THE BITTERSWEET TASTE OF GAMBLING REGULATION IN GERMANY

 

It is indeed paradoxical: the gambling industry had been longing for and working toward the introduction of a regulatory framework for online gambling in Germany for – at least – the last two decades. Now we are looking back at roughly six years of German online sports betting licenses and roughly four years of German online slots licenses. One could believe that the first few years were used to ‘tune in’ to the new reality of a much longed for regulatory framework.

But this is true only in part. Even though, for the first time in history, Germany can now look back on the first few years of regulation that covers (most) online gambling offers, the truth is that the industry is still facing massive regulatory headwinds rather than slowly sailing into smooth waters.

A recap: in October 2020, the first online (and retail) sports betting licenses were granted, following a decade of uncertainty and failed attempts to introduce a licensing system. In July 2021, revised legislation entered into force and paved the way for licensing online slots (virtuelles Automatenspiel). In the run-up to this new legislation, the German federal states had issued a circular resolution (Umlaufbeschluss) introducing a transitional regime for operators to remain active on the market prior to being granted a license under the new legislation but subject to the regulatory restrictions that entered into force in July 2021.

Also, for the first time in history, Germany now has a “real” nationwide gambling regulatory authority in place. The revised legislation of July 2021 also introduced a change in the regulatory competence for gambling in Germany as of January 1, 2023. Licensees are now supervised by the central regulatory and licensing authority of the federal states in Germany (Gemeinsame Glücksspielbehörde der Länder, mostly referred to by its abbreviation “GGL”) with competence for all of Germany and based in Halle/Saale in the federal state of Saxony-Anhalt.

However, the decade (and longer) of lacking regulation and the legal uncertainties that came with it are now catching up with the German gambling industry. As in Austria, mass litigation relating to the refund of player losses is rampant in Germany. Austria still has a gambling monopoly in place (as one of the last EU Member States) and has only recently decided to open the market by allowing an unlimited number of online gambling concessions (please see our article on Austria for details)^{1Link to web article once published}. While the situation around player claims remains uncertain, the situation in Germany seems bizarre: on the one hand, the federal states have amended the previous gambling legislation to rectify its lack of conformity with EU law and, in many instances, German authorities have over time provided operators with assurances that they may legitimately continue their offers in the course of transitioning into the locally licensed market. Additionally, the German legislator (and regulator) also deliberately decided not to implement a “blackout” period in order to actually achieve the transition from the formerly EU-licensed into the newly locally licensed market. On the other hand, civil courts are granting player refund claims for losses that occurred during the time when the law was not in line with EU law and even for the transitional period for online slots.

You could also put it differently:

Many of those operators, who were initially considered illegal operators, as they operated in Germany on the basis of licenses granted in other EU Member States, have meanwhile been licensed by the GGL but are still facing massive economic threats from the player claims industry. For the sake of this article, let’s call it a threat to the German online gaming market.

And while these operators are meanwhile licensed by the GGL, there are other operators who do not want to adhere to the strict regulatory requirements of the (no longer so new) German State Treaty on Gambling, particularly when it comes to the online slots offer. The GGL is actively trying to combat this black market that is putting the licensed offer at risk, but the problem currently seems big enough to, for the sake of this article, also refer to this as a threat to the German online gaming market. Let’s take this one first.

 

The first threat: the black market

When Germany introduced its new licensing regime for online gaming, one of the central political objectives was channelization. The idea was straightforward: by creating a legal framework for online gaming products, consumers would be directed toward licensed operators offering online gaming in a controlled environment subject to strict regulatory oversight by the GGL. Thus, the success of the reform would not be measured only by the number of licenses that the GGL would be granting, but by the extent to which consumers actually choose licensed products over unlicensed alternatives.

However, several years after the entry into force of the current State Treaty on Gambling in July 2021, serious concerns remain as to whether this objective is being achieved. While Germany now has a comprehensive licensing system for online sports betting, online slots and online poker in place, a significant portion of consumer demand continues to be served by operators that do not hold a German license and that target German players from offshore jurisdictions outside of the EU. As a result, the black market has emerged as one of the most pressing challenges of the German regulatory framework.

The existence of a black market is, of course, not unique to Germany. Every regulated gambling market faces some level of illegal competition. The critical question is not whether unlicensed operators exist, but whether the regulatory framework is capable of attracting a sufficient share of consumers to the licensed market. If the legal offer becomes unattractive compared to unlicensed alternatives, consumers may increasingly migrate toward operators that are beyond the reach of regulators like the GGL.

