” products. Ratification is expected to be completed by the end of March 2021.

The prime ministers have decided that the federal states will delegate their responsibilities to a joint gambling authority, which will be responsible for the supervision and licensing of gambling on the internet going forward. The authority will be located in the federal state of Saxony-Anhalt.

Although IP blocking was suggested as a technical measure to protect consumers from unlicensed operators in the discussions leading up to the 2012 Interstate Treaty and a first draft, the final wording of the law did not include provisions on IP blocking. Instead, the Ministry of the Interior of Lower Saxony was given enforcement powers to act against financial institutions and payment service providers (PSPs) that process payments for gambling operators that act unlawfully. It is important to note that payment blocking shall only be a secondary enforcement in case the primary enforcement action – ie, the enforcement action brought against an operator – fails. In 2019, the responsible regulator of the federal state of Lower Saxony issued a payment blocking order against a payment service provider in a high-profile case. Payment service providers that carry out transactions for operators that comply with the Joint Guidelines of the transitional regime are likely to be exempt from enforcement.

Blocking of websites will be introduced under the Interstate Treaty 2021.

Land-based and online operators are required to ensure the protection of minors and players by suitable responsible gambling measures. In a licensing environment, these measures have to be documented by way of responsible gambling policies and guidelines, also referred to as a “social concept”. First and foremost, this means blocking access to minors and players who have opted to exclude themselves from gambling. They must also not be targeted by advertising. In addition, operators will need to train their staff to be able to detect early signs of problem gambling behaviour and apply the appropriate responsible gaming measures. Such measures can include speaking to the customer, suggesting breaks be taken and, if necessary, offering advice on where to find help. In an online context, it is necessary to, for example, offer the possibility for the player to set limits, define timeouts or exclusion periods and to offer information on the risk of addiction. Often operators create a designated responsible gambling site. Such a site should include general information on the addiction risk associated with the offering, an overview of the available responsible gaming measures, a self-test to provide the player with a way to review his or her gambling behaviour, and contact details for institutions that provide help.

One of the key gambling management tools is to verify the player's identity prior to allowing access to the gambling offering. In an online context, the Interstate Treaty 2020 defines a EUR1,000 monthly stake limit per player and sets out that players shall be given the opportunity to define daily, weekly and monthly deposit or loss limits at registration. It must be possible for them to change the limits they have set. However, if a player opts to increase a limit, operators have to ensure that the increase only takes effect after a period of seven days. Reductions of limits shall take effect immediately. In addition, players must be offered sufficient self-exclusion tools and, in relation to some products, operators are expected to check the central player barring database (OASIS) for entries of excluded players before allowing a player to register or log in.

The most relevant AML legislation in Germany is the AML Act, which implemented the Fifth Anti-Money Laundering Directive and entered into force on 1 January 2020. It follows a risk-based approach and requires gambling operators that are affected by the scope of the AML Act to undertake a risk analysis of their business and to implement appropriate measures to prevent money laundering and the financing of terrorism. Only certain gambling sectors are excluded from AML obligations:

  • operators of gaming machines, including gaming halls;
  • race clubs that carry on the business of a totalisator;
  • land-based lotteries; and
  • charitable lotteries.

In order to prevent money laundering and terrorist financing, obliged entities must have an efficient risk management system in place, which must be proportionate to the nature and size of the business. It must include a risk analysis – ie, an identification and assessment of the money laundering risks of the business considering the risk factors that have been identified in the law/the national risk analysis – and adequate customer and transaction-related internal safeguards need to be implemented to manage and mitigate the risks of money laundering and terrorist financing by means of policies, procedures and controls.

Measures include the implementation of compliant customer due diligence (KYC) procedures; the appointment of an AML officer and deputy AML officer; vetting and training of staff; monitoring, record-keeping and reporting; internal revision and audits; and compliance with the special provisions for online gambling (namely regarding player accounts and payments). Drafting an AML concept that describes in detail how the internal safeguards are implemented in practice and why the implemented measures are adequate is certainly useful in this respect. Measures are deemed adequate if they are proportionate to the risk exposure of the respective obliged entity and sufficiently cover such risks. The risk analysis has to be regularly reviewed and updated (at least once a year) and the efficiency of the internal safeguards has to be monitored and updated as and when required. A member of the management (who may not at the same time act as the AML officer) shall be appointed as the responsible person for the overall risk management system. The risk analysis and internal safeguards shall be subject to that member’s approval.

