Sports Betting in Germany: The State of Play

November 04, 2014

While citizens in EU member States such as the newly reunited United Kingdom traditionally can bet on virtually any possible event such as the Scottish vote, the day the earth will be annihilated by meteorites or who Prince Harry is going to marry, German consumers have been kept long enough from engaging in such leisurely activities by a monopoly of the Federal States that allegedly served the only purpose of protecting them from becoming all addictive gamblers but in fact helped to secure a significant part of the states ́ budgets, which was heavily relied upon in a tough economy. The only exception to the rule used to be the northernmost Federal State of Germany Schleswig Holstein, which introduced a comprehensive licensing regime for both online wagering and casino games in 2011 which was rescinded when Schleswig Holstein joined the Interstate Treaty on Games of Chance (“Glücksspielstaatsvertrag”) in 2013. When it became clear that the fiercely defended monopoly was inconsistent and incoherent and hence irreconcilable with the freedom of services laid down in Article 56 TFEU, the Federal States reluctantly revised their Interstate Treaty and for the first time ever introduced a new licensing regime, which allowed for sports betting offerings by private operators.¹

Despite the fact that the Ministry of Interior Affairs and Sport of Hesse that is in charge of the licensing process put out the 20 available licenses for tender in August 2012² it took over two years until the names of the successful applicants were published in September 2014³. By that time, all license candidates had answered an exhaustive catalog of hundreds of questions that had been posed to ensure their eligibility under financial, technical and other aspects. It did not take long, however, until a court order of the administrative tribunal of Wiesbaden stopped the allocation of the licenses on 17th September 2014 and asked the Ministry to keep the licensing procedure still open and refrain from issuing licenses to the successful applicants.⁴

What had happened? An unsuccessful contender for a license had sued the State of Hesse and filed an urgent motion in that court after having been informed by the Ministry that he had only reached the 26th place in the ranking of 41 public and private sport betting operators that had made it to the second round of the selection process. The motion to suspend the allocation of the licenses wasn ́t granted in the actual summary proceedings on the merits of the case or even in the main proceeding, but by a special “pending order” (“Hängebeschluss”) which enabled the court to render a preliminary decision in the narrow timeframe between filing the motion for interim relief and the decision on such a motion. The Higher Administrative Court of Hesse meanwhile confirmed the ruling.⁵

To properly understand the consequences of this interim decision for all applicants and the sports betting market in Germany it is indispensable to consider the nature of the selection decision and the selection process. As the Higher Administrative Court correctly pointed out, it is not the plaintiff ́s aim to oust all other 20 competitors from the positions they gained in the selection process but simply to obtain one of the highly coveted licenses as well. As the court of first instance, the Higher Administrative Court therefore considered it pointless and unconscionable for the plaintiff to initiate summary proceedings against the 20 successful applicants in various courts and upheld the order issued by the lower court to protect the plaintiff from becoming cut off from obtaining a license before it had been clarified, if the selection process had been carried out in a transparent, non-discriminatory way as required by the European Court of Justice in its judgment of 16th February 2012⁶. The Higher Administrative Court of Hamburg chimed in and rendered a similar decision as the court in Wiesbaden.⁷

The court rulings that stopped the allocation of the licenses thus do not mean that the successful applicants are not suitable for obtaining a license but merely mean that the Ministry of the Interiors and Sport in the Federal State of Hesse will need to demonstrate that the unsuccessful plaintiff has not been unjustly denied a license. If and to which extent the German licensing regime needs to be reworked will soon be decided by the European Court of Justice in the case C-336/14 (“Ince”) in which the county court of Sonthofen in Bavaria has submitted various questions related thereto to the ECJ.

