No spam - just the latest insights!
Join over 30,000 industry professionals who subscribe for free
Mr. Nicholas Aquilina
Partner
Nicholas Aquilina is a partner at BRANDL TALOS specialising in, international gaming, betting and entertainment law, EU law as well as new gaming products including loot boxes, social, skill and fantasy gaming and e-sports.
Nicholas provides regulatory, corporate and transactional advice, and regularly represents clients before national courts and regulators, European associations, EU institutions and the CJEU. He has assisted clients in several licensing procedures across Europe and the US and advised on large-scale transactions in the gaming and betting sector. He is a co-author of Social Gaming in Europe, and frequently contributes to legal publications and international conferences.
Chambers Global ranks Nicholas as a leading gaming lawyer: “Nicholas Aquilina has played significant roles in corporate and regulatory mandates relating to high-profile transactions and international online sports betting.”
“Nicholas is a first-class legal and regulatory professional.”
Mr. Jens Becker
Associated Partner
Jens is an associated partner at BRANDL TALOS and specialises in German gaming, betting and entertainment law. He advises leading gambling and sports betting providers as well as Bundesliga clubs and media companies in Germany and has been advising in the sector for more than 20 years. He also specialises in European law, contract law and public commercial law. Jens regularly represents clients before regulatory authorities, courts and EU institutions. He is a member of the executive committee of the German Sports Betting Association (Deutscher Sportwettenverband e.V.).
THE HIGHS AND LOWS OF GERMAN GAMBLING REGULATION WHEN CREATING LEGAL CERTAINTY COMES WITH TONS OF UNCERTAINTY
For the first time in history, Germany can now look back at the first few years of having implemented regulation that covers online gambling. In October 2020, the first online sports betting licenses were granted, following a decade of uncertainty and failed attempts of introducing a licensing system. In July 2021, revised legislation entered into force and paved the way for licensing online slots (virtuelles Automatenspiel). Also, for the first time in history, Germany now has a “real” 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 1 January 2023. Licensees are now supervised by the central regulatory and licensing authority of the federal states in Germany (Gemeinsame Glücksspielbehörde der Länder) competent 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. Like in Austria, mass litigation relating to the refund of player losses is rampant in Germany. While Austria still maintains a gambling monopoly (as one of the last EU Member States) and as such also maintains its view that any foreign online casino offer is illegal (please see our article on Austria for details), the situation in Germany seems even more bizarre: on the one hand, the federal states have amended the previous gambling legislation to rectify its lack of conformity with EU law. On the other hand, however, civil courts are granting players’ refund claims for losses that occurred during the time when the law was not in line with EU law.
This contradiction needs to be resolved. There are currently various courts in Germany as well as in Malta, where most of the operators that are licensed in Germany today have their corporate seat, that have referred or are considering referring questions for a preliminary ruling to the Court of Justice of the European Union (CJEU). At the time of writing this article, also the German Federal Supreme Court (Bundesgerichtshof, BGH) is considering a referral, because ultimately only the CJEU is entitled to rule on questions of EU law. Hence, in our view, at the end of the journey it will be the judges at the CJEU in Luxembourg who will decide the questions around the conformity of the previous German gambling legislation with EU law and thus also the questions around whether losses occurred during those periods are refundable. At this point in time, despite countless court decisions in Germany, it seems that – once again – everything is open and – once again – the industry is waiting for a directive decision on German gambling law.
But what got the industry into this situation? The reasons are multi-dimensional, and you need to go back many years to understand why we are where we are today, but also to understand how we think the matter could be resolved. Let’s travel back in time to Germany – and to Luxembourg – to get a clearer picture on the never-ending odyssey of German gambling legislation.
The failed sports betting license tender of 2012
Prior to receiving German licenses as of 2020, operators based and licensed in the EU had been serving the German market with online gambling based on the EU freedom to provide services. This led to several national court cases, including cases that were referred to the CJEU for a preliminary ruling, such as in the Markus Stoß, Carmen Media and Winner Wetten cases that were decided in 2010.
In its Grand Chamber decision Markus Stoß (C-316/07) of 8 September 2010, the CJEU had given a clear decision finding the former German sports betting monopoly to infringe overriding EU law. The German legislator needed to rectify this situation.
To make things a bit more complicated, there is no federal gambling law in Germany and the sixteen federal states (Bundesländer) had put legislation in place in form of a State Treaty to ensure a – more or less – uniform legal framework to apply across all of Germany. The CJEU’s decision required a change to this State Treaty. As a result, it required all federal states to agree on changes to the law following the Markus Stoß landmark decision. Some of the states wanted to see modern and business-friendly regulation, while other states wanted to maintain the sports betting monopoly or at least restrict the opening of the market to the furthest extent possible by restricting the number of concessions. And so the discussions around finding a compromise began.
Ultimately, the federal states agreed on a limited opening of the market, introducing a concession model for 20 sports betting concessions that would cover retail and online sports betting (depending on what an applicant would apply for). All other forms of gambling via the internet remained prohibited according to the so-called “internet prohibition” of the State Treaty.
On 1 July 2012, a new State Treaty on Gambling (Glücksspielstaatsvertrag) entered into force. For the very first time (with the noteworthy exception of a licensing system for online sports betting and online slots that was in place solely in the federal state of Schleswig-Holstein from 2012 until 2021), German legislation provided a licensing opportunity for private sports betting operators. The licensing of private operators was provided within the framework of a so- called “experimental clause” (Experimentierklausel), which would have allowed a private sports betting offer in Germany between 1 July 2012 and 30 June 2019. During this experimental phase of seven years, the sports betting monopoly would not have been applied.
