Germany: Gambling Law

Section 3 (1) Sentences 1 and 2 GlüStV 2021: “A game is a game of chance if, in the context of such a game, a fee is charged in exchange for acquiring a chance of winning a prize, and if the decision on winning or losing depends entirely or predominantly on chance. The decision on winning or losing is always considered to be dependent on chance if the decisive factor is the uncertain occurrence or outcome of future events.”

The Interstate Treaty on Gambling 2021 (Glücksspielstaatsvertrag, GlüStV, “ITG”) is the main legal framework. It is a Treaty between the 16 German Federal States, as gambling regulation lies predominantly within the competency of the States, that came into force on 1st July 2021.,

Regulation on terrestrial slot machines is laid down in the German Trade, Commerce and Industry Regulation Act (Gewerbeordnung) and the Federal Gaming Ordinance (Spielverordnung).

Further relevant legislation is the Race Betting and Lottery Act; It predominantly deals with taxation of gambling services; the German AML Act; Gambling Acts of the Federal states (in particular on land based gambling)

The Joint Gambling Authority of the States (Gemeinsame Glücksspielbehörde der Länder, GGL) is responsible for enforcement against unauthorised gambling and the advertising thereof.

However, the GGL will only take over responsibility for issuing nationwide licenses and supervision of licensees in the following verticals on 1 January 2023:

• online sports betting
• horse race betting
• virtual slots
• online-poker

Until 31 December 2022, the responsibilities for issuing the nationwide licences and supervision of the licensees are distributed among the federal states:

• online sports betting and horse race betting: regional council Darmstadt, Hesse (Regierungspräsidum Darmstadt)
• virtual slots and online poker: State Administrative Office Saxony-Anhalt (Landesverwaltungsamt Sachsen-Anhalt)

The new ITG marks a turning point in German gambling legislations and opens the private market to new verticals such as online casino, virtual slot machines and online poker. These add to the existing licensing possibility for sports betting, horse race betting and low risk lotteries.

Land-based casinos, gaming machines and betting shops are regulated on a state-by-state level and local licences are available.

Licenses for online-sportsbook, virtual slot machines and online poker: in general 5 years for initial license, 7 years after that, but the competent authority can set shorter terms in certain cases.

Online sportsbook, horse race betting, virtual slot machines, online poker on a federal level;

The regulation of online casino games with a bankholder (e.g. Blackjack, Roulette) falls under the responsibility of the individual federal states. The individual federal states can decide for themselves whether they offer online casino games in a (state-) monopoly or issue licences to private operators. If the latter is the case, the number of available licences is limited to the number of licences for land-based casinos. At the present time, only Schleswig-Holstein has opened an tender procedure for private providers. This is planned in NRW. Lotteries are subject to a state-monopoly. Private operators can only obtain a licence for so-called low risk lotteries/social lotteries.

German Gambling law does not know licensing for B2B operators, only licenses for B2C operators are available. However, in addition to the operator-license the B2C also needs approval for the games they offer. This approval has to be applied for by the B2C-operator.

Software suppliers are not required to be licensed under the German Interstate Treaty on Gambling.

German Gambling law is characterized by “prohibition with reservation of permission”. According to section 4 (4) ITG: “A licence for public games of chance on the internet may only be granted for the self-distribution and brokering of lotteries, for the organisation, brokering and self-distribution of sports bets and horserace bets as well as for the organisation and self-distribution of online casino games, virtual slot machine games and online poker. Otherwise, the organisation and brokering of public games of chance on the internet is prohibited.”

This means in particular: Any games of chance outside the above catalogue are not permissible.

Common application procedures consist of two hurdles:

Applicants must submit all necessary documentation. This includes concepts on player protection, money laundering and other fields. Applicants must also submit recent official documents and proof of economic capacity.

In addition, applicants must pass a reliability check. A prognosis decision is made as to whether the provider offers a guarantee that the gambling business will be conducted properly in the future.

The applicant must be seated in the EU/EEA, local presence in Germany is not required.

According to section 9a (4) ITG the cost of the procedure depend on the expected gambling and betting stakes:

• up to EUR 40 Million, 0,2%, minimum EUR 100,
• between EUR 40 Million and EUR 65 Million a minimum fee of EUR 80 000 and 0,16% of the amount exceeding EUR 40 Million,
• between EUR 65 Million and EUR 130 Million a minimum fee of EUR 120 000 and 0,1% of the amount exceeding EUR 65 Million
• more than EUR 130 a minimum fee of EUR 185 000 and 0,06% of the amount exceeding EUR 130 Million

In addition, the granting of a licence requires a security deposit of at least EUR 5 Million.

