German Regulator Targets Lottoland, But Offers Reprieve To Pending Applicants

July 11, 2022
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Germany’s new federal regulator has waited less than two weeks to take its first enforcement action, as it moves against Lottoland, but clarity on its plans to combat the black market will be a relief to operators that have applied for a licence.

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Germany’s new federal regulator has waited less than two weeks to take its first enforcement action, as it moves against Lottoland, but clarity on its plans to combat the black market will be a relief to operators that have applied for a licence.

In a press conference on Friday (July 8), the Joint Gambling Authority of the States (GGL) said it was beginning the process to block websites belonging to lottery betting company Lottoland.

“The network of companies, which operates under the name Lottoland, has been offering illegal gambling for years,” it said in a statement.

The regulator said that Lottoland’s offer was particularly dangerous because players may believe they are taking part in an actual lottery, rather than betting on the outcome of a draw.

Taking its very first enforcement action since it came into partial control of the German market on July 1, the regulator said it would IP block the offending Lottoland URLs. The three websites to be targeted are www.lottoland.com, www.lottohelden.de and www.lottohelden.com.

In a statement, Lottoland said it would fight the blocking orders in court. The operator is “defending itself” against the plans of the GGL and argued that website blocking was “generally prohibited vis-à-vis providers within the scope of protection of the free movement of services in Europe”.

The lottery betting company said it had pending applications for licences in Germany and was seeking to be regulated.

"It is obvious that the state-owned GGL wants to create facts on behalf of the state lottery companies and federal states in order to protect the ultimately remaining lottery monopoly and to eliminate competitors in the lottery sector — for purely fiscal reasons," said Laura Pearson, VP of corporate affairs at Lottoland.

Lottoland already has pending legal judgments in courts in Darmstadt and Hanover, as part of its long battle against the various state-owned lottery companies in Germany.

Application protection

On Friday, officials also laid out their general plan for enforcement action, including the promise that those who have not applied for a licence will be the first to be targeted.

Germany’s slow pace of awarding licences, particularly for virtual slots games, has left many operators technically in breach of the law, even though they are voluntarily complying with various stringent requirements in advance of being awarded authorisation.

The country’s Gambling Committee, a group of 16 state regulators, fanned the flames earlier this month when it warned that all those offering gambling in Germany without a licence from July 1 would be fair game for enforcement.

But GGL board member Benjamin Schwanke said: “For us, the priority in combating the black market is enforcement against providers who are not willing to regulate.

“We will remove players from the market who do not comply with the rules of the State Treaty on Gambling, who have not applied for a licence or who have been rejected. Criteria for prioritisation in implementation include market size, awareness and advertising behaviour/volumes.”

The regulator is also launching a whistleblower system to report gambling companies that are offering illegal gambling or advertising for illegal gambling.

In addition to IP blocking, the GGL laid out three other enforcement tools it plans to use against the black market.

The regulator said it will order payments companies to block transactions to illegal operators, report firms to the tax authorities for unpaid taxes and recommend criminal charges to law enforcement agencies.

“From our point of view, the reporting of gambling providers to the responsible tax authorities is one of the most effective instruments for combating illegal gambling on the internet. Because with tax debts, the probability of obtaining a permit in the future is close to zero,” said Schwanke.

The official added that it hopes payments companies will comply with blocking requests when asked, but noted the GGL does have the power to take administrative action to compel them to comply.

“The prerequisite for combating illegal gambling on the internet is the creation of a legal market. Our goal is to ensure that the business model of offering illegal gambling on the internet is not worthwhile in the long term,” said fellow board member Ronald Benter.

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