Ambiguity About Enforcement Worries German Licensing Applicants

May 27, 2022
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​​​​​​​Questions surround the two-stage assumption of power by the planned German “super regulator”, including whether would-be online slots and poker licensees are at risk of enforcement after the regulator gains website and payment blocking power on July 1.

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Questions surround the two-stage assumption of power by the planned German “super regulator”, including whether would-be online slots and poker licensees are at risk of enforcement after the regulator gains website and payment blocking power on July 1.

Applicants for virtual slots and poker licences have been operating under a toleration agreement announced in October 2020, which asked them to meet standards that will become requirements under licensing, such as €1 slots stakes and five-second delays between slots spins.

But a recent statement by Benjamin Schwanke, co-director of the planned regulator, the Joint Gaming Authority for the Federal States (GGL), has left online gambling officials guessing.

Asked about the toleration agreement, Schwanke said that he believed that the so-called white list, or list of licensees, was paramount, or a suggestion that only a licensee is safe from enforcement.

The problem is that almost 11 months into slots licensing, only one applicant is on that white list: a company called Mernov, which industry executives believe is a joint venture between gambling giants Gauselmann and Novomatic.

That would leave the other 57 virtual slots applicants and eight poker applicants wondering whether they should shut down to avoid enforcement and potential disqualification from the licensing process.

“Does this [statement] mean the transitional regime is over?” asked attorney Joerg Hofmann, speaking at the iGaming Germany conference in Berlin this week. “This makes no sense.”

The industry urgently needs clarification, he said.

“I don’t think it will be as bad as this sounds, it’s probably a misunderstanding,” he told the audience. “But enforcement starts July 1.”

Schwanke’s statement was in response to questions at a May 18 meeting of the German Sports Betting Association (DSWV) in Berlin, a meeting at which GGL officials discussed possible cooperation with the trade group.

Attorneys have noted that the transitional rules, or the so-called circular agreement, have no force in law and may not be binding on the regulator.

The GGL has not responded to emailed requests for clarification on how it views the toleration agreement, which was negotiated by the heads of 16 state chancelleries.

Hofmann said the regulator’s statements were confusing for members of the industry, who have been looking forward to the new agency cracking down on operators that clearly have no intention of applying for a licence, rather than those waiting to have applications approved.

“Anything that endangers this agreement goes against the spirit of the transitional regime,” he said.

But the authority currently in charge of sports betting, Hesse’s Darmstadt Regional Council, has been bombarded with more than 100 lawsuits over provisions in the gambling treaty, such as an extremely limited menu of permissible bets.

Executives predicted a similar fate for the GGL, if those who have already applied for a licences from last July find themselves not only without a licence but also at risk of enforcement.

“They will have lawsuits ready to go at 12:01 (AM) July 1,” said Tal Zamstein, managing director of Löwen Play Digital.

An intensely complicated era in German gambling regulation will continue until at least January 1, when the Saxony-Anhalt-based GGL is meant to assume full powers.

The Darmstadt council has been overseeing sports and racing bets and the Saxony-Anhalt administrative office has been reviewing virtual poker.

Licensing decisions by both need to be approved by the Gambling Committee — a body with representatives from all 16 states — alongside both industry officials. At least one government official has voiced frustration at the committee’s tight rein on regulation.

Industry officials have said they believe another half-dozen online slots and poker applications have been approved by both Saxony-Anhalt and the committee, and are hoping they will be announced shortly.

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