Can Hesse serve as the catalyst for change in Germany?20th September 2016 8:29 am GMT
The failure of the German State Treaty on Gambling is clear for all to see, even if this understanding is yet to translate into meaningful action. But the latest move by the state of Hesse may finally bring about change.
More than four years have passed since the State Treaty of Gambling came into force, and it has proved totally ineffective. Operators, legal experts and commentators have raked over its failures many times but we are yet to see the federal government make any meaningful push for change.
A half-hearted attempt to appease at least some applicants by doubling the total number of sports betting licences available under the Treaty to forty has been mooted but is unlikely to appease its critics. German gambling legislation has been stuck in its own groundhog day for years, where experts and politicians call for change, courts admit the legislation is flawed, state lottery body the Deutsche Lotto- und Totoblock (DLTB) disputes this, and the process repeats.
But Hesse has suddenly thrown the other German states a curveball by opening up a toleration process. This is effectively an amnesty for online sports betting companies operating without a licence in the state, allowing them to do so, as long as they pay taxes.
“What the state is doing is saying that legally speaking [offering sports betting] is okay, but they see no need for a detailed tender process,” Wulf Hambach of law firm Hambach & Hambach Rechtsanwälte says. “It’s a way of sending out a signal.”
It is hard not to sympathise with the Hesse Ministry of the Interior and Sport (HMDIS). The ministry was handed responsibility for licensing operators and was expected to handle a process that it did not devise, with staff that had never handled such a project.
HMDIS became a magnet for all the resentment and bad feeling generated by the contentious legislation and licensing process. It did not help itself with a lack of transparency towards operators and media alike, but it was put in charge of a doomed task.
Now the nation’s licensing state looks more like its rebellious northern neighbour in Schleswig-Holstein, which launched its own regulatory regime before pledging to rejoin the State Treaty. Hesse, however, is better-equipped to stand its ground. It is significantly larger with a population around three times the size of Schleswig-Holstein. Frankfurt, Germany’s financial centre, is also within its borders.
Hesse can also take heart from the that fact Schleswig-Holstein is no closer to scrapping its existing, liberal gambling laws in favour of the Treaty. And Schleswig-Holstein has never faced a legal challenge from other states. Yes, this may be a result of its pledge to join the Treaty but the states have not attempted to shut down the Schleswig-Holstein regime. Considering how damaging the DLTB believes liberal gaming regulations to be, it seems likely such action would have been taken if the states felt they had a chance of success.
The parliamentary secretary of Hesse’s Social Democratic Party (SPD) has already accused Christian Democrat Minister of the Interior Peter Beuth of capitulating to illegal gambling. But these may be empty words.
“The state can immediately withdraw the toleration, as they could with a licence,” Hambach says. “What [HMDIS] is saying is that it has been stopped [from awarding licences] by the courts, so it has found a solution.”
Hesse is positioning itself to argue that by opening up the toleration it is simply finding a new way to achieve the goals set out in the Treaty, protecting players from illegal operators and ensuring that they give something back to the community through taxes.
Beuth has also laid out an alternative path with a liberal gaming regime with no limit on the number of licenses or products – described as a “quality, not quantity approach”.
What Hesse has done is serve notice on the other states – start working for change or watch the State Treaty crumble.
“Hesse is likely to exit the current interstate treaty and establish a law for sports, casino and poker if other states are not willing to change,” Hambach suggests. This may happen as early as next year.
Germany’s other states, and the federal government, will be forced to sit up and take notice. Having some form of approval to operate in Schleswig-Holstein and Hesse, taking in over 10 per cent of the country’s population, will give companies a foothold to offer their services into the remaining states. As long as a regime that fails to comply with European Union law remains the alternative, legal cases to date suggest that the compliant system will win.
“They can rely on the Duldung from a criminal point of view,” Hambach explains. “They cannot be criminally challenged if they operate in another federal state.”
Hesse’s actions may not endear it to the other states but in the absence of a viable alternative, it can argue that it is simply doing the best it can. It is achieving some if not all of the goals of the state treaty. It would be foolhardy for any other state to attempt to challenge it on this.