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Germany: Legislation Update

Earlier this autumn the Court of Justice (FCJ), Germany’s highest civil court, ruled in favour of banning online gambling operators in the country. The decision will only be valid until the end of the year, however. Current legislation, under which the state holds a monopoly on sports betting and lotteries, is due to expire on January 1, 2012.

Online gambling should receive more favourable treatment in upcoming legislation. According to reports, lawmakers were expected to agree upon a new State Gambling Treaty by December 16, but now a bill could be drafted before then—and ratified by all 16 federal states.

Changes need to be made. The European Commission issued an opinion this summer against the proposal backed by 15 of Germany’s 16 Länder, which calls for a restrictive opening (only seven licenses) of online sports betting based on a hefty 16.67% turnover tax. According to H2 Gambling Capital, the proposal would only capture 7% of the country’s online gambling market.

Shunning the online sports betting-only option, Schleswig-Holstein passed more liberal legislation on September 14. The bill from Germany’s northernmost state legalises poker and casinos games with the exception of roulette, blackjack and baccarat. Sports betting is also approved—the first time that it has been regulated in the EU member state—and there are no restrictive proposals on the number of licenses issued.  

The move puts pressure on Germany’s other 15 Länder to make unified changes to the State Gambling Treaty, and lawmakers now want a proposal that will be ratified by all 16 federal states. Legislation will be drafted with more regard “for the European framework,” Rainer Robra, chief of staff to Saxony-Anhalt state premier Rainer Haseloff, told the Financial Times.

After months of complaints from commercial operators and criticism from the European Commission, Germany finally acknowledges that past proposals may be commercially unviable and questionable under EU law. Martin Stadelmaier, chief of staff to Rhineland-Palatinate premier Kurt Beck, told the Financial Times that Germany’s Länder were discussing “a more differentiated tax system,” modelled on France’s 8% sports betting levy. Commercial operators could pay half the planned 16.67% turnover tax, and there will be more than seven licenses issued.

While the number of private concessions and the specific tax rate have yet to be agreed, Internet Service Providers (ISPs) will not be required to block non-licensed operators under the latest draft of legislation. An earlier draft had included a requirement that ISPs block customers from accessing sites not licensed by German lawmakers.

It is still unclear if any agreement has been reached with Schleswig-Holstein for a proposal that will be ratified by all 16 federal states. Stadelmaier, however, said that a new State Gambling Treaty involving all 16 Länder could be reached by October 27 or 28, when state premiers meet for their biannual summit. According to reports, a new draft could include 22 sports betting licenses based on a 5-7% turnover tax.

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