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Adjustment Period Before German Gambling Industry Regulation

27-10-2020

After years of planning and consideration, Germany has begun to implement regulation of its online casino and betting industry, which will go into effect from July 2021. However, before that happens, the German gambling industry is entering into a transitional period. During which, online casinos and other gaming websites will have to have to follow a number of strict regulations if they wish to gain a license.

In this article, we’ll take a look at those regulations and what how they’ll affect the industry going forward.

Brief history of the German Gambling industry

As traditional, ‘brick-and-mortar’ casinos have been legal since the 16th century, Germans are no strangers to gambling – in a variety of forms. There are casinos all over Germany, with some, such as the Baden-Baden casino and Casino Bad Elms, remaining popular tourist destinations to this day.

Online gambling, meanwhile, was unregulated for a long time. This was mainly due to the fact because it was a new industry and lawmakers had yet to decide what to with it. Eventually, from 2008 to 2012, online casinos and other betting sites were gradually made illegal. The only exception, however, was in Schleswig-Holstein, Germany’s most northern state (which, ironically, also borders Denmark –where gambling is legal).

For this reason, many German gambling websites simply obtained their licenses from Schleswig-Holstein. To prevent Schleswig-Holstein from receiving gambling revenue that they could be collecting instead, other states figured they’d get in on the action and started legalising online casinos and betting sites.

More importantly, by legalising online gambling, each state could prevent revenue from flowing out of Germany to countries where online casinos could be set up legally, such as Malta, Gibraltar and Curacao. In fact, experts within the gambling industry estimated that only 1.8% of online gambling activity in Germany took place on officially-licensed German websites. This is known as its ‘channelling rate’ and is incredibly low compared to rates of 90% in neighbouring Denmark and 95% in the UK.

In an effort to combat this and streamline and standardise its gambling sector, the German government decided to create a new, single state treaty and regulatory body, the Glücksspiel Neuregulierung Staatsvertrag (GlüNeuRStV). As long as the treaty is ratified by 13 of Germany’s states by April 2021, the GlüNeuRStV will be responsible for regulating all of Germany’s online casinos and other betting activity from July 2021.

Germany’s New Gambling Regulations Come with Restrictions

Now, until the regulation fully goes into effect, in July 2021, Germany’s online gambling industry has entered into an adjustment period. During this time, German betting and casino brands have to do several things if they wish to receive a license from the GlüNeuRStV.

Firstly, companies must do the following by October 15th 2020:
  • Launch a German website with all necessary information for players written in German.
  • Remove all table games such as blackjack, dice games, such as craps, roulette and baccarat, and three-card and four-card poker.
  • Remove all live casino games, i.e. live dealer games.
  • Enforce a deposit limit of €1000 per month, per player.
  • Add a ‘panic button’ to their site that allows players to exclude themselves for 24-hours.
Additionally, companies must do the following by Dec 15th
  • Place a €1 max bet per spin on all virtual slot games.
  • Make sure that each virtual slot game lasts a minimum of 5 seconds – effectively adding a 5-second delay between each spin.
  • Websites with virtual slots must market themselves as online casinos.
If businesses fail to comply with these new rules, it can result in prohibition orders and a block on payments to their site. Worse still, it can lead to said business being labelled as ‘unreliable’ and a gaming licence being denied in future applications.

Problems with Germany’s New Gambling Regulations

Although these restrictions are designed to protect players and, at the same time, ensure the long-term health of Germany’s legalised gambling industry, some experts, including the Secretary-General of the European Gambling and Betting Association (EGBA), fear they’ll do more harm than good. In short, some of the new regulations company must comply with are too restrictive.

For a regulated, online gambling industry to work, it needs to offer consumers two main things: choice and value. Firstly, in regards to choice, some of the restrictions are so tight that many companies will simply opt to not apply for a German license. This is especially true for companies that operate successfully with a license from elsewhere. It’s currently better for them to continue as they are.

As a result, the regulated marketplace will attract less companies, depriving players of the choice necessary to make it a success. Instead, these customers will be increasingly drawn to betting and casino brands without a German license, as many will feature a larger variety of games or more advanced technology.

For a prime example of this, look no further than live dealer games, which aren’t permitted during the adjustment period and aren’t expected to be available after the new license is in effect. The problem is, many players prefer these live dealer games because they feel they offer a richer, more realistic experience than some virtual games. Live dealer games are also popular because they allow you to interact with other players, providing that all-important social aspect. And most importantly, some players simply trust these games more, as they’re interacting with a real dealer, instead of a machine. Now, if the GlüNeuRStV choose not to allow live casino games going forward, players that prefer them will simply go elsewhere, taking their business to betting and casino brands without a German license.

Though on a different continent, a recent example of this can be seen in Cambodia, who decided to ban live dealer games. The result was an increases in unregulated live games and some companies moving their base of operations to the Philippines, where live dealer games are still legal.

Secondly, when it comes to value, German sites will also be hamstrung by what they can offer players in terms of odds, sign-up offers, and other bonuses – the €1 max bet being an obvious example of this. Meanwhile betting and casino brands without a German license will have more freedom in how much value they can give to players. This will result in the regulated market losing marketed share to unlicensed casinos and betting sites – the channelling rate, as mentioned above, will not improve.

The Unclear Future of Germany’s Gambling Industry

Ultimately, if licensed online casinos can’t compete with those holding licenses in other countries, they won’t be able to turn a profit and will be forced to cease operations. Hopefully, in light of this, German lawmakers will be willing to meet companies half-way and make industry regulation beneficial for everyone.

Clearly, these restrictions are still a wok in progress and some changes still have to be made if the German market is to prosper like some of their European neighbours.




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