This concern has been raised repeatedly by licensed operators since the implementation of the State Treaty in 2021. Germany’s regulatory framework is among the most restrictive in Europe. Online slots are subject to a stake limit of EUR 1 per spin, mandatory waiting periods between spins, restrictions on autoplay features, a prohibition of jackpots, extensive player protection measures and a comprehensive cross-operator monitoring system, in particular to monitor the cross-operator deposit limits. In addition, the legislation prohibits many products that remain highly popular among consumers, including most forms of online casino table games outside a very limited number of state-licensed offers.

 

From a consumer protection perspective, these restrictions were introduced with the legitimate aim of reducing gambling-related harm. Yet they also create a significant discrepancy between the licensed offer and the products available on the black market. Unlicensed operators do not adhere to German stake limits, product restrictions or player protection measures. They are often able to offer larger product portfolios, higher payout rates, more aggressive bonus schemes and a less restrictive user experience. And we haven’t even started speaking about taxes.

The result is a substantial competitive imbalance, which creates a fundamental regulatory dilemma. The more restrictive the licensed market becomes, the greater the risk that consumers will seek products that are unavailable under German law and simply turn to unlicensed providers, who are only one click away on the internet. In such circumstances, strict regulation may inadvertently achieve the opposite of its intended purpose: instead of bringing gambling activity under regulatory supervision, it may encourage players to migrate toward operators that are entirely outside the German system.

At the same time, the black market has become increasingly sophisticated. Unlicensed operators often invest heavily in digital marketing, affiliate networks and technological measures and crypto payments designed to circumvent enforcement actions. Payment blocking and website blocking measures may have some impact, but experience from other jurisdictions demonstrates that determined operators can frequently adapt their business models and continue serving customers.

This raises an important question regarding the overall effectiveness of enforcement. The GGL has made combating illegal gambling a key priority and has intensified its enforcement activities. These efforts have undoubtedly strengthened the regulatory framework and signaled a commitment to protecting the licensed market.

 

Nevertheless, enforcement will not be sufficient to address the underlying structural challenge. Achieving a successful channeling rate ultimately depends on whether the licensed market is sufficiently attractive to compete with unlicensed alternatives. Even the most sophisticated enforcement mechanisms face limitations if a substantial portion of consumer demand cannot be satisfied within the regulated framework.

Hence, the debate surrounding channelization goes beyond questions of enforcement and enters the broader discussion regarding regulatory design. The long-term success of German gambling regulation requires a careful balance between consumer protection and market attractiveness.

Finding the correct balance is easier said than done. Policymakers must reconcile competing interests, including consumer protection and the prevention of gambling addiction, product requirements and compliance with EU law. However, one point appears increasingly clear: the effectiveness of gambling regulation cannot be assessed solely by reference to the rules imposed on licensed operators. The decisive question is whether those rules encourage consumers to remain within the regulated environment.

Ultimately, the black market remains a persistent reminder that regulation does not operate in a vacuum. The introduction of licenses and regulatory oversight was intended to replace a largely unregulated market with a sustainable legal alternative. Whether the German model will achieve this objective in the long term will depend not only on the regulator’s ability to combat illegal operators, but also on the willingness of legislators to ensure that the licensed market remains sufficiently attractive to fulfill its channelization function. If that balance cannot be maintained, the black market may continue to represent one of the greatest threats to the success of German gambling regulation.

 

Looking ahead, the ongoing review of the State Treaty may provide an opportunity to reassess certain aspects of the current regulatory framework. While the core objective of player protection will not change, policymakers are increasingly aware of the importance of channelization and the need for licensed operators to remain competitive against the black market. It remains to be seen whether the review process will result in targeted adjustments to product restrictions, operational requirements or market access conditions that could enhance the attractiveness of the regulated offer. If successful, such reforms may strengthen the ability of the licensed market to channel consumers away from unlicensed operators and thereby further the overarching objectives of German gambling regulation.

The second threat: player claims

It seems paradoxical, but the second threat relates to something that is somewhat comparable to the aforementioned threat of the black market, i.e. illegally offering online gambling.

Player claims essentially argue that offers made prior to operators having been granted German licenses must be considered illegal gambling and thus losses need to be paid back to players because the illegality results in the contracts being null and void.

While several operators used to rely on the EU freedom to provide services and their licenses issued in other EU Member States for their offer during that time, primarily because the German concession tender was heavily flawed, these very operators are today licensed by the GGL.

However, while these “good corporate citizens”, which have been found suitable and licensed by the GGL, are being attacked by player claims, the black market persists, as described above.

