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New German Gambling Regulations

July 2008 - Corporate & Commercial. Legal Developments by Avocado Rechtsanwälte .

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The new state treaty on gambling (the "Treaty") came into effect at the beginning of this year. The 16 federal states which have the authority to pass regulations in regard to gambling in Germany were challenged to modify the existing regime due to a decision of the Federal Constitutional Court in which the court had declared the then existing gambling regime as unconstitutional.

The new state treaty on gambling (the "Treaty") came into effect at the beginning of this year. The 16 federal states which have the authority to pass regulations in regard to gambling in Germany were challenged to modify the existing regime due to a decision of the Federal Constitutional Court in which the court had declared the then existing gambling regime as unconstitutional. The new regime complies with the requirements set by the Federal Constitutional Court. The Treaty will be in force until 1st January 2012 and it applies to

  • the arranging of,
  • the operating of, and
  • the providing for

any form of gambling. Horse racing and gambling machines as well as games of skill and fun games are not covered by the new regulations. The key targets of the new regulations are the prevention of gambling addiction, the governance and supervision of gambling offerings as well as the protection of minors and young people.

Under the terms of the treaty any arranging of and providing for gambling by private operators requires a license. The licence shall not be granted where the arranging of and the providing for gambling would be contrary to one of the key targets of the Treaty (see above). Thus, the state monopoly on gambling is upheld.

The Treaty also provides for a complete ban on internet gambling. Any violation may be punished by fines up to € 500,000. However, in 2008 private operators may still offer gambling on the internet, provided that such gambling activities comply with the requirements of the new Treaty.

Advertising is limited to the provision of information on the opportunity to gamble and must not be directed at minors or other vulnerable groups. Advertising on the internet, on TV or by means of telecommunications is generally prohibited. In addition, advertising must not be deceptive and should not invite, offer incentive to or encourage gambling.

German authorities are authorized to take appropriate measures in order to enforce the Treaty. In particular, they may prohibit financial institutions from processing payments relating to illegal gambling. Internet providers may be required to block access to unauthorized gambling sites. Authorities may impose considerable fines of up to € 500,000 for any violation. However, fines in respect of the ban on internet gambling which were dropped at the last minute. It remains to be seen how the authorities will proceed with the enforcement of the Treaty.

Serious concerns voiced by the EU as to whether the new regulations comply with EU law (in particular in respect to internet gambling) were rejected by the Heads of States during the drafting of the Treaty. It is expected that the European Commission will initiate formal infringement proceedings against Germany. There are already various actions against the Treaty pending before German courts, which were partly referred to the European Court of Justice.

Thus, the new regulations introduced legal uncertainty within the domain of gambling law in Germany. Until a final court decision in the matter is rendered, all operators of gambling activities, financial institutions, advertising companies and internet providers not complying with the new regime may be subject to enforcement measures of the authorities under the Treaty.

frankfurt@avocado-law.com

+49 69 913 30 10

www.avocado-law.com