The regional government of Düsseldorf is the competent authority for issuing TV and online advertising permits to licensed sports betting, horse race betting and lottery operators. Advertising permits have had little relevance for private operators so far as there were only a few horse race betting licensees in the past. With the recent continuation of the sports betting licensing procedure and the granting of sports betting licences, the advertising permit will probably become more important in the near future.

Until recently, advertising licences had little relevance for private operators, as there are only a few licensees for horse race betting and sports betting licences were not issued due to the suspension of the licensing procedure by the administrative court of Darmstadt. In this context, it has been possible to argue that sports betting operators that can rely on the European fundamental freedoms are not obliged to apply for a licence to advertise before a sports betting licence is granted.

German law applies a very broad interpretation of what constitutes advertising. Article 2 litera a of Directive 2006/114/EC provides for a helpful definition: "Advertising is the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations."

These include the provisions of the Interstate Treaty, the Advertising Guidelines published by the Gaming Committee, the Act Against Unfair Competition, the Law for the Protection of Children and the Young, the Interstate Treaty on the Protection of Children and Minors in the Media and the Interstate Treaty on Broadcasting. Other laws and guidance may apply depending on the product in question, as may certain specifications included in the respective licence conditions.

As a general principle, only licensed operators may advertise and only licensed products may be advertised. The Interstate Treaty, however, defines additional restrictions with regard to TV and online advertising applicable to licensed sports betting, horse race betting and lottery advertising. Such advertising is prohibited unless permitted by the regional government of Düsseldorf by means of an advertising permit.

With the continuation of the sports betting licensing procedure and the granting of sports betting licences, the advertising permit will become more important regarding potential enforcement measures against unauthorised gambling advertising. 

According to the Interstate Treaty 2021, advertising and sponsorship for licensed gambling operators in Germany will be permitted in general, whereby individual special features of the game of chance may also be highlighted, such as the size of the jackpot or the use of the proceeds for good causes. However, on the internet and on radio and television, gambling advertising for virtual slot machines, online poker and online casinos shall only be permitted between 9pm and 6am.

This “watershed” does not concern advertising for sports betting but it is worth noting that immediately before or during the live broadcast of sporting events, advertising for sports betting on that sporting event is not permitted on the broadcast channel.

Section 5 (3) 3 of the Interstate Treaty 2021 is important for companies engaged in sponsorship, according to which, advertising for sports betting with active athletes or sports officials is not permitted. This concerns, in particular, the popular kind of advertising with brand ambassadors. Perimeter advertising and jersey advertising would still be allowed in sports arenas and stadiums. However, it should be noted that the advertising of games of chance in sports facilities (on jerseys and boards, as well as similar advertising material) will only be permitted in the form of family brand advertising (umbrella advertising). Advertising for unauthorised gambling will still be prohibited (Section 5 (7) of the Interstate Treaty 2021).

Sanctions and penalties for infringing advertising regulations will vary depending on the type of violation, its gravity and the overall situation affecting the gambling offering that is being advertised. Advertising-related enforcement by German authorities overall, however, has been limited and it seems more likely that competitors, especially the state-owned lottery companies, may seek to challenge certain advertising by filing for cease-and-desist orders with German civil law courts.

Disclosure requirements for acquisition and change of control of gaming and gambling companies vary depending on the state and product in question. They tend to be rather vague and generally lack specification with regard to the exact percentages triggering notification and timings. More specific guidance may sometimes be included in the relevant licences and some requirements can be derived from corporate law.

Provisions on corporate control triggers usually are very abstract, mostly lacking specification; eg, with regard to the exact percentages and timings. More specific guidance may sometimes be included in the relevant licences and some requirements can be derived from corporate law.

Even indirect changes of corporate control (eg, passive investors) may require notification in certain situations but these will depend on the relevant state provisions and product in question, which is why no general statements can be made and a case-by-case assessment is required.

Gambling regulators may enforce under administrative or administrative offence law with respect to the territory of their state unless they have been authorised to act on behalf of other German states as well. Criminal enforcement falls within the competence of the state prosecutors. Usually, the place where the alleged violation took place will determine which state prosecutor may assume responsibility. Enforcement in a gambling context has been focused on administrative enforcement in the past. In the meantime, however, a few criminal proceedings have been initiated against major operators and there seems to be a tendency on the part of the authorities to take a more rigorous approach regarding enforcement against unauthorised gambling.

