Researchers warn German regulator risks being “toothless”

The Gambling Research Centre of the German University of Hohenheim claims “major improvements” are required if the new state gambling regulator to be established under the country's new gambling regulations is to avoid being a “toothless tiger”.

Following the first day of its annual gambling symposium yesterday (4 March), the centre’s chief Professor Tilman Becker noted that the new State Treaty on Gambling (Glücksspielneuregulierungsstaatsvertrag – GlüNeuRStV) would allow for more opportunities to target illegal activity in the country.

However, if this new regime and the regulator tasked with overseeing the market are to be truly effective, further measures are needed to strengthen enforcement powers, Becker added. In particular he set out four key areas for improvement.

First was a call for the proposed regulator to be given the power to issue legal ordinances.

“There are always new forms of gambling with new technical developments,” Becker explained. “Examples would be the use of blockchain technology and artificial intelligence, blurred lines between gaming and gambling, and the spread of internet-based affiliate marketing.”

To ensure the new authority can govern an evolving industry, he said, it should have the power to issue statutory ordinances itself, rather than having to wait for the government to shepherd amendments to regulations through the legislature. While Becker admitted that this was “new territory” for state bodies, giving the authority this ability was “on solid constitutional ground”. Previously the Glücksspielkollegium, the effective regulatory council, was accused of contravening constitutional law in legal challenges by operators. 

Second, he recommended amending regulations to ensure that unlicensed operators were also required by law to pay gambling taxes, something it first called for in November 2019. Becker noted that legal lottery providers currently pay out tax and duties equating to almost 47% of revenue, while sales taxes and levies on land-based casino operators amount to around 52%.

As illegal providers are not subject to gambling taxes or the sales tax on revenue, they are spared a significant financial burden. To change this state of affairs, the federal government would have to amend the race betting and lottery laws to make the tax obligations apply to all gambling, rather than just licensed offerings.

Efforts to tackle illegal gambling could further be strengthened through amendments to the German Criminal Code, Becker continued. Currently illegal gambling is an offence by law, but as the law was drawn up before the advent of widespread online gambling, it does not extend to foreign providers targeting the German market from abroad.

“One problem is that the Criminal Code is limited to Germany, but of course the internet is not,” Becker explained.“The legal situation is complicated, but there are potential starting points, for example if an offer is made in German, or the website ends with a dot.de domain suffix.”

Finally, Becker called for the German federal states to fund continuing scientific research on gambling, to better understand and avoid the risks posed by addiction. He said that by underpinning laws with scientific research, states would be better equipped to tackle not only addiction, but also issues such as fraud, match-fixing and the prevention of gambling-related crime.

“Sensible regulations should be designed on a scientific basis, and continuously, scientifically, evaluated,” he said. “This is the only way to ensure that the measures taken are really suitable to achieve the desired goals.”

He noted that there had been little evidence of state funding for scientific gambling research, and urged other states to follow the example of Baden-Württemberg – where the University of Hohenheim is based – and provide more financing.

This follows the state’s Ministry of Science and its lottery, Toto-Lotto Baden-Württemberg, committing to continuing to fund the Gambling Research Centre. Each will provide €100,000 in annual funding, which Becker said secured the centre’s long-term future.

“With the additional funding for the Gambling Research Centre, the Ministry of Science secures Baden-Württemberg's leading position in scientific research in the field of gambling,” chief of the state’s Ministry of Science, Research and Arts Ulrich Steinbach said.

The lottery’s managing director Georg Wacker added: “The gambling market is changing rapidly. With the additional funding, the Research Centre can further examine these developments.”

Next week promises to be a major moment in German gambling, with the Minister-Presidents of its 16 federal states to meet to finalise the terms of the GlüNeuRStV. It currently contains a number of potentially tricky controls for operators to negotiate, such as a €1 cap on online slot stakes, as well as retaining restrictions on in-play betting first set out in the third amended State Treaty.

This has prompted the likes of operator body the Deutscher Sportwettenverband and the European Gaming and Betting Association, as well as the association of private media businesses Vaunet to propose a series of amendments.

Read leading German gambling lawyer Wulf Hambach’s assessment of the current state of affairs, provided exclusively to iGB, here.