German courts clash over gambling licensing requirements

Bundesverwaltungsgericht ruling over German licensing
The Federal Administrative Court of Germany has ruled that online casino, poker and scratch card operators need a license to operate in the country.

The Bundesverwaltungsgericht released a press statement late last month confirming that the ban on unlicensed operators is in line with the European Union (EU) law after two online casino operators continued to operate in Germany without credentials.

The two unnamed offshore online casinos operating in Germany, with one located in Malta and the other in Gibraltar, continued to accept Germans after the Regional Court of Appeal in Baden-Württemberg approved their operations.

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The operators, which offered casino games, poker and scratch cards, did not have a local license and continued to accept Germans before being noticed.

They then appealed to the lower court to continue to operate, where it ruled that the disorganised licensing process infringed on the applicants’ freedom of services guaranteed by the EU Treaty.

The ruling likely relied on previous decisions by lower courts, which have allowed operators that unsuccessfully apply for a license to continue to operate due to the delay of the Interstate Treaty on Gambling implementation.

The Treaty, introduced in 2012, allowed offshore gambling operators to apply for online sports betting licenses. However, only 20 operators would be successful.

EU authorities contested the Treaty due to a cap on the number of operators, arguing that it violates two EU Treaties.

The Treaty also requires 16 states to comply with the terms, with several delaying the gambling legalisation process as they have been slow to sign it into law.

However, the Leipzig court overturned the lower court’s decision, stating that the operators did not apply for a local license and they could not use the Treaty as an excuse. The court also confirmed that organising and offering online gambling in Germany is illegal, except for sports betting and lottery services.

Bundesverwaltungsgericht also stated that the ban on the two operators does not infringe on the EU Treaty, which gives businesses and professionals the right to operate freely within Europe. The court ruled that the ban was intended to protect children and vulnerable people from unregulated online gambling services.

The ruling has since raised concerns about the State Treaty, which is already being contested by the state of Schleswig-Holstein after Germany amended the limit from 20 to 40 licensed operators to appease EU authorities.

There are now calls for a regulatory review of the gambling industry in Germany, with the president of the industry association Deutsche Sportwettenverband, Mathias Dahms, pressing for an overhaul of the entire framework.

According to Legal Gambling, Mr Dahms said that “the states should create a licensing procedure that allows all applicants who meet the stringent state quality requirements to be granted approval to operate.”

A report, published by the state of Hesse in 2017, says there are 487 unlicensed online casinos and poker sites that accept German players. Additionally, Germans reportedly wager €30 billion at these sites.

Lower courts and local authorities aren’t quick to enforce the ban on operators as the situation fluctuates due to the ongoing changes with the Treaty and at the EU level.

Along with a call for a gambling regulation reform in Germany, the report states that an unlimited number of licences for sports betting, online casino and poker operators should be available to offshore operators, provided they meet the criteria.

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