Gaming in Germany Newsletter: The German online gambling market – Current state of play

By | September 21, 2021

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Below you will find an overview of the current situation with regards to the German online gambling market.

Sports betting

At present, 35 sports betting licenses have been issued, including most of the major brands in the market. It is not expected that this number will increase substantially in the short to medium term. A few pending license applications could still be granted in the next one to two months.

Virtual slots and poker

The new national regulator in Sachsen-Anhalt has been accepting applications for virtual slots and online poker licenses since July 1, 2021. However, guidance on application requirements appears to be largely unavailable and it is unclear to what extent the regulator has made progress on processing the applications it has received.

Operators who are in the process of applying for a license and who comply with the current Transitional regime will not be subject to enforcement measures.

However, the licensing requirements include a €5m bank guarantee, which is likely to be prohibitive for smaller operators. It further appears that the restrictive regulatory framework and high tax rates have deterred many operators from the regulated German market. Interest appears to be limited to major international operators and land-based incumbents, such as major gaming hall operators.

Virtual bankholder games

Licenses for virtual bankholder games (roulette, blackjack, baccarat, etc.) will be issued on a state-by-state basis. Each state (Land) may only make available as many of these licenses as they have issued land-based casino licenses (in case it chooses to issue such licenses to private operators). Some states, however, will extend their land-based casino monopolies to include online services.

These bankholder/table game operators may only accept customers from the state in which they are licensed to operate. This means that, apart from certain larger states (e.g., Nordrhein-Westfalen), the regulated market for these games will probably be too fragmented to entice license applications from international operators.

Taxation

Since July 1, 2021, Germany-facing providers of virtual slots and poker are liable for a 5.3% tax on gaming stakes. In practice, the tax rate will be slightly lower (5.03%), as the included tax is factored out of the tax base.

Still, this leads to an effective tax rate far higher than the 15-30% tax on GGR (rather than turnover) that is being charged in many other European jurisdictions. As a result, regulated operators will be forced to drastically reduce their RTP (return-to-player ratio). For instance, instead of the ca. 96% customary in online slots, operators will be forced to work with a RTP of 85-90%, which severely limits their competitiveness versus black-market alternatives.

It is thus widely assumed in industry circles that several, mostly smaller operators, rather than applying for a German license, have made the decision to continue to offer a cheaper, more attractive black-market alternative.

Industry efforts to persuade relevant authorities to switch to a more reasonable GGR-based taxation model have failed for now, cementing the current disadvantageous tax situation for, at least, the foreseeable future.

Player refund claims

It has become increasingly common for German players to attempt to reclaim their losses from online operators through court proceedings, on the basis that these operators offered their services illegally.

Many of these claims are financed by litigation funders, to whom the plaintiffs cede part of their claims in return for financing the lawsuit.

So far, these claims have not yet reached the appellate level, and different lower courts have reached divergent verdicts, both in favor of claimants (player) and defendants (casino).

The current uncertainty surrounding the eventual outcome of such claims appears to keep claimants and litigation funders at least somewhat in check.

The ongoing regulation of the German online market will undoubtedly lead to a decline in the number of such suits brought in the future. Meanwhile, the commercial risk to operators appears to be manageable.

2021 Gaming in Germany Conference: Towards a well-functioning market? | Oct. 25, Berlin

As the above overview indicates, the regulated German online market appears to be in a state of suspension: while new regulation has been introduced and finalized, its practical implementation still must be worked out.

Fortunately, it appears that much is happening behind the scenes. Important regulatory clarifications are expected to be published in the coming weeks.

Thus, the 2021 Gaming in Germany Conference, which takes place on October 25 at the Grand Hyatt Berlin, comes at a most opportune moment.

We are working hard to bring together all major decision makers and leading experts.

At this moment, we are happy to announce our first confirmed speakers:

  • Prof. Dr. Tilman Becker, Gambling Research Center, University of Hohenheim
  • Dr. Jörg Hofmann, Head of the Gaming & Betting Law Practice Group, Melchers Law Firm
  • Mathias Dahms, President, Deutscher Sportwettenverband
  • Birgitte Sand, CEO Birgitte Sand & Associates, fmr Director Spillemyndigheden

In addition, we will give a lot of attention to the topic of responsible gaming and have already confirmed the following responsible gaming experts:

  • Michael Auer, Director, neccton
  • Prof. Dr. Kim Mouridsen, Aarhus University and Mindway AI

Due to quickly rising vaccination rates across Germany and Europe, we expect that the event will be subject to minimal (if any) Covid-related restrictions. After many months of restricted travel, we hope to be finally able to meet each other in person!

We hope to see you in Berlin!

Other Events

The following events may be of interest to the Gaming in Germany community.

  • Kindred Group will host the 6th annual Sustainable Gambling Conference on 5 October. The event will take place online and is free to attend.
  • There is still time to register for the 2021 Gaming in Holland Conference on 28 September in Amsterdam – only three days before the regulated online market opens!
  • The half-day event Reputation Matters: UK Gambling’s Future at Stake, which takes place on 2 November in London, will take an in-depth look at the current and expected regulatory pressure facing the UK gambling industry.
  • SiGMA Europe has been rescheduled to 16 – 18 November, 2021.

  • The Betting on Sports America conference and expo has been scheduled for 30 November – 2 December, 2021 and will bring together all the major players in the fast-growing North American sports betting industry.

  • The World Gaming Executive Summit is returning live on 6 – 8 December, 2021 at the W Hotel, Barcelona.

  • ICE London and iGB Affiliate London have been postponed to 1 – 3 February, 2022.

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