Almost as in former days long before the introduction of a local licensing system in Germany, clarification is being sought from the judges at the CJEU in Luxembourg. Broken down to the simplest level of complexity, the question is whether operators may be sanctioned through the backdoor of civil law for a regulatory framework that remained in violation of the EU market freedoms for more than a decade. While the CJEU has already clarified early on in its Placanica (C-338/04) judgment of March 6, 2007 and its subsequent Ince judgment that criminal sanctions must not be applied in such circumstances, in its Unibet judgment (C-49/16) of 22 June 2017 the CJEU maintained the same logic for administrative sanctions. Such clarification is now also required for claims brought under civil law.

 

And the courts are seeking such clarification: in Malta, a player claim regarding losses that occurred in Germany was referred to the CJEU with regard to online casino games (Case C440/23, European Lotto and Betting und Deutsche Lotto- und Sportwetten), referred by the Civil Court Malta (Prim’Awla tal-Qorti Ċivili) on 14 July 2023. As a result of this referral, the German Federal Supreme Court (BGH Case I ZR 53/23) along with several German Higher Regional Courts (Oberlandesgerichte) had suspended cases pending the CJEU’s preliminary ruling.

On 16 April 2026, the CJEU delivered its judgment, holding that Article 56 TFEU does not, in principle, preclude a Member State from prohibiting certain types of online gambling that are lawfully offered in another Member State and from attaching civil-law consequences to such a prohibition.

Most importantly, the CJEU confirmed that a consumer may claim reimbursement of gambling losses from an operator established in another Member State where the gambling activity concerned was prohibited in the consumer’s Member State of residence, hence, in Germany. The judgment provides substantial support for player actions relating to online casino products that were offered into Germany. The judgment has fundamentally altered the legal risk assessment for operators facing mass litigation in Germany. While numerous proceedings had previously been stayed pending the outcome of the reference, German courts are now resuming these cases to apply the principles established by the CJEU.

Following the CJEU’s judgment in C-440/23, the Federal Supreme Court has resumed the online casino proceedings in a designated leading case (BGH I ZR 216/25) concerning the reimbursement of losses incurred in online casino games. While this is not the case that had initially led to the CJEU referral C-440/23 (as mentioned above, this was a referral by a Maltese court), the Federal Supreme Court has selected an online casino refund case and designated it as a so-called leading model proceeding (Leitentscheidungsverfahren) due to the large number of comparable claims pending before German courts. The other cases relating to online casino refund claims pending before the Federal Supreme Court will be suspended while awaiting the judgment in the leading model proceedings.

 

The designation of Case I ZR 216/25 as a leading model proceeding is noteworthy in itself. The mechanism, introduced into German civil procedure only recently, enables the Federal Supreme Court to provide authoritative guidance on legal issues affecting a large number of pending cases and prevents the clarification of such issues from being frustrated by settlements or procedural terminations in the individual case. The concept of such leading model proceedings was introduced as a result of mass litigation in the past that was unrelated to online gambling, primarily relating to the so-called Volkswagen “diesel scandal”.

However, the case designated to serve as this leading model proceeding is in fact not a “normal” online casino refund case, because it technically does not relate to “casino” gameplay but rather to the very limited online slots product offered during the so-called transitional regime.

As a reminder, in anticipation of the State Treaty 2021 that entered into force on 1 July 2021 and after the first sports betting licenses had been granted as of the beginning of October 2020, a transitional regime for the operation of online slots came into force in mid- October 2020. The German federal states had agreed that they would not prioritize enforcement against existing online slots offers operated by EU-licensed operators that had already implemented certain key regulatory requirements of the new legislation as of mid-October 2020 and thus more than half a year prior to the new law entering into force and more than a year before the first online slots licenses were actually granted under the new law. This came with a massive business impact for operators adhering to the transitional regime, first because the transitional regime did not allow them to offer online casino table games (such as, for instance, online roulette) and, secondly, because the online slots offer was made subject to much stricter regulatory requirements. Hence, in our opinion, the transitional regime introduced by the German federal states by means of a circular resolution (Umlaufbeschluss) could not be understood otherwise than as allowing operators who were willing to adhere to the regulatory requirements of the new State Treaty 2021 to transition into the licensed offer. It thus seems like an unsatisfactory result that losses having occurred under the transitional regime should now serve as the blueprint for online casino refund cases to be reviewed in the course of the leading model proceeding.

 

The Federal Supreme Court will hold an oral hearing in the leading model proceeding on 17 September 2026 and may issue a judgment shortly thereafter. Any such judgment will indeed be direction-setting for the online casino refund claims in Germany.

