The German gambling regulator will probably soon reject licence applications in the interest of speedier processing as it tries to dig itself out of a deluge of paperwork, the agency’s co-chairman has said.
Germany requires online slots games to be approved individually for each licensee or applicant. But many applications are "deficient", which is likely to lead to rejections, said Benjamin Schwanke, co-chair of the Joint Gambling Authority of the States (GGL).
“Hopefully the learning improves,” he said.
The regulator currently has only 75 staff, below its allotted 104 workers, he said.
Schwanke was the keynote speaker at the Gaming in Germany conference in Berlin on Monday (October 16). He spoke in German with simultaneous translation provided.
The regulator has been deluged with lawsuits, which is “to be expected” given that Germany’s interstate gambling treaty needs to be tested in court, he said.
He outlined the GGL’s progress since it became the primary regulator for German online gambling in January 2023. Forty online slots licences, 31 sports-betting licences, five online poker licences and 800 slots games have been approved so far.
The GGL has reviewed 2,500 websites and filed 70 lawsuits and 120 criminal actions against unlicensed operators, Schwanke said.
The unlicensed market is “slowly getting smaller” as the authority puts pressure on payments providers to stop servicing illegal operators.
“We think the legal market is consolidating,” he said.
But that assessment was sharply at odds with that of other speakers, who said there are unmistakable signs that the illegal market is rapidly gaining ground.
A University of Leipzig survey commissioned by the German Online Gambling Association (DOCV) suggests that online player time is only 53 percent with licensed operators and 47 percent with unlicensed, said Dirk Quermann, the trade group’s president.
Offshore operator share of revenue is probably considerably higher, he said.
The results of the survey are “sobering for all of us”, Quermann added.
Tax receipts from online slots have dropped precipitously, and so far there are no licences for online table games such as roulette and blackjack, he said.
Industry-unfriendly provisions of the treaty include a €1 ($1.05) cap on slots stakes, a €1,000 limit on deposits and a limited menu of sports-betting options.
To add an advertising ban to the list, as has been suggested by some politicians, would be “poisonous”, Quermann said.
A €100 annual cap on bonuses that was challenged in court has been suspended pending appeals, gambling attorney Joerg Hofmann said.
And taxes are high. The 5.3 percent tax on wagers amounts to 60 to 100 percent of the more usual tax base of gross gaming revenue, said Pontus Lindwall, chief executive of Betsson.
Sponsorships dropped from 84 to 63 in 2021-22, according to Mathias Dahms, president of the German Sports Betting Association (DSWV). Advertising spending more than halved between 2019 and 2022 to €142m, he said.
With a bigger menu of betting products, individual sports would benefit, the DSWV argues.
For example, the German Rugby Federation has asked to be included as a betting product as it would like to generate income from gambling sponsorships, said Luka Andric, CEO of the DSWV.
A lawsuit settlement should add 200 new betting products each year, but “that is not going to compensate for the massive losses which came in implementing the treaty”, Andric said.
Channelisation, the German gambling treaty’s target of keeping consumers in the legal market, is the “ultimate goal” as it maintains other priorities such as protection of consumers and minors.
But channelisation is failing in Germany, Dahms said.
“German regulation is the strictest we have on this planet,” he said.
Only 41 percent of gross win in 2022 was with licensed operators, said H2 Gambling Capital’s Ed Birkin.
Taxed online slots revenue was down 37 percent in the first seven months of 2023, he said.
H2 conservatively estimates the offshore gambling market to have generated at least €600m in revenue in 2022, compared with a GGL estimate of €200m, Birkin said.
But when using comparisons derived from comparable markets such as the Netherlands, the offshore market could be as big as €1bn to €2bn, he said.
H2 developed a range of estimates for the offshore share of the German gambling market using a combination of tax data, web traffic statistics, operator statements and comparisons with comparable markets, Birkin said.
Changes in the German market are unlikely to come quickly. An review of the gambling treaty is not due until June 30, 2026, with an interim report set for next year, according to Schwanke.
The first online casino table games licences will likely go to state-owned lotteries and casino groups.
Unlike online slots, poker and sports-betting licences, they are approved state by state, and several have chosen to stick with a state monopoly.
So far only Schleswig-Holstein and North Rhine-Westphalia (NRW) have approved licensing programmes.
With NRW, Germany’s largest state by population, looking to set up a system next year, one of the state-owned companies in Bavaria, Saxony or Baden-Württemberg may be the first to offer legal online roulette, blackjack and baccarat in Germany.
Executives of Staatlichen Toto-Lotto Baden-Württemberg and Spielbanken Sachsen & Sachsenlotto, who spoke at the conference, said they are aiming to launch in the first quarter next year.