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Schleswig-Holstein turns villain….or does it?

12th June 2012 8:45 am GMT

The gaming industry has had one helluva comedown in the past week following the euphoria of the first German gaming licences being issued by the state of Schleswig-Holstein just one month ago.

In summary, Schleswig-Holstein has a new coalition government and unlike the old one, it really is no friend of the i-gaming industry. Well, that would be the immediate reaction to the new coalition agreement, which expresses a desire to join the State Treaty, junk the recently-implemented gaming regime and cancel all licences.

Of course the truth – as ever – is a little more nuanced than that. Actually, it’s a lot more nuanced than that.

Of most importance to the lucky seven, who already hold licences – that’s bet-at-home, Betfair, Bet365, bwin,  Jaxx, NordwestLotto and Tipico – is the belief of those on the ground that the recently-issued licences will not be cancelled.

That is Jaxx CEO Mathias Dahm’s reading of the situation – both from the wording of the coalition agreement and from his inside knowledge of the personalities and politics of the new government.

The coalition’s new finance minister, Monika Heinold of the Green Party, has always maintained that she would do nothing that would cost the State money. Easily said in opposition but as Dahm and his counterparts at Betfair et al would likely pursue a seven figure compensation claim, Dahm is fairly confident that is not a route the government will go down.

On that basis it is probably arguable that the 41 other operators to have applied for a Schleswig-Holstein licence could also mount a legal claim for compensation. However, we must remember that Dahm is very aggressive. He has fought over 100 cases on these issues and will not stop until we have a free market in Germany.

We can only salute him for that. He is a fantastic ambassador for the industry. He is a fighter but not without charm. He seems to know the local politicians well and he seems to have played the political game well despite his aggressive approach. It’s not an easy balancing act.

However, Dahm has to be an optimist. He has also had a friendly government until now. For one that has come this far, defeat is not an option. For others, with less long-term strategies, a tactical withdrawal should not be eliminated. Because, like in the US, recent progress could prove an illusion.

It is almost painful to start discussing the possible outcomes such are the numerous variables when dealing with the local political situations in 16 different states and at a federal level. In simplified blog-friendly terms, this is the situation as it stands.

“The goal of the government is for Schleswig-Holstein to join a nationwide gaming regulation,” said the coalition agreement. However, the nationwide gaming regulation (the State Treaty) is in the midst of a crucial fortnight.

It needs to be ratified by the parliaments of 13 of the 16 other German states by the end of June and if they don’t then the whole thing will be stopped. Generally, the parliaments are in favour but it also needs agreement from the federal government. This is not a given.

The states only have until June 15th to ratify their laws. As far as I understand it, Schleswig-Holstein is not in a position to vote on it now because it has its own law and North Rhine Westphalia is not either because it has just had an election and probably does not have the time to do it. So that means that 13 out of 14 states need to get it ratified in the next two weeks.

It is going to be a tricky exercise to pull off. Unlikely yes, but not impossible. If they do pull it off then we will have a new State Treaty from July 1st and Schleswig-Holstein will try and change its own law later in the year.

“It would be a good idea if Schleswig-Holstein tried to move the seven licences that they have already issued into the pool of 20 licences that will be issued by the State Treaty,” says Dahm, when asked to speculate on the possibilities.

A good idea maybe, but even if it could be done without legal challenges, the taxation regime of the State Treaty will be ruinous to online operators. It will be France all over again.

If the State Treaty is not ratified, there is nothing for Schleswig-Holstein to join and its existing law will stay in place for the time being. The states will have to start negotiations on a new Treaty. The new Schleswig-Holstein coalition government will have to consider how to proceed bearing in mind its desire not to open itself up to a slew of lawsuits.

An initial reading of the coalition agreement, which has now been ratified by all three coalition parties, would suggest the government is opposed to online gambling. However, it is understood that there are influential politicians that are more pragmatic.

Back to square one in some respects but with the precedent of licences and a law in place, which could yet prove influential.

By the end of this week, the murky status of the State Treaty should be clearer. To these eyes, this market looks like staying grey for a while yet.


sah@gamingintelligence.com

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