However, there is still a – slight – chance that the Federal Supreme Court may consider that not everything has indeed been clarified already in the CJEU’s C-440/23 judgment and, once again, refer the case to the CJEU for further clarifications under EU law, such as the highest German court already did at the beginning of summer 2024 in the case of sports betting. That referral had been made against all odds as the interested reader may recall that the Federal Supreme Court’s referral to the CJEU regarding sports betting was anything but to be expected because it had been predated by a so-called indicative order (Hinweisbeschluss), which had basically already decided the case in favor of the player. Then, more than unexpectedly, the Federal Supreme Court did not proceed along the lines of its indicative order but referred the case to Luxembourg for a preliminary ruling.

For this very reason, sports betting remains subject to the pending preliminary ruling proceedings in Case C-530/24, where a steer from Luxembourg is still pending while numerous sports betting cases continue to be stayed until the CJEU has rendered its judgment.

Case C-530/24, Tipico, is the pending preliminary ruling case referred by the German Federal Supreme Court itself (Bundesgerichtshof, I ZR 90/23). In a nutshell, the main question regarding sports betting is whether the lack of a license can be held against EU-licensed operators in light of the failed concession tender of 2012 and the monopoly – that was found to be incompatible with EU law – persisting in practice until German sports betting licenses were finally granted in late 2020. The essence of this question is once again to determine whether betting contracts concluded by EU-licensed operators during the period of the defective German concession tender may nevertheless be regarded as void under German law and give rise to player refund claims under civil law.

 

On 19 March 2026, the CJEU’s Advocate General Nicholas Emiliou delivered his Opinion. While the final judgment is still pending, the Advocate General largely rejected the argument that deficiencies in the German concession tender process automatically prevent the application of civil-law consequences. The Opinion suggests a restrictive approach to the operators’ reliance on the freedom to provide services under Article 56 TFEU. However, the Opinion has not entirely closed the door on such cases. While the Advocate General rejected the proposition that defects in the former concession tender automatically preclude player claims, the Opinion appears to leave room for a case-specific assessment where operators relied in good faith on the conduct of German authorities, participated in the concession tender and reasonably believed that their activities complied with the evolving regulatory framework. Consequently, the CJEU’s final judgment may still distinguish between operators who acted in reliance on regulatory assurances and those who operated entirely outside the German regulatory system back in the day.

Further to these cases, the German Regional Court of Erfurt has referred three further requests for a preliminary ruling to the CJEU on sports betting as well as online casinos. Beyond the “landmark” references in Cases C-440/23 and C-530/24, Case C-898/24, TSG Interactive Gaming Europe Limited, questions the compatibility of Germany’s former online casino prohibition with Article 56 TFEU and the permissibility of player refund claims based on that prohibition in more detail than C-440/23. Cases C-9/25 and C-778/25, Tipico, address online sports betting and raise further questions concerning the legal consequences of the defective German concession tender and the recoverability of pre-licensing betting losses. Overall, it remains uncertain at this point whether the CJEU will indeed provide substantial new guidance through these cases beyond the “landmark” references.

 

Our last article said that it seems like something out of a bad film that, now that there is a regulatory system in place in Germany, that has finally introduced a licensing system and a dedicated regulatory authority, all introduced with the sole aim of bringing the legislation that has persisted for more than a decade into line with overriding EU law, and as a result Germany has finally become a regulated market, the legislative mistakes of the past are once again causing serious headaches for the operators licensed and regulated in Germany. Well, this is still the case up until today. It also still holds true that ultimately it may not only be the operators suffering from headaches. Depending on how things develop, the German federal states, which were in charge of the 2012 tender, may be faced with state liability claims. While, again, we had already pointed this out in our last article, meanwhile the CJEU’s Advocate General has also noted this fact in his Opinion in Case C-530/24, where he rightfully states in paragraph 83 of his Opinion that “[r]equiring such an operator, many years later, to repay the stakes […] may not only be unfair, but could also have a considerable impact on its current activities. Such an obligation could potentially concern thousands of contracts concluded over several years. Hundreds of thousands of euro in profits may need to be paid back, amounting to very substantial sums long after they were earned and possibly spent or invested by the operator in good faith. If harm was suffered by the consumers in such circumstances, any liability could only be borne by the public authorities that gave the assurances in question.”

 

Once more, the last word will have to be spoken by the judges in Luxembourg, including when they deliver their judgment in Case C-530/24, but it may very well be that the Federal Supreme Court will try to sustain its own view of what was legal and what was not.

Ultimately, we may soon be in a situation to assess whether reliance on the guidance given by German authorities in light of overriding EU law and CJEU case law may give rise to state liability claims, particularly if operators do suffer substantial outflows of value resulting from player claims.