The EC Rejects German Online Gambling Law

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The European Commission (EC) has rejected Germany's draft gambling law stating that it violates the laws framed by the European Union (EU) in this regard. The EC has extended its consultation period by another month to allow the German states to amend the objectionable terms in the proposal, failing which the EC may initiate infringement proceedings, which could lead to a referral to the European Court of Justice and ultimately financial penalties.

The European Gaming and Betting Association (EGBA), the primary trade body of European online gambling operators, has elaborated on the reasons for the rejection. The proposals claims to open the market for online sports betting to operators from EU member states, but it cleverly protects the interests of the present German state monopolies. The total number of sports betting licenses that will be issued is limited to only seven and the state monopolies will be exempted from the licensing process.

The other proposals that the EC has objected to are as follows. An exorbitant turnover tax of 16.67% has been proposed. This will make online wagering unviable and protect the state monopolies' offline betting operations from online competition. On the online casino front the German draft proposal allows for certain casino games to be offered online but only by specified casino operators that are already running land-based casinos in Germany. The proposed license fee favors those applicants with land-based operations and is unrelated to the costs of processing the applications maintaining the licenses.

Sigrid Ligne, secretary general of EGBA issued a statement this week that read, "The draft German treaty has many provisions which are in conflict with EU law. But worse: it is clear that, taken together and especially including a prohibitive tax on wagers from which the incumbent state monopoly is exempt, these provisions effectively slam the door in the face of EU operators from other member states and will in fact extend the monopoly for offline to online games." Ligne called upon the EC to act quickly to against the German proposal, which violates the EU's stated aim of a common framework for online gambling across Europe.

The current law expires at the end of 2011. It is a common treaty agreed to by all the sixteen German states. The German states are trying to forge a new common treaty that will come into force in January 2012. But this seems very unlikely as of now.
The state of Schleswig Holstein has already notified an alternative gambling law that envisages a commercially viable regulated regime for EU-licensed online gambling operators. The EC has raised no objections to such law and the EGBA supports the efforts to enact it.

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