Germany: New government in Schleswig-Holstein opposes liberalised online gambling market

Schleswig-Holstein license update - it is going to be tough

New government in Schleswig-Holstein opposes liberalised online gambling market

On Tuesday, 12 June, the new prime minister of Schleswig-Holstein (SH) was elected and with this election the new government took office. The election in May resulted in a small majority for the coalition of SPD, Greens, and SSW. These parties more or less oppose the new liberal online gambling regulation in SH and want to join the other 15 states with their more restrictive regulations (higher taxes, no liberalisation of online poker and casino). The coalition agreement clearly aims at revoking the gambling regulations that took effect just a few months ago:

"The state government's goals are coherent national gambling regulations and Schleswig-Holstein's accession to the Interstate Treaty on Gambling. Accordingly, the state government will investigate how Schleswig-Holstein's Gambling Act can be repealed without liability for compensation and how the law can be amended to stop the issuing of licenses".

Undoing the new gambling regulation?

Of course, the licenses will remain in effect as long as Schleswig-Holstein's Gambling Act is in force, and for the time being, licensed operators are authorised to continue/start their online sports betting business. And no matter how much the new government may want to undo Schleswig-Holstein's Gambling Act, the licenses already issued will make a repeal more difficult and potentially also more costly.

If the new government passes a bill invalidating these licenses, revokes them, or abolishes the Gambling Act on which they are based, the newly licensed operators - especially if they have begun using their licenses - are likely entitled to compensation from the state. After all, they had a legitimate expectation that they could rely on existing law when they applied for licenses.

For example, operators may have to be compensated for investments and expenses connected with their license application, such as setting up an office in Schleswig-Holstein. However, it is unlikely that they would be compensated for any loss of future profits.

There is a ray of light among the shadows: unlike the majority of his party, the new prime minister, Torsten Albig (SPD), has publicly welcomed betting and gambling operators to sponsor public events. He might find it difficult to join the other 15 states and their Interstate Treaty on Gambling. Instead, he might follow a "moderate" approach.

Seven sports betting licenses - but probably no more to come

Just before the new government took office, Schleswig-Holstein issued additional sports betting licences. In total, there are now seven licensed operators (one state lottery, three German-focused operators, and three international heavyweights). These operators are now licensed to offer sports betting for a term of six years, until May 2018:

• The state lottery NordwestLotto Schleswig (Oddset)
• The local operator Jaxx/Mybet via Personal Exchange International Ltd.
• The local operator (foremost retail shops) Tipico
• The German/Austrian operator Bet-at-home
• Bet365 (via Hillside New Media Ltd.) obtained one of the first ever local licenses of the company
• BwinParty via Electraworks Kiel Ltd.
• Betfair via Polco Ltd.

They can begin their sports betting business immediately even though a so-called Monitoring Ordinance is not yet in place. This ordinance will detail the various technical and performance requirements operators must meet - such as a system to verify and validate players' identity and age and checklists of blocked players.

According to information received by MECN, some licensees already pay taxes in Schleswig-Holstein. However, the tax authority could not determine whether these tax payments also include taxes on German players outside of Schleswig-Holstein.

No online casino and poker licenses yet and probably no additional betting licenses

The Ministry of the Interior announced that it has received an additional 34 applications - 24 for sports betting and 17 for online casino/poker. But according to various sources it seems rather unlikely that new sports betting licenses will be awarded in the near term. Moreover, no casino and poker licenses have been awarded yet - and this will likely not change.

First state laws on gambling published and ratified

In order to enact Germany's Interstate Treaty on Gambling at least 13 states (minimum requirement) have to ratify laws for each individual state. As the EU Commission issued the results of its notification process only in late March, the pressure is now on - the new Interstate Treaty is scheduled to take effect on July 1, 2012. Here are some updates:

• Most state laws seem to be on track - MECN learned from various state officials that they are confident that at least 13 states will have their individual state laws in place before July 1.
• First state laws were ratified - Some states, such as Rhineland-Palatinate and Bremen, have already ratified their laws, and most other states have published drafts of their state laws (see overview here). Rhineland-Palatinate was among the first to ratify its new state law - as many as 20 sports betting licenses will be issued.
• The largest state will not make it - Germany's largest state, North Rhine-Westphalia (NRW), recently had elections, and the new government (SPD and Greens) will need more time to get new laws passed. Therefore, it is not realistic to expect the ratification of a new state gambling law before July 1. According to government sources, the new state law might be ratified in fall 2012.
• Interim law in Lower Saxony - It is likely that the state law in Lower Saxony will also be ratified before July 1. But the uncertainty has prompted the governing CDU/FDP coalition to jump in and submit an interim law to the state parliament for adoption. Among other far-reaching provisions, this law allows live betting via the Internet. This point, in particular, is a bone of contention because the proposed Interstate Treaty on Gambling only allows live betting offers to a very limited extent. The interim law also authorises the state's government to issue statutory instruments - including any that would further liberalise the gambling market.

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