German Payment Providers Could Cut Off Non-Whitelist Operators

August 25, 2022
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​​​​​​​Operators in Germany that have applied for a new online licence but still have not been added to the federal regulator’s whitelist could be cut off by payment service providers (PSPs) next month, a legal expert has warned.

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Operators in Germany that have applied for a new online licence but still have not been added to the federal regulator’s whitelist could be cut off by payment service providers (PSPs) next month, a legal expert has warned.

Joerg Hofmann of MELCHERS law firm, speaking on a Gaming in Germany webinar, said he has heard that PSPs "are considering" the move, starting from September 1.

A whitelist of licensed operators is available on the Joint Gambling Authority of the States’ (GGL) website and was last updated on August 19, 2022.

Any such move by payments firms would effectively call an early end to the transitional regime, which has allowed companies abiding by Germany’s tough new online rules to remain active in the country while they wait for their licences to be processed.

“This would ignore the currently existing category of operators still participating in the licensing process,” Hofmann later confirmed to VIXIO GamblingCompliance.

“The transitional regime [should serve] precisely to protect operators willing to be licensed. This also applies to their cooperation with payment service providers and software providers,” Hofmann said.

A “de facto toleration” agreement signed by state officials in 2020 should allow former grey market operators yet to have their licences issued to continue in the market until the end of 2022, after which time the GGL will make a call on how to proceed, said Hofmann.

There are currently 34 sports-betting licensees, but for virtual slot machines and poker only eight operators have been added to the whitelist since new rules took effect in July 2021. More approvals are believed to be in the works.

The biggest challenge facing operators that are currently in the process of applying for a licence is now to ensure they get one before the end of the year when the pseudo toleration period looks set to end for good, said the panellists.

Operators need to make sure “documents, certificates, etc. are already sent off to the regulator. Also, it is best to stay in contact with your case handlers, as they are willing to help and can save you a lot of time. This is the best way to proceed,” Hofmann said.

Hesse’s Darmstadt Regional Council, which is reviewing online sports-betting applications, and the Saxony-Anhalt administrative office, which is reviewing online slots and poker applications, can have their decisions delayed or overruled by the Glücksspielkollegium (Gambling Committee), which has representatives from all 16 German states.

There are currently two sports-betting licensing regimes.

One started in 2020, and some operators that applied under this old regime are still waiting for their first licence, which will then need to be extended ahead of the second licensing regime. The licence will last a period of five years.

However, the federal regulator is still not yet fully staffed, according to Hofmann, which “can be another reason for delays”.

The GGL will take control of licensing on January 1, 2023, having begun oversight of enforcement in July.

The regulator can implement IP blocking, payment blocking, criminal sanctions or start investigations.

“The authority needs to deliver success or the black market will be too strong, as licensed operators are having to pay high tax rates as well as having to deal with other restrictions,” Hofmann said.

Once operators do receive their licence, they then must also get a separate licence for each individual game they offer, even if they are online slots firms with hundreds of games.

“It's a double permission system and every single game must be approved. This does not happen via certification. This could explain why we are having delays with slot licences,” Hofmann said.

Looking ahead, Hofmann predicted that the biggest upcoming challenge for operators in the German market will be complying with the controversial LUGAS IT system, which will allow players to be tracked across multiple operators.

The system will track a mandatory deposit limit of €1,000 per month across all operators. After that, players can request to set a personal deposit limit, which is only valid with the operator that agreed to it.

Hofmann explained that operators are still waiting to see the technical standards associated with LUGAS and that the “safe server” should be ready next year “but the IT structure is not ready yet”.

Germany is regulated by a complex framework of federal and state laws.

The implementation of the 2021 Interstate Treaty on Gambling allowed operators to offer online slots and poker on a federal level for the first time, in addition to the already permitted sports betting.

The treaty provides for a general gambling legal framework nationwide; however, states are allowed to enact more stringent requirements when implementing the treaty.

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