The concession tender commenced on 8 August 2012, led by the Ministry of the Interior and Sports in the federal state of Hesse. Hopes were high in the industry. After roughly two years of back-and-forth, the Ministry finally issued a list of the 20 selected operators that would receive a license, accompanied by a list of further 15 operators that had met the minimum requirements to receive a concession, but did not make it under the “top 20”. Challenged by the latter, in 2014 the administrative courts in Hesse blocked the granting of concessions and ultimately found the concession tender to have been incompatible with EU law as well as German constitutional law. In 2015 and 2016, the administrative courts rules that complainants should have been granted concessions. The state of Hesse appealed. On 4 February 2016, the CJEU issued its ruling on the Ince (C-336/14) case, stating that despite a theoretical option to receive a sports betting concession, the monopoly that the CJEU had already considered illegitimate in its Markus Stoß ruling persisted in practice.
As the experimental clause was about to end on 30 June 2019, bringing the 2012 concession tender to an end, in order to prevent the sports betting monopoly from re-entering into force also de iure as of 1 July 2019, the German federal states agreed on a reform that resulted in abolishing the termination date of the “experimental clause” as well as the limitation to 20 concessions. These amendments entered into force in 2020, paving the way for awarding sports betting licenses later that year.
Paving the way towards licenses online casino regulation
However, as the State Treaty was about to expire in its entirety by the end of June 2021, the German states were – once again – forced to work on further amendments of the law that entered into force on 1 July 2021 by means of a State Treaty on the re-regulation of gambling in Germany (Staatsvertrag zur Neuregulierung des Glücksspielwesens in Deutschland, “State Treaty 2021”).
Politically, it had already become clear much earlier that Germany would develop new legislation, which shall maintain the concept of a licensing regime for sports betting as of 1 July 2021 with an unlimited number of licenses.
In addition, the German states had understood that the internet ban on the other forms of online gambling was no longer sustainable. Once again, there were discrepancies between the individual states as to which forms of online gambling should be allowed in the new legislation. This resulted in a compromise to allow a limited opening of the market by introducing a Germany-wide licensing system for online slots and online poker, while reserving online casino table games and live casino to the competence of each of the federal states, whereby those states that want to open their online casino market can do so on the basis of a private or public monopoly (which, for instance, Bavaria has implemented) or on the basis of a limited number of concessions, while the other states can opt to maintain a full prohibition.
In anticipation of the new State Treaty 2021 that would enter into force on 1 July 2021 and after the first sports betting licenses had been granted as of the beginning of October 2020, a so-called transitional regime for the operation of online slots came into force in mid- October 2020. The federal states had agreed that they would not prioritize enforcement into existing online slots offers operated by EU-licensed operators that 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.
Compliance does not shield from enforcement?
However, pressing the fast forward button to arrive in today’s brave new regulated world, operators have had to experience quite the contrary to what was expected. Finally having obtained German licenses after more than a decade of back and forth, operators were assuming that they would now sail on calm waters, in particular now having a central regulatory authority, the Gemeinsame Glücksspielbehörde der Länder, in place to manage the licensed operations.
The reality is different: operators, including those who had fulfilled all the requirements in the tender procedure of 2012 without ever having been awarded a license and who had implemented the requirements of the transitional period for online slots, are facing a massive wave of refund claims. Unlike in Austria, where refund claims are basically limited to online casino products, claimants in Germany seek the refund of losses from online casino products (including online slots and poker) as well as from online sports betting. The argument is always the same: operators offered these products into Germany without complying with German law and without a German license.
Despite the Markus Stoß and the subsequent Ince rulings of the CJEU, which held that (i) the German sports betting monopoly was not compatible with EU law and (ii) that this monopoly persisted in practice despite the theoretical possibility to receive a license, courts in Germany have granted player claims for the refund of sports betting losses. The same applies to online casino products, which used to be subject to the inconsistent “internet prohibition” – a fact that also the German states understood and thus introduced licensing and concession systems for these products, as described above.
Once again, clarification will be 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 6 March 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 required also for claims brought under civil law.
And the courts are seeking such clarification: in Malta, a player claim regarding losses that occurred in Germany has been 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 and currently pending with the CJEU. 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) have suspended cases to wait for the CJEU’s preliminary ruling in this regard.
However, also with regard to online sports betting, a steer from Luxembourg is needed. While, at the date of writing this article, no reference for a preliminary ruling has yet been made, it is almost certain that this will happen (and may very likely already have happened at the time you are reading this).
As of April 2024, the German Regional Court of Erfurt has issued indicative orders (Hinweisbeschlüsse) in several proceedings, presenting its clear indication to request a preliminary ruling from the CJEU on sports betting and well as online casino.
Following the very first oral hearing in an online sports betting case, also the Federal Supreme Court (BGH case I ZR 90/23), indicated that it was considering a referral to the CJEU and announced that it will publish its decision on how to proceed in this case on 25 July 2024. The main question regarding sports betting will be whether the lack of a license can be held against EU-licensed operators in light of the failed license 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.
It seems like something out of a bad film that now that there is finally new legislation, 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. However, ultimately it may not only be the operators suffering from headaches. Depending on how things develop, the German federal states, who were in charge of the 2012 tender, may be faced with state liability claims.
To sum up, the last word will have to be spoken by the judges in Luxembourg, and it is only a matter of time before they are asked to do so in order to provide legal certainty on an issue that seemed to have been resolved in 2020, when the licensing system finally started to work.
