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Affiliates in Germany will have to “decide which side of the law they are on” in 2023, as lawyers say they expect advertising pressure on operators to tighten from next year.
Online sports-betting licences in Germany are set to expire at the end of this year and their renewal will be timed with the full launch of the country’s nationwide regulator.
A new authority, based out of Saxony-Anhalt, will take over limited oversight of the market from this summer and be fully up and running from the start of next year.
Matthias Spitz, a partner with MELCHERS law firm, said that current sports-betting licences are light on advertising rules and noted that affiliates still active in the German market are in some cases directing traffic to both the licensed and unlicensed portions of the market.
Speaking at an event organised by Malta-headquartered law firm WH Partners, Spitz said he expects pressure to ramp up when licences are renewed at the end of this year.
“I’m 99 percent sure [the regulator] will include much more detail on advertising,” he said.
In particular, there will be demands on operators to only work with affiliates that steer clear of the black market.
“I think there will be more pressure on affiliates to decide which side of the law they’re on,” said Spitz.
The situation, he added, could resemble the UK in 2017, when the Gambling Commission began punishing operators for the actions of their affiliates, prompting a radical shake-up of the market.
Despite the approval of a new interstate treaty in 2021, after years of negotiation, numerous questions about Germany’s online gambling scene remain unanswered.
In particular, a 5.3 percent turnover tax for online slots is a constant source of woe for operators.
Attempts to challenge in court the same tax rate as applied to sports bets ultimately failed, but Frieder Backu of law firm Witzel Erb Backu & Partner said there was some hope that challenges of the slots version could be more successful.
In particular, because the high rates have pushed return-to-player figures much lower than those still available on the black market.
No proceedings have yet been launched, but “there will certainly be cases against the new tax regime”, said Backu, although he said whether or not they would be successful was highly uncertain.
A lack of consistency across different gambling products may also help convince judges that changes are needed, added Spitz.
“We hope they continue this nonsensical strategy,” he said, wryly. “That will make it easier.”
Germany’s system for digitally tracking players may also run into legal trouble, predicted the two lawyers.
All operators are supposed to connect to the database, which will enforce deposit limits across the market and prevent “parallel play” on multiple gambling sites at the same time.
Backu said the system could have come from George Orwell’s 1984 and predicted it could prove incompatible with the EU’s General Data Protection Regulation (GDPR).
“Someone in local government had this idea that we needed strong technical supervision”, but ignored all GDPR concerns, said Spitz.
Malta based-operators present at the WH Partners event also voiced fears about players looking to reclaim losses from Germany’s previous era as a grey market.
Similar challenges in Austria are being overwhelmingly approved by the courts, and lawyers are now transferring cases to Malta to force operators to pay up.
The situation in Germany is more nuanced, however, and although many cases to reclaim gambling losses have been launched, around 70 percent of them are being rejected, said Spitz.
Yet uncertainty remains so long as the cases remain in Germany’s lower courts. The rulings of higher courts could yet open the floodgates.
“It is not yet decided if we will have an avalanche like in Austria,” said Backu.