Historically, enforcement has been focused on administrative law. In line with general principles under German administrative law, licensed and unlicensed operators will usually be approached by the regulator by means of a hearing letter in a first step to give them the chance to comment on the allegations. If the allegations cannot be rectified or the authority continues to believe that there is a violation, the regulator will issue an order interdicting the alleged infringement. This interdiction letter will usually threaten a fine but regulators tend to actually impose fines at a later stage. In most cases this will be after the court proceedings, which an operator will usually initiate to challenge the interdiction, have ended, if the operator lost.

Effective enforcement of fines has partly proven to be difficult for German authorities, if operators are based outside Germany, due to the lack of mutual assistance agreements in administrative matters, but operators will still have an interest in avoiding debts with German authorities as these could become an obstacle in licensing proceedings.

German gambling regulation does not regulate social gaming as social games will usually be designed to fall outside the definition of a game of chance.

Esports is a growth sector and betting on esports is becoming increasingly popular. So far, esports has not been recognised as a sport, making the regulatory situation complex. However, an increasing number of voices in the scientific sports and legal community see esports as a sport, and it seems possible that in the coming years regulators will be more open to recognise esports as a sport. 

Depending on how a fantasy sports offering is designed, it will fall outside the scope of German gambling regulation. A key criterion will be whether the payments made qualify as valuable consideration given in exchange for a chance to win. In the case of a football manager game that spans an entire football season, the Federal Administrative Court did not assume it was a game of chance.

A game will be considered a skill game if the likelihood of winning predominantly depends on skill rather than chance. If this can be established, the game will not fall under the definition of a game of chance and, as a result, will not be subject to gambling regulation.

Blockchain technology has so far predominantly only played a role in a cryptocurrency context with regard to gambling in Germany.

There are no envisaged reforms of the existing framework regarding social gaming, skill gaming or blockchain concepts. Willingness to open the regulation to new trends is most likely to be seen in the field of esports, even if no binding statements have yet been made by the regulatory authorities.

The types of taxes imposed on gambling operators are determined by the specific gambling product and the respective state legislation.

Land-based casino operators are exempted from corporate taxation but taxed on the basis of gross gaming revenue (GGR) or a combination of gross gaming revenue and profit tax. Tax rates between 20% and 80% apply. The applicable tax rate depends on the relevant state provisions. In some states, additional levies or progressive tax rates that depend on the economic capability of the casino operator apply.

Online casino operations are subject to VAT on turnover in terms of the VAT Act (the standard rate is 19%, but it has temporarily been lowered to 16% due to the coronavirus crisis). The federal tax authorities have confirmed to the German Online Casino Association (DOCV) that GGR can be considered to be the tax base, and not stakes. Although the Interstate Treaty still does not provide for a licensing regime for online casinos, they are still subject to taxation. According to Section 40 of the Fiscal Code, taxation applies regardless of whether an activity is illegal or not.

A 5% federal tax on stakes applies to any operator offering licensed or unlicensed sports or horse race betting throughout Germany. Betting shop taxes of up 3% on stakes may be imposed on betting shop owners at local level by municipalities. Sports betting is VAT exempt due to this special sports betting tax.

Slot-machine operators must, in addition to regular corporate taxes, pay municipal amusement tax. Amusement tax rates differ from municipality to municipality, but range between 12% and 20% and will usually be based on the GGR generated from the slot machines.

Lotteries are subject to a 16.66% lottery tax.

MELCHERS Rechtsanwaelte Partnerschaftsgesellschaft mbB

Im Breitspiel 21
69126 Heidelberg
Germany

+49 0 6221 1850 141

+49 0 6221 1850 100

gaming@melchers-law.com www.melchers-law.com
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Law and Practice

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MELCHERS is a law firm with offices in Heidelberg, Frankfurt am Main and Berlin that has been advising companies in the gaming and betting industry for over 30 years. The Gaming & Betting Law Practice Group consists of specialised regulatory and commercial lawyers and, being a full-service law firm, its advice in gambling-related matters also includes all corresponding areas of law, such as competition, company and administrative law. The firm advises national and international clients, has developed an excellent global network and pays attention to elaborate communication with regulators, which in many cases may be helpful in avoiding litigation. It also has considerable experience in lobbying.

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