EU law vs. State Treaty on Gambling

Maybe Christmas will be brought forward by three months this year. At least that’s what the German federal states of Berlin, North Rhine-Westphalia, Hamburg and Bavaria seem to want, which after tough negotiations have now reached a so-called circular resolution through which online gambling is to be tolerated as early as October 1st of this year. This decision is to be implemented on the basis of the new State Treaty on Gaming, which will only come into force on July 1, 2021. Of course, only if everything goes as planned. Apparently, the representatives of the Senate and State Chancelleries completely missed the fact that the new State Treaty on Gambling first had to be ratified by the individual state parliaments. In addition, the standstill period stipulated by the EU notification procedure has not yet expired. There are currently justified doubts that this new State Treaty on Gambling will ever be valid, as there are a number of serious violations of Union law.

Is the new State Treaty on Gambling illegal?

The new State Treaty on Gambling provides for a fundamental reform of the old legislation and thus also a legalization of online gambling – albeit under strict conditions. With regard to online casino games, for example, the federal states are allowed to decide for themselves whether they offer it on their own or whether they issue concessions to private providers or prohibit them entirely. This is parallel to the terrestrial area. A distinction is made between casinos that offer casino games and arcades that only set up machines. The number of respective licenses for online casinos is limited to the number of real casino licenses. Now EU law comes into play, against which this license model clearly violates due to the established freedom of establishment (Art. 49 TFEU). Because if a federal state decides to exclusively offer online casinos itself, it makes it impossible for private online casino companies to establish a branch there. The granting of a license also restricts the freedom of establishment, as only a few companies get access to the market and others do not. The concession model is also contrary to European law because it violates the freedom to provide services (Art. 56 TFEU). In this context, one even has to speak of discrimination if, for example, providers from other EU member states are excluded with their services in Germany.

Schleswig-Holstein’s exemplary special route

Schleswig-Holstein has been the only German federal state to take a special route since 2011 by allowing online gambling. The success proves the North Germans right, because the number of so-called problem gamblers has not increased, nor have there been any cases of manipulation or the like. The differentiation between individual online gambling types is not provided in Schleswig-Holstein. There a distinction is only made between casino games, betting and lotteries. Every online casino based in the EU can receive a permit, provided it has the necessary licensing, expertise, efficiency and reliability. Now the question must be allowed why nobody dared to look at the Nordic neighbors when the new State Treaty on Gambling was passed. In addition, there is no evidence that this “market-fragmenting differentiation” is necessary, since it curtails the fundamental European freedoms.

Incorrect treatment of terrestrial and online gambling equally

The new State Treaty on Gambling clearly states that a state monopoly is not necessary for online gambling. In contrast to the terrestrial casinos, all online casino games must be recorded by the online provider in order to check them for abnormalities if necessary. Among other things, this serves to prevent manipulation. And here again it is worth taking a look at Schleswig-Holstein. The test experiences of the Northern Lights have shown that no manipulations have been found in online gambling. As far as the so-called gambling disorders are concerned, those responsible for the new State Treaty on Gambling have stuck to an outdated state of research. They disregard the fact that a complex combination of different factors and the occurrence of certain events can lead to a gambling disorder. This is just as possible through online gambling as through a single lottery participation.

The present license model cannot be called for in favor of player protection either. After all, terrestrial gaming in casinos and amusement arcades is significantly more dangerous than online gaming, which restricts a number of measures. However, it offers a comprehensive analysis of the respective player behavior. Clear deficits, however, can be found in the terrestrial area. An alleged control by the staff of the gambling halls and a lack of technical requirements make it very difficult to identify a player with a gambling disorder. It must therefore be stated that the equal treatment of online and terrestrial gambling is extremely flawed.

Circular resolution with problematic early tolerance

The circular resolution mentioned at the beginning of North Rhine-Westphalia, Hamburg, Bavaria and Berlin, as well as its early toleration, are apparently intended to bring about a situation that is both anti-competitive and violates EU law. It seems that German politicians do not want to wait until the standstill period in the EU notification procedure has expired. Nobody seems to want to wait for ratification by the federal states either. Instead, a decision contrary to European law will probably be implemented. The previously existing market will be shattered by this early tolerance, and great uncertainty will spread. Game and software manufacturers, advertising companies and other so-called suppliers are also surprised by this tolerance. You hardly have an opportunity to adjust so quickly to the suddenly changed conditions on the market. Online casino games are also clearly excluded from this tolerance decision. And that although the individual federal states have not yet made a decision as to whether the operation of online gambling should be left to private or state providers.

Author: Casino Rulz