Why shouldn't gambling be forbidden?

Gambling on the Internet: EU Blue Letter puts pressure on countries

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Games of chance in online casinos and betting on the winners of gaming duels are not permitted by law in Germany. It is time for state gambling regulation to arrive in the digital present.

Fifa, League of Legends or Counter-Strike: Online games or "e-sports" have long been a mass phenomenon and a market that has a global turnover of around 800 million euros with games, merchandising and tournaments. But it's not just about gaming, there are professional players with star status, a large fan base and an extremely dynamic e-sports betting market, which is expected to generate an estimated turnover of 1.8 to 6.3 billion euros . In addition, there are classic games of chance such as online casinos, which are not permitted by law in Germany, with the exception of Schleswig-Holstein.

But there is a lack of equally dynamic regulation. The current regulations appear unsuitable for keeping pace with market developments. How should the protection of minors be guaranteed and the risk of addiction curbed if the legislature only has bans in place for new forms of gambling on the Internet instead of creating sensible regulatory frameworks?

The federal states that are responsible for regulating gambling cannot come to an agreement. The time is running from the clock, the current State Treaty on Gambling is only valid until the end of June 2021. A new draft must be notified to the EU Commission. This implies a three month standstill period. During this time, the draft may not be ratified so that the Commission and the other Member States can examine whether the draft will hinder free movement within the European Union. If this standstill period is breached, the national courts must declare the legislation inapplicable. In order to be able to meet these requirements, the federal states will have to make a decision this year on how gambling regulation should look from July 2021.

The Prime Minister's Conference is scheduled for October 2019. This should be groundbreaking. Here the countries must finally come to an agreement or at least set a timetable. There is broad consensus that administrative enforcement should be strengthened and that a central body should be created for this purpose. Regarding the regulation of the large market for online casino games such as "Black Jack", "Roulette" and playing online poker, however, no agreement has yet been reached.

A blue letter from the EU Commission

For the time being, the federal states could only agree to create a new procedure for the issuing of licenses for conventional sports betting by means of the 3rd State Treaty on Gaming. The previously planned licensing procedure had failed before the courts, so that not a single license could be granted. Because of the violation of Union law, the private providers can invoke the freedom to provide services, so that sports betting is currently tolerated in practice.

It is planned that the Darmstadt regional council will be responsible for the new licensing procedure for sports betting. In August, it invited to an information event which was attended by more than 200 representatives from the industry. The previously planned cap of a maximum of 20 licenses will no longer apply, i.e. all applicants can receive a sports betting license if the legal requirements are met. There should be a maximum stake limit of 1,000 euros per month for Internet offers. All providers have to connect to the OASIS lock file so that player locks can be effectively implemented.

However, new adversity looms here as well: Also in August, a letter from the EU Commission on the notified regulations of the sports betting procedure became known. After the EU authority remained calm on this matter for a long time, it has now sent a "blue letter" - and not for the first time in matters of gambling regulation.

The commission specifically complains that it is currently not foreseeable what the regulation of conventional sports betting will look like from July 2021. If, however, the new regulations come into force on January 1, 2020 at the earliest, the possible license period will be shortened to a maximum of 18 months. In the Commission's view, these are not an attractive framework for providers. It therefore appears to be doubtful whether this will really work as a "political bridge" for the sports betting procedure, which previously failed due to European law, and whether it would only trigger new legal proceedings.

But that's not all: The EU Commission also criticizes the fact that the federal states have not yet investigated the addictive dangers of Internet games in more detail. Should Germany continue to ignore the EU's demands on this, infringement proceedings could be threatened. In this respect, the Commission explicitly refers to a letter of March 20, 2012 addressed to the federal states, in which it was criticized in clear terms that the federal states had not submitted any data on the fundamental ban on games of chance on the Internet, although this is necessary according to the established case law of the ECJ be. In fact, to date, the countries have not determined any empirically reliable data on the allegedly special dangers of Internet gambling, let alone evaluated relevant studies.

Own gambling laws in individual countries?

This shows where the rabbit is in the pepper: The Internet is demonized as dangerous - probably because some decision-makers seem alien to its basic structures. However, this means that the opportunities offered by comprehensive legalization of online gambling are lost. After all, there are increasing voices who, like Nathanael Liminski (CDU), head of the State Chancellery of North Rhine-Westphalia, recognize that effective enforcement of the applicable law requires regulation that is legitimate and accepted by the population with binding criteria across all varieties.

Hesse and North Rhine-Westphalia have now followed in Schleswig-Holstein's footsteps and are striving for comprehensive regulation. The northernmost federal state had already passed its own gambling law in 2011, which provided for the legalization of online casino and poker games with strict regulation and licensing based on qualitative criteria. The licenses issued on this basis were now, after they had expired in the meantime, until July 2021 reactivated with the tolerance of the other federal states. This is necessary because the billion-dollar black market shows that people play regardless of whether it is forbidden or not, according to the Interior Minister of Schleswig-Holstein Joachim Grote (CDU).

The states of Schleswig-Holstein, Hesse and North Rhine-Westphalia have made one thing clear: If there is no agreement at the Prime Minister's Conference in October 2019, they will individually or jointly establish their own gaming law. The aim here will be to create a reliable legal framework for as many forms of game as possible that are in demand on the market. The model for this could be the Schleswig-Holstein Gambling Act, which was in force from 2012 to 2013 and at that time was found by the EU Commission to be in conformity with EU law due to the wide market opening.

Opt-in / opt-out solution as a way out?

Now, in addition to Schleswig-Holstein, Hesse and North Rhine-Westphalia also want to introduce a license model for the popular online casino and online poker games. Other states such as Lower Saxony, Saxony and Brandenburg, however, continue to advocate a general ban on Internet gambling. Should an agreement not be reached, the last option discussed is an opt-in / opt-out model. According to this, the countries that are currently deciding against a general opening of the market could first observe the experiences of the others and only join in later, or they could not.

The juxtaposition of fundamentally different online regulations could, however, turn out to be a "regulatory mistake". How should the population in Germany be conveyed that, depending on where the player is located, participation in certain Internet games of chance is sometimes permitted and sometimes strictly prohibited? And this would also be extremely problematic under European law. Because the moral and moral ideas are almost the same within Germany, so that it is impossible to understand that one and the same offer is sometimes legally permitted or sometimes strictly forbidden, depending on the player's whereabouts. It could therefore be that the federal government would then have to take on the task of creating uniform gaming regulation for the whole of Germany.

In any case, one thing is clear: only with comprehensive regulation can the natural play instinct in the population be channeled to a legal and thus monitored offer. The assumption that an online casino or poker player would allow himself to be drawn to legally permitted forms of gaming such as lottery or sports betting offers seems anachronistic in any case.

The author Dr. Wulf Hambach is a founding partner of the law firm Hambach & Hambach, specializing in regulation.

The author Dr. Bernd Berberich is a lawyer at Hambach & Hambach specializing in criminal and administrative law as well as gambling and enforcement law.