Schleswig-Holstein Issues First Online Gambling Licenses

We got news on Friday that Schleswig-Holstein (one of sixteen states of Germany) had just issued its first three online gambling licenses (for sports betting). Forty other applications, partly for online sports betting, but also for online poker and casino games, are said to be in the pipeline. So far so good and not overly interesting, but look into the details and the matter becomes more intriguing.

Gambling law in Germany is a tricky affair: It’s a state matter, which means that the federal parliament is barred from regulating this sector. In order to avoid legislative fragmentation, however, the German states entered a few years ago into an Interstate Agreement on Gambling (Glücksspielstaatsvertrag) thereby providing for a uniform law on gambling that applied in all over Germany. Which sounds like a reasonable idea was struck down two years ago when the European Court of Justice (ECJ) (I’d say: correctly) held that the interstate agreement was in violation of European law as it provided for an unjustified, since disproportional, government gambling monopoly. Last year then, the state governments attempted to address the ECJ’s concerns (or, at least, claimed to address them) and drafted a new interstate agreement.

However, one state decided to part with the others: Schleswig-Holstein.

This state considered the new interstate agreement still violating EU law. It argued that it still provides for a monopoly that is too far-reaching to be permissible (and the EU commission agreed just weeks ago). And so they proceeded to pass their own gambling state law. Under this law, any gambling establishment may apply for a license, with no restrictions on the number of licenses that can be issued. There might be other reasons for Schleswig-Holstein’s decision to veer away from the other states – in particular to get a good share of taxes by attracting gambling providers – but their legal arguments are certainly not without merits.

However, the state’s power is limited. And actually, all licenses issued by Schleswig-Holstein can only be effective for the territory of the state itself. Which is not that big (it’s smaller than the Krüger national park in South Africa). Therefore, under the state gaming law, online gaming services may only be provided to customers with a residence in Schleswig-Holstein. It will be interesting to see, how companies will make sure this restriction is met, and how strict the state agencies will monitor gaming providers’ compliance.

There is another twist to the story: Yesterday was an election in Schleswig-Holstein, and it looks likely that the former opposition, which had voted against the state’s outsider decision, will form the next state government. They have threatened to reverse the gambling legislation and revoke all issued licenses. But let’s see if this will in fact happen, considering the potential legal recourse the license holders could have.

 

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