The current stand-off in the German licensing process naturally raises the question what this all means for the prospects of the German Gaming market and the successful applicants for a license. While it is impossible to predict the outcome of the proceedings on the merits now pending in German courts, some conclusions can be drawn without engaging in pure guess work: Since the Hesse Ministry is defending its selection process it is also defending the selection of the successful applicants for a wagering license and has made it quite clear already in its statements in the aforementioned court proceedings that it has selected only the best candidates which met all selection criteria and ensure a safe betting experience. Even if it is decided in the main proceedings initiated by the unsuccessful applicants that the licensing procedure is wanting, it will only be adjusted to comply with the standards set by the ECJ and the total number of licenses may possibly have to be increased. But, and that ́s the catch, giving up the licensing model altogether and reverting to the dark age of a state monopoly is not a viable option any longer. The reasons for this are manifold but perhaps the most obvious one is that any shortcomings of the licensing procedure as such cannot be used as an excuse to refuse reliable contenders for a license who meet all licensing criteria and hence do not put any consumers at risk a permit for their sports betting businesses. If the licensing procedure is wanting, it must be fixed but there ́s no legitimate reason to declare it impracticable as other Member States have already shown that licensing regimes do work very well if they are properly designed from the outset.

Apart from this basic but obvious argument, another recent development may well turn out to be or at least pave the way for the finishing blow to a renewal of the state monopoly in Germany: The Commission Recommendation of 14th July 2014 on principles for the protection of consumers and players of online gambling services and for the prevention of minors from gambling online (see my comments on this here). In these carefully drafted recommendations the Commission laid down the requirements for a safe betting environment thereby not only protecting players from overspending and underage-children from betting at all, but it also set an industry benchmark which, if achieved, leaves no credible reason to deny a sports betting operator a license to woo and win adult customers in any given Member State. If the aim to protect its citizens from the perceived perils of wagering has already been achieved by the sports betting operators themselves because they implemented all safeguards required by the Recommendations, they can no longer be denied access to any national sports betting market by claiming that their offerings would still put players at risk. And once the recommendations are fulfilled by private operators, there is no need to limit the total number of licenses in any way in order to “channel” players to sport bets and games of chance that are offered by state owned lotteries to protect citizens from unsafe betting and casino gambling. On a closer look, the non-binding character of the recommendations does not diminish the considerable achievement of the EU Commission which followed through with this new benchmark all betting and gambling providers –private or state owned– must now adhere to.
While the court proceedings initiated by the unsuccessful applicants may still take years until a non- appealable judgment is rendered, it is an obvious fact that the German sports betting market is a reality and it is here to stay. A unified, if not harmonized common market for betting and gambling services is no longer wishful thinking but the natural consequence of the Recommendations of the EU Commission and the ever evolving case law of the ECJ. Member States that try to ignore this will only be punished by consumers, who will vote with their feet and flock to more appealing offerings by privately held sports betting operators and cause tax losses to the Federal States.

¹ The new version of the Interstate Treaty which entered into force in January 2012 can be downloaded at http://www.nds-voris.de/jportal/?quelle=jlink&query=Gl%C3%BCStVtr+ND+%C2%A7+6&psml=bsvorisprod.psml&max=true in German only
² See the Official Journal of 8th August 2012, short version downloadable in English at
http://ted.europa.eu/udl?uri=TED:NOTICE:253153-2012:TEXT:EN:HTML&src=0&tabId=0 and full German version at
³ For a complete list of all designated licensees see http://www.sportwettenlizenz.com/
⁴ Downloadable at http://openjur.de/u/743416.html (in German)
⁵ http://www.lareda.hessenrecht.hessen.de/jportal/portal/t/1awe/page/bslaredaprod.psml?doc.hl=1 &doc.id=JURE140017298&documentnumber=1&numberofresults=1&showdoccase=1&doc.part=L&paramfrom HL=true#focuspoint
⁶ joined Cases C-72/10 and C-77/10 –“Costa and Cifone”, available at
http://curia.europa.eu/juris/document/document.jsf?text=&docid=119505&pageIndex=0&doclang=EN&mode =lst&dir=&occ=first&part=1&cid=184839
⁷ Order of 22th September 2014, file no. 4 Bs 189/14, not yet published on the court ́s website but available in German at http://www.vewu.com/urteile.php.

 

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