EC Approves German State Online Gambling Law

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The German state of Schleswig-Holstein has broken away from the pack and has not only drafted its own online gambling law but has received approval from the European Commission (EC). After the statutory three-month standstill period set aside for review of the draft law, the EC made only one minor stipulation, which was that only major banks acting on behalf of online gambling operators would be required to give guarantees, and not smaller institutions. The highlights of the bill are a 20% gross profits tax, permitting all online gambling verticals and issuing an unlimited number of licenses. It is expected that the bill could be passed this summer when the Schleswig-Holstein parliament meets for a second reading and a final vote. If all goes well the licensing process could begin as early as autumn.

Some of the leading online gambling operators that service the German market have already expressed their delight at this news. A Betfair spokesman called the EC approval a "decisive step forward in the political process to modernize gambling regulation in Germany". He said the Schleswig-Holstein bill has a more pragmatic approach to regulate the industry and includes best-practice examples from other European regions. He added that Betfair would most definitely apply for an online gambling license in Schleswig-Holstein if and when the gambling law is passed by the parliament.

The other online gambling operator to speak out in favor of this move was bwin.party. Online gambling industry watchers will recall that in April bwin.party's share price fell 16% when the majority of German states came out with a highly restrictive and untenable online gambling proposal. That this happened within a week of the merged company going live made it all the more dramatic. Officers from bwin.party also confirmed that if the Schleswig-Holstein law is passed then they would apply for a license. John Shepherd, director of corporate communications at bwin.party indicated that the EC approval was a clear signal to the other 15 German states that Schleswig-Holstein was moving in the right direction.

The joint proposal from the 15 states had come in for much flak from the online gambling industry. That proposal had a restrictive opening for sports betting based on an unworkable 16.66% turnover tax. The other objectionable clauses were a five-year test period for seven sports betting licenses and online casino licenses restricted to land-based casino operators, again for a five-year test period. In an official statement the ruling conservative-liberal coalition in Schleswig-Holstein said that following the EC approval of its draft bill, the federal draft online gambling proposal submitted by the 15 other states would not pass muster. In December 2010, German gambling experts had forecasted that online gambling in Germany would be regulated on a state to state basis. That forecast seems to be coming true.

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