The state-owned gambling sector is going to its biggest disruption in its history
“Glücksspielneuregulierungsstaatsvertrag” – this is one word. (Non-native German speakers who know the far-fetched neologisms of our language may laugh at this point.) “Glücksspielneuregulierungsstaatsvertrag” means the re-regulation of the state treaty of gambling. And this is going to disrupt the entire gambling industry in Germany. Currently, gambling is a purely state-owned business in Germany.
What appears counter-intuitive at first glance, has a good reason. This is to say, there are 3 reasons:
First, state-owned casinos ensure adequate player protection. There are registration procedures and players are supervised. It is quite simple at local casinos to prevent underaged, addicted, or drunk persons from gambling.
Second, by restricting gambling to state-controlled businesses, the illegal part can be kept under control. Gambling can e.g. illegally be used for money laundering purposes or illegal payments.
But there is also a third reason which is not mentioned in the regulation papers. In 2018, gambling was a EUR 14 billion business (federal regulatory bodies for gambling in Germany). With every dollar paid to the (legal) online gambling provider, the federal state is earning between 5 ct (sports bets) and 20 ct (lottery) in tax. And as few people know, the amount of money spent in casinos and online gambling websites is enormous. With a gross gaming revenue (GGR) of EUR 14 bn in 2018, the German state could collect EUR 1.5 bn in taxes. The German state is now threatened to lose a large amount of these tax revenues. This is due to the increasing shares of offshore online gambling.
The internet enabled gamblers to find new opportunities to circumvent governmental regulations. Online gambling is an emerging market and changed everything. Online, players are no longer forced to go to casinos or arcades. They are now able to play regardless of place and time. Although using foreign websites, online casinos and players can act completely under the radar of the German state. These non-German websites are usually located in European countries like Malta or Gibraltar, which barely have any regulation for online casinos. But due to their membership in the EU, they are acting in a legal grey area.
To prevent gambling capital from leaving the country, the German state seeks to legalize online casinos. The first steps were taken in the federal state of Schleswig-Holstein. They legalized online gaming on sites that were grated a state concession. This role model will be replicated in all other German federal states with a new regulation for 2021 – the “Glücksspielneuregulierungsstaatsvertrag”.
This new law will turn online gambling into a legal activity and transform the whole gaming market in Germany. It allows all German states to issue concessions to potential online casino providers. Fulfilling the strict requirements of the regulation is the only condition. Especially the player protection is a highly debated topic and will turn into a challenge for many providers.
The most important and already decided aspects in the so-called, “Glücksspielneuregulierungsstaatsvertrag” are:
- The founding of a central gambling authority
- Provider related gamer profiles with cross-provider restrictions managed by the central authority
- A deposit limit and a respective central file for control (1000 EUR / month)
- The prohibition of parallel gaming on multiple websites and a respective central file for control
- The possibility of self-exclusion for addictive players and a respective central file for control
To manage and execute the new regulation, the federal states will set up a central gambling authority. This authority is complementary to their individual smaller offices. Every player will create separate accounts for all the websites he visits. The central organ will manage information about these profiles and prevent the players from gambling beyond the limits. The identity of each player must be verified to enable the cross-platform functionality of this regulation.
The list of new technological requirements is quite long. The essential aspect is the linkage of every provider to the central authority to perform its player protection measures. According to the regulation, the prevention of gambling addiction and the associated damages in the victims’ lives have the highest priority. For this purpose, every provider must allow the player to receive a full overview of his playing history upon request.
The law will come into force in July 2021 and it will redistribute the gaming revenues in Germany. The existing and potential providers must hurry to implement the requirements. Otherwise, they will not get market access as early as possible. With this new regulation, Germany accepts the fact that it is impossible to prohibit online gambling entirely. Instead, the state now tries to create a safe environment for players by building the market in a controlled way. That could be an opportunity for Germany to ensure reliable player protection and to become a pioneer in safe online gambling. Germany can also generate tax revenues in this industry.