The German state of Hesse recently launched its own regulatory system for sports betting. As background, the last two of Germany’s 16 states signed the German State Treaty on Gambling in 2012. The treaty has governed online gambling law, and authorized a limited number of licensed providers to offer online sports getting. The state of Hesse was named to regulate the Treaty and issue licenses. In September 2014, Hesse awarded 20 licenses under the Treaty, but they were suspended due to legal challenges. Subsequent lawsuits in Germany and the European Union Court of Justice ultimately ruled the Treaty was not compliant with EU law or the German constitution.
Hesse is using a temporary period of “tolerance” to guarantee the state government won’t prosecute operators under Treaty provisions. As a result, Hesse will be able to collect gaming taxes from sports betting. In addition, under EU law, operators who ignore the Treaty cannot be prosecuted.
Hesse is receiving applications for sports betting licenses through November 15. The new permits basically keep the provisions of the Interstate Treaty, but also include regulations about staffing, age verification, problem gambling and drug taking. Applicants must pay a security deposit of $412,700. Permits only are valid for sports betting in the state of Hesse, and there is no limit to the number of permits that may be issued.
In March, at a meeting of the German Länder state presidents to discuss the Treaty, Hesse tried to offer amendments to bring the Treaty into line with other EU treaties and to allow casino games and online poker. The presidents rejected the proposals. Schleswig-Holstein FDP Party Leader Wolfgang Kubicki said, “Once again a viable solution for gambling regulation in the country has been refused. The Länder Presidents are running repeatedly into the same wall, because they seem to have learned nothing.”
When Schleswig-Holstein joined the Interstate Treaty in 2012, it was the only state with an existing legislative framework for online gambling. Its first licenses were issued at the end of 2012 to PokerStars, 888, Ladbrokes, Bet365, PartyPoker and others. The five-year licenses it issued will start to expire at the end of 2017 and will not be extended because reforms of the Interstate Treaty are unlikely. The EU Commission announced it will prosecute German for its failure to bring its gambling laws into compliance with EU law.
As a result, the new Hesse permits will be the only form of licensing available for online sports betting in Germany, one of the largest sports betting markets in the world. The permits will not be valid for operations in the other 15 German states, so operators will have to balance the benefits and downsides. However it’s expected the German national operators and some of the larger offshore operators will apply for the new permits. Still, the Hesse government will not be able to prevent unlicensed operators from having equal access to licensed operators.
