Germany Delays Online Gambling

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The prime ministers of the 16 German federal states have jointly declared that they are deferring any decision on a new common State Gambling Treaty until October 2011. This was communicated by the prime minister of Saxony-Anhalt, Reiner Haseloff, speaking on behalf of all of them after their meeting in Berlin. In order to express their unanimity and intent Haseloff said, "We are well on our way".

In April 2011, 15 of the German states had forwarded one proposal for the consideration of the European Commission. This proposal provided a restrictive opening of the online sports betting market to private operators based on a 16.66% turnover tax. It had then received considerable flak from the online gambling industry, particularly from the newly formed merger between Bwin and Party Gaming. The shares of the merged company had fallen by 16% on the day of the announcement by the German States. The European Commission is expected to give its ruling on the German proposal on July 18. The deferment of the decision on the online gambling treaty will give time to the German states to study the implications of the European Commission's verdict.

Betfair is an online gambling operator with considerable interest in the German market. It has commissioned research by leading German law professor Bernd Grzeszick of the University of Heidelberg. Professor Grzeszick gave his opinion that the present draft proposal of the German states will be turned down by the European Court of Justice as well as national courts. This is because it violates the Articles of 49 and 56 of the European Union Treaty. To compound the problem, leading online gambling data business H2 Gambling Capital has also opined that if Germany proceeds on the draft proposal of the 15 states it would capture only 7% of the market, with other citizens preferring to access offshore markets as they are currently doing.

A Betfair spokesman responded to this saying, "We are hopeful that the prime ministers use the remaining time available to them to agree on a legally watertight treaty that provides reputable private companies a fair market opportunity and protects German consumers against an uncontrolled black market."

The proposal given by the 16th state of Schleswig-Holstein was lauded by the online gambling industry. It was considerably less restrictive towards the private operators. The proposal intended to issue licenses to private operators for all product verticals, including online casinos, and not just sports betting. Also it proposed a 20% gross profit tax and not a turnover tax. This proposal has received approval from the European Commission last month. The Betfair spokesman said that he hoped to see the other German states adopting this proposal in totality.

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