Key personnel must provide police and tax clearance certificates as well as a proof of qualification in their field (either by way of professional experience or degrees). Germany does not know Key Function Certificates (as for example Malta).

Advertising for gambling is regulated in section 5 ITG as well as in the individual license ancillary provisions. Currently, German gambling law has no public advertising guideline. As a general rule, advertising is only allowed for licensed gambling services; Advertising for illicit gambling can constitute a criminal offence. Advertising must not be excessive and must not address minors or comparably vulnerable target groups. Games of chance must not be presented as a solution to financial problems. Please find the main regulations below:

• Licensees may advertise and undertake sponsoring for the permitted games of chance.
• The licence will specify ancillary provisions for the arrangement of the advertising for public games of chance, in particular for advertising on television and in the internet.
• The nature and scope of advertising for public games of chance must not be contrary to the objectives set out in section 1 of the German Interstate Treaty on Gambling (in particular player protection, addiction prevention).
• Between 6 a.m. and 9 pm advertising for virtual slot machine games, online poker and online casino games via television, radio or the internet is prohibited.
• Advertising for sports betting by active athletes and sports officials is prohibited.
• In sports facilities, advertising for games of chance in the form of umbrella brand advertising on jerseys and perimeters and similar advertising media is permitted.
• Advertising addressed to individuals for games of chance is only permitted if the prior consent of the intended recipient has been obtained for the receipt of advertising and for a cross-check by the advertiser with the blocked player file. Advertising for these games of chance personally addressed to blocked players is not permitted.
• Advertising for and sponsoring of illegal games of chance is prohibited and can constitute a criminal offence in Germany.
• Ban on influencer marketing and collaborating with streamers (part of the ancillary provisions of the license)
• Rigid restrictions on affiliate marketing, variable turnover, stake or loss-based remuneration of affiliates is prohibited

Yes, affiliate marketing is regulated in section 5 (6) ITG as well as the ancillary license provisions. Affiliates are direct addressees of German gambling regulations only in the context of the prohibition of advertising for illicit gambling. Otherwise, the gambling operators are addressees of the specifics on affiliate marketing.

The main regulations on affiliates are:

• Affiliates may not be granted variable remuneration for affiliate links based on turnover, deposits, or stakes of a player at the gambling operator.
• Further restrictions are laid down in the ancillary provisions of gambling licenses, however, these are subject to legal challenges:

Gambling operators must ensure their affiliate partners do only link to whitelisted operators.

All advertising material on affiliate websites must be clearly marked as such

Upon opening of the website, the gambling operator must notify that the affiliates receives a remuneration in case the player registers.

Offering, facilitating or marketing unlawful gambling is a criminal offence in Germany. It punishable with a penalty fee or up to 5 years imprisonment for the responsible natural persons.

Gamblers can also penalised. (Intentional) participating in illicit gambling is also a criminal offence is punishable with a penalty fee or up to 6 months imprisonment.

Operators of or advertisers for illegal gambling also face administrative fines of up to 500,000 EUR per breach, see section 28a GlüStV.

Germany has a two-part licensing process for slots and poker. Providers must apply for an organizer’s license and, in addition, approval of the individual games they offer. The latter contains a definite list of allowed games/poker variants. Sportsbetting licensees have to apply for their intended betting markets.

Sportsbetting-, virtual slots-, online poker- and online casino operators are also required to connect to the LUGAS-Database. LUGAS consist of the so-called limit-file, activity-file and the safe server.

• The limit-file monitors the monthly deposit limit, as players are required to set a maximum monthly deposit limit of EUR 1000 which applies across all licensees. The licence may provide that a limit exceeding EUR 1000 may be set by certain players.
• The activity file is intended to prevent parallel play with several operators and to ensure the waiting time of 5 minutes when the player switches from one operator to another.

As a general rule, key requirements for licensee is acting in compliance with the concepts and policies submitted to the licensing authority during the application procedure. Notwithstanding the adherence to material law, licensees are also required to fulfil several reporting duties. The licenses also specify advertising restrictions.

Anti money laundering requirements are predominantly stipulated in the federal AML Act. Central AML requirement is a thorough KYC process, including identification and verification of the customer. Additionally, deposits and withdrawals are only allowed from and to a payment account within the meaning of the German Payment Services Supervision Act (ZAG), which is held in the name of the player. Anonymous payment methods are prohibited. Furthermore, operators are obliged to report suspicious activities or transactions to the German Financial Intelligence Unit (FIU).

