German State Treaty on Gaming 2019
The German federal state of Schleswig-Holstein announced new online sports betting regulations to streamline the licensing process. The Germany State Treaty on Gaming is the third version of the bill since 2012. The latest bill continues the limited test case on sports gambling into 2021.
In a corresponding move, officials in Schleswig-Holstein asked the national government to grant an extension to online gaming operators with expired licenses. If Germany grants extensions, online bookmaker operation can avoid financial penalties and continue the path towards legalization with no loss of momentum.
Under the new law, gaming operators will need to pay 20% of their gross gaming revenue (GGR), similar to the tax Schleswig-Holstein has charged for the past several years.
Due to foreseen complications with the coming German State Treaty on Gaming, which is expected later this year, regulators in Schleswig-Holstein chose not to issue the standard 5-year gaming license. Instead, the current licenses will run through June 30, 2021.
State Treaty of 2019
Many expect the German federal government to devise a universal framework for online sportsbooks that can be applied to the entire country. This is not the first time German national gaming laws have been pushed or expected. Such efforts have never come to fruition before, leaving regulation to the individual German states.
Among those, the states of Schleswig-Holstein and Hesse have deviated from the path of other German states. Of the two, Schleswig-Holstein has maintained the most independent stance, as it licenses online gaming sites while other German states do not.
Christian Democratic Support
In previous years, the Christian Social Union (CSU) and the Christian Democratic Party (CDP) took a social conservative stance on gaming laws. Now that the CDP and CSU are in a ruling coalition government with the Green Party, the social conservatives are willing to pass a universal law which regulates online bookmaker sites.
Under German national law, online lottery ticket sales under a state-run monopoly, but sports betting is not legal.
Christian Democrat Leaders Calls it a “Breakthrough”
Hans-Jorn Arp, a leader of the Christian Democratic Union in Schleswig-Holstein is a vocal critic of the State Treaty. Arp called the meeting a “breakthrough” for his state, as its vision of sports betting could win the day.
Arp stated, “Today’s decision of the Minister President Conference to present the foundations for follow-up regulations to the State Treaty on Gambling, means we have finally achieved a breakthrough after ten years, and gained recognition from the other federal states.”
“For Schleswig-Holstein, this is a great success, after the state had long met with resistance to its forward-looking solution in the field of gambling. Now the other federal states are pulling in the same direction, after they were finally convinced that the Schleswig-Holstein model is expedient.”
Minister-Presidents’ Conference of March 21
The Minister-Presidents’ Conference, which had representatives from all 16 states, met on March 21 to discuss the national framework for online sports betting. All members of the Minister-Presidents’ Conference signed the German State Treaty on Gaming, a sign the legislation finally might have enough support.
This is the third amended treaty since the State Treaty of 2012. The major difference this time is the 20-license limit is gone. The State Treaty of 2019 has not limit on the number of operators, so the strict limitations on the amount of potential revenue generated also has been lifted.
State Gaming Taxes
As always seems to be the case, state treasurers are searching for new ways to collect revenues without direct taxation, so states want to be able to tax gaming revenues and foster new domestic business startups with the gaming liberalization.
For online sports betting, the tax rate is 5% on turnover. While most gaming laws tax gross gaming revenues (GGR) instead of turnover, the low rate (5%) should translate to around 15% to 20% of gross gaming revenues. A similar Spanish online gaming tax of 16% of turnover translated to about 44% of GGR.
The changes in taxation should be comparable, but a move towards 20% GGR makes for a clearer taxation system. Under the new law, in-play betting will be banned. Also, players cannot wager more than €1,000 (£868/$1,137) a month on gaming sites. Sports betting is the only vertical covered.
Trial Period from 2020 to 2021
If draft legislation is passed into law, most expect a trial period for online gaming sites to take place between 2020 and 2021. If that period goes well, Schleswig-Holstein plans to extend gaming licenses until June 30, 2024.
Nothing is being taken for granted. The current move towards a national framework have been the most positive events for proponents of legalized German iGaming in over a decade. At the same time, such proponents have met with many disappointments over the years, so many wonder if all 16 German states will fail to back a federal plan once again.
One important organization, Deutsche Sportwettenverband, has failed to support the effort. Deutsche Sportwettenverband, which is the German sports betting federation, has dismissed talk of the German State Treaty on Gaming.
Wulf Hambach’s Prediction
Dr Wulf Hambach of the prestigious law firm, Hambach & Hambach, predicted that the short term nature of the law means enforcement of the live ban will face troubles. As written, Dr. Hambach suggested the law was unenforceable.
He added, “There is also also big question over whether the online casino ban will be obeyed from January 1, 2020 onwards. If, for instance, other federal states are in favour of online casino regulation, they are unlikely to enforce the ban.”
“I think it’s is likely that after 2021 you will see a fully regulated market, so this one step in the right direction, and there are already a lot of discussions between states, but I think these talks are very fruitful. If you look back two or three years, there haves never really been serious discussions about major reforms [to gambling regulation]. This is the first time that it feels like a major step forward has been taken.”