## A Pivotal Moment for Sports Wagering in Germany
Matthias Spitz, a partner at Melchers Law Firm, illuminates the recent shifts in the German sports wagering narrative.
The lengthy and convoluted path of German gambling regulations took a sharp turn in 2016. The European Union Court of Justice (CJEU) delivered a significant judgment in the Ince case (C-336/14), favoring gaming operators possessing EU permits. This verdict shook the core of Germany’s restrictive stance.
The CJEU’s position was unambiguous: EU member states cannot sanction sports wagering providers if the market is essentially controlled by a single entity and licenses are unobtainable. This carries particular weight for legal proceedings. This decision substantially bolstered the legal footing of EU-licensed providers operating in Germany without a German permit. The ruling further emphasized the flaws in the German system, where states had not managed to substitute the state’s control over sports betting with a transparent and equitable licensing framework, as mandated by EU law. Despite the licensing process being a fundamental element of the Interstate Gambling Treaty (“Interstate Treaty”), no permits had been granted.
This legal dispute originated in 2013 when a Bavarian local court referred the Ince case to the CJEU. The court questioned the appropriateness of criminal penalties against unlicensed gaming operations. The case centered around Sebat Ince, who encountered criminal charges for running her local betting establishment without a license. This case exposed the discrepancies between German gambling statutes and EU law, clearing the way for a more accessible and competitive sports betting market in Germany.
Prior to 2012, Germany outlawed gaming enterprises, maintaining a government-controlled monopoly. However, a modified Interstate Gambling Agreement in July 2012 opened the door for national sports wagering permits. This initiated a protracted and intricate licensing procedure, riddled with legal disputes.
A lawsuit, presented to the European Court of Justice (ECJ) by a Bavarian court, exposed the defects in Germany’s strategy. The ECJ censured three fundamental matters: the ambiguous and contradictory licensing standards, the favorable treatment afforded to state-run providers, and the utilization of provisional licenses that did not ensure enduring market entry.
This judgment was a substantial setback for Germany’s Federal Administrative Court, which had previously endorsed the restrictive measures. Despite the ECJ’s 2010 “Winner Wetten” decision that deemed the state monopoly incompatible with EU regulations during the transitional phase, the Federal Administrative Court persisted in permitting the ban on private operators unless they fulfilled rigorous prerequisites. This compelled numerous businesses to pursue temporary licenses within a framework deemed insufficient by the ECJ.
German officials lacked the initial authority to grant those permits. This “cavalier” approach, as Advocate General Szpunar aptly criticized it in his 2015 Ince case opinion, did not impress the European Union Court of Justice.
The justices believed that exploiting this legal gray area to rationalize the discrepancy between national control and EU regulations, particularly during a period of impending regulatory adjustments, was inappropriate. They essentially contended that gaming companies shouldn’t face consequences for functioning without authorization when the existing framework contradicted EU law and awaited revision.
Furthermore, the Court highlighted Germany’s failure to fulfill its legal duties. By prolonging the online wagering prohibition without formally informing the European Commission, as mandated by Directive 98/34 for “technical standards,” they caught EU operators off guard. These enterprises merit advance notice – it’s about affording them the opportunity to adjust to evolving legal environments.
Bavarian authorities, recognized for their aggressive tactics, appeared to have miscalculated in this instance. By disregarding the notification requirement, they effectively invalidated their own endeavor to suppress gambling. The Court emphasized that omitting this vital step renders the regulations unenforceable in legal proceedings, especially concerning criminal cases.
## The German Sports Wagering Permit Chronicle: A Tale of Postponements and Impasses
The procedure of granting sports wagering permits in Germany is less a direct undertaking and more a perpetual epic, replete with postponements and hindrances.
Germany’s objective was to overhaul its online sports betting sector by issuing up to 20 national permits under the “trial provision” of the Interstate Treaty on Gaming. This provision, according to the German states, was intended to explore the landscape and assess the consequences of a more liberal market.
However, the licensing procedure, hastily initiated in August 2012, was instantly met with disapproval and allegations of opacity. The European Court of Justice, through cases like the Engelmann case (C-64/08), has determined that awarding choices for such permits must be grounded in unbiased, non-discriminatory standards established beforehand. Regrettably, Germany’s procedure failed to meet these prerequisites, resulting in its suspension by German courts.
Exacerbating the situation, a superior court delivered a harsh condemnation of the procedure. It decreed that the Gambling Board, the decision-making entity within Germany’s primary gambling regulator, had acted unconstitutionally. The court contended that the Board, by interjecting itself between the states and the federal government, had essentially established a “third tier” of authority not acknowledged by the German constitution (Hessian Higher Administrative Court, ruling of October 16, 2015, case number 8 B 1028/15).
As a consequence of these legal disputes and procedural blunders, no permits have been granted to date. It’s noteworthy that the operators who submitted applications for these permits bear no accountability for the flaws of the procedure itself.
The European Union’s highest court, in the matter of Ince, determined that Germany’s framework for licensing sports wagers, implemented via the “experimental clause,” failed to harmonize with EU regulations. The central issue? Germany’s limitations on sports betting conflicted with the broader legal framework of the European Union. Furthermore, because the unlawful state-controlled monopoly remained effectively operational, authorities lacked the ability to effectively curb unauthorized sports wagering.
Notwithstanding this, speculation persists that German regulators are not prioritizing any modifications. This is worrisome because the German sports betting sector essentially operates without constraints at present. However, this recent judgment constitutes a significant victory for sports betting enterprises – it substantially bolsters their legal position.
Matthias Spitz, a partner at Melchers Law Firm within Germany and a fellow of the esteemed International Masters of Gaming Law (IMGL), possesses expertise on this subject.