Participants of games of chance must be 18 years or older, which has to be technically ensured by the relevant identification/verification procedures.

As a key requirement regarding responsible gambling and player protection, operators must implement and run an automated system for the detection of addictive behaviour. The system must be based on scientific findings from the field of gambling addiction research.

Operators must connect to the German central player blocking file OASIS. The system allows for self exclusions and third party applications for player exclusions. Players that are registered in this cross-provider database must not be allowed to participate in gambling or receive any marketing material. Furthermore online-operators are obliged to implement a so-called “panic-button” on their website which triggers an immediate 24h exclusion.

Under the acronym for Cross-border gambling supervisory system, LUGAS combines a central playing activity file and a central deposit limit file. The files are intended to monitor and control playing behaviour, prevent parallel playing and limit the monthly deposits to EUR 1000 in general.

The Interstate Treaty knows shareholder reporting and approval duties during the licensing process and after the granting of a license. For legal entities, any change exceeding a 5% threshold in relation to the voting or shareholding rights, need to be reported and pre-approved by the gambling authority. This includes planned changes in advanced stages.

In order to combat illicit gambling, the ITG knows 3 different instruments.

1. Issuing of country wide prohibition orders against operators and advertisers. Such prohibition orders can be enforced by penalty fees or detention of responsible directors.
2. Payment blocking: The supervisory authority can act against Payment Service Providers collaborating with illicit gambling operators and therefore stopping cashflow for unlicensed operators.
3. ISP Blocking: As an administrative ultima ratio, the supervisory authority can take measures against Internet Access Provider and other Service Providers within the meaning of sections 8-10 German Telemedia Act. This requires, that prior enforcement attempts against operators themselves where unsuccessful.

The Interstate Treaty furthermore knows an extensive catalogue of administrative offences, punishable with penalty fees of up to EUR 500,000 per breach.

The tax rate is 5,3% of the net stake (minus the actual tax) for horse race betting, sportsbetting, virtual slot machines and online poker.

The effects of the Interstate Treaty on the development and spread of unauthorized gambling in black markets, will be evaluated by the gambling supervisory authorities of the federal states with the involvement of the Joint Gambling Authority of the Federal states and the Advisory Board. An interim report will be submitted by December 31, 2023. A summary report will be submitted by December 31, 2026 and every five years thereafter Any significant changes to the ITG are therefore not expected before the evaluation of the interim report.

Abolishment of the “Gambling Council”

Since the initial establishment of licensing procedures for private operators, the decision on the granting or rejecting of such licenses is ultimately made by the Gambling Council, sections 27p (6), (7), (8) and (9) ITG 2021. The gambling council consists of 16 members. Each federal state has appointed one member through its supreme gaming supervisory authority. The Gambling Council passes its resolutions by a majority of at least two-thirds of the votes of its members. The resolutions are binding on the competent authorities. The majority rules of the Gambling Council lead to the legally problematic situation that individual countries are outvoted and their competence in the field of gambling is undermined. Also, a more protectionist stance by various countries often leads to a stalemate that renders the body unable to act. The work of the Council in recent years has been characterized primarily by a lack of transparency. In addition, the Gambling Council has already been classified as unconstitutional in parts of the literature and case law due to a violation of the principle of democracy.

With the new Joint Gambling Authority of the Federal States fully taking over from 1. January 2023, the Gambling Council will formally be abolished.

Passing of new state laws on online casinos

Section 22c ITG contains a so called option model. According to this model, the individual federal states are free to regulate casino table games within their territory. Some have opted for a monopoly solutions, others, like Schleswig-Holstein or Northrhine-Westfalia have opted for a concession model. It is expected that several state laws will be passed to regulate online casino table games in the next years.

Regulatory adjustments on limits and stakes:

Starting 2023, operators can apply for the increase of the cross-provider deposit limit and the current one EUR max stake per spin for virtual slot machines.

The evaluation and interim report to the ITG will be key in detecting risk factors for the market and industry in Germany. However, current regulatory developments, in particular wagering and deposit limitations, complex technical compliance requirements and the tax rate on slots, casino and online poker pose a challenge to compliant operators and have the potential to cause a consolidation of the regulated market. The success of the regulated market will also strongly depend on the authority’s success in combatting illicit gambling, in particular black market operators outside the EU.

With the right incentives, the German gaming market has the potential for long-term and significant growth. The shift of the gambling market from terrestrial to online gambling is expected to continue. The abolition of the controversial Gambling Council and the transition to new regulatory bodies offers the opportunity for a new, constructive exchange between industry, regulators and player protectors.