14.07.2020

by Maarten Haijer, Secretary General, European Gaming and Betting Association (EGBA).

As the discussions continue on Germany’s online gambling reforms, the European Gaming and Betting Association (EGBA) urges Germany’s policymakers to simplify the country’s complicated policy framework for online gambling. Germany is one of the very few remaining European countries which has no properly functioning online gambling market yet, and the new State Treaty must fix this.

That is why EGBA fully supports the government’s efforts to establish a new gambling policy and we welcome progress towards developing a functional and effective online gambling regulation. However, with less than 50% of the country’s online gambling activity currently taking place on offshore websites, re-regulation will not be an easy task.

The starting position of Germany is so bad that, in 2017, the Düsseldorf Institute for Competition Economics (DICE) predicted that the country had a “channelling” rate of only 1.8% (e.g. 1.8% of online gambling activity in Germany took place on websites which are licensed in Germany), compared to 95% in UK and 90% in Denmark.

At least this makes the priority for the new policy clear: channelling. The new policy can only be effective if it ensures that gambling websites licensed in Germany are more attractive than those outside it – so customers will play on these websites rather than unlicensed ones. This requires the new policy to meet the customer’s needs by ensuring there is sufficient choice in the market – including brands, products and bet offerings.

That is why the policy measures currently on the table are highly questionable.  They are overly prescriptive and introduce restrictions which are not evidence-led. The combined effects of the proposed restrictions on player accounts (e.g. deposit and time restrictions), on products (e.g. the ban on online casino is not fully lifted) and on bet types (e.g. live betting will be banned), jeopardises the task of achieving a high channelling rate and sets the scene for continued political and legal challenges.

The biggest threat to the success of the new policy remains the piecemeal approach towards the regulation of online casino. The decision to leave this to the Lander will not only create mini-casino markets, with varying degrees of channelling, but it will also lead to gambling regulations which are inconsistent. This has also been the opinion of the European Commission who previously questioned whether the cumulative effects of the limits and restrictions to Germany’s betting program would enable a sufficiently attractive product range to achieve a high channelling rate.

We have had proper regulation of online gambling in Europe for well over 10 years now and it is time Germany got its house in order as well. It is in everyone’s interest to introduce a law which ensures high channelling rates, long term regulatory stability and a fully functioning market. This requires 3 essential ingredients.

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Firstly, the consumer needs to have choice – and they need to have value. These are ultimately the essential drivers of any consumer-driven market, including the online gambling market. Gambling is human behaviour and players will “shop around”, for their favourite brands, products, or the most competitive betting odds or bonuses.  Even more so in an online environment, where choice is freely available regardless of whether the website is part of a regulated market or not. Putting up artificial walls or ‘top-down’ regulations does not work, the most effective policies are those which flow from what the consumer wants.

Secondly, the government should create a proper regulatory framework for the country’s online gambling market. This is currently not the case. Only within a functional regulatory framework can the legislator set a high level of consumer protection for German players. Part of this framework must also be a licensing procedure that is clear, transparent and predictable, so that companies that want to obtain a license, or have obtained a license, know what they need to comply with, and are able to build a sustainable relationship with their customers.

Thirdly, companies need to be able to turn a profit to make them able to stay in the market. The two points above both rely on this. If the tax and regulatory burdens are too high, companies will not enter or stay in the market, particularly when there are already other restrictions in place which will reduce their revenues. More companies in the market mean more choice for the consumer and more tax revenues for the state. The licensing system needs to be simple and consistent but the proposal to allow opt-outs for Lander on the licensing of online casino puts this in jeopardy.

Policy consistency is really the key concern for many companies who are interested to operate in Germany. It is also why EGBA welcomes the proposal to set up a central regulatory authority. Having a functioning market authority is important for any sector, not least for a highly regulated sector like online gambling. It is indispensable to have one central authority which will interpret, apply and enforce the rules in a consistent and fair manner. Licensed companies need to be able to communicate with the authorities about their license and its requirements, and for this, a centralised authority is key.

We all want to see a properly functioning regulatory framework in Germany and now is a perfect time for policy makers to make a clean break from the failings of the current system and introduce a modern and well-functioning regulation. This regulation should be evidence-led and put the customer’s rights and interests first. The best way to do this is to provide a full gambling offer to provide customers with the choice they look for, the state the oversight and revenue it requires, and companies the opportunity to provide their services in a sustainable and responsible way. This must be the goal, and looking across the rest of Europe, it is certainly achievable.

*This article appeared in the latest edition of Gaming in Germany‘s newsletter.