German Sportsbetting: Back to the Stone Age

30 March 2006

The verdict in the German State monopoly case on sports betting has created one big legal turmoil, and it reminds me of the Gambelli case. There also the two main interest groups (European Lotteries/State monopolies and the rivaling crossborder online operators/EBA&RGA) both proclaimed victory. This 24-page verdict of the Bundesverfassungsgericht, the German constitutional court, is like déjà vu. I have seen it before where every interest group felt it was the winner. However, the real winners are the lawyers because the verdict is certain to lead to even more court cases.

The European Lotteries (EL) were by far the first group to distribute a press bulletin. Their heading read: "German constitutional court decision on sports betting in Bavaria a victory for state monopolies. Ruling highlights the role of state gambling providers in preventing addictive behavior."

A little later, the headline of the press missive of the European Betting Association (EBA) read: "Federal Constitutional Court of Germany declares state gambling monopoly unconstitutional and recommends opening up the market to private operators."

Meanwhile, German Gambling lawyer Martin Arendts gives his interpretation of what the Constitutional Court really decided:

-The state monopoly in its current form was clearly held to be unconstitutional. Fiscal reasons, even such as the promotion of sports, can not justify the state monopoly. The current legal situation and exercise is not compatible with the German Constitution.

-The state monopoly can only be justified by effectively fighting gambling addiction, which has not been practiced by the state operators so far.

-The law governing sports betting must be reconsidered and amended until the end of 2007. The amendments do not necessarily have to be implemented by the German states, but may also be implemented on the federal level. The Federation is competent as the case of sports betting does not only concern police law, but also commercial law.

-The legislator may choose between two ways to regulate sports betting. He may either keep the state monopoly, but with clear limitations for marketing and sales, or he may liberalize the market by opening it up to private operators (thus abandoning the state monopoly).

-Advertising for Oddset, the sports betting offer of the state operators, is prohibited for the future, instead only factual information is allowed.

-In the meantime, according to the Federal Constitutional Court, operating and conveying sporting bets may be prohibited.

Arendts also wrote down what the Federal Constitutional Court did not decide:

-The Court did not decide on the question of culpability. During the transition period the decision regarding Art. 284 German Criminal Code ("illegal gambling"), a provision accessory to administrative law, is left to the criminal courts.

-The Constitutional Court could not and did not have the competence to decide on Community law. The primacy of Community law still applies. Nonetheless, the court noted, that operating and conveying sports betting was approved by Community law and could therefore not be reserved to the public authorities. For the rest, the court cited the European Court of Justice, ECJ's Gambelli decision and pointed out that verifying the justification of the state monopoly according to the German Constitution had to be conducted parallel to the verification according to Community law.

What makes the German market so complicated is the holders of licenses issued by the former GDR (East Germany). Martin Oelbermann, CEO of MECN, Media & Entertainment Consulting Network GmbH, has published several studies on the German gambling market and state monopolies. He explains the future status of the 4 private betting licenses in Germany that have retained partial validity because of the Unification Treaty. In addition, there are many brokers brokering to these holders of licenses issued by the former GDR. Whether these licenses are valid beyond their region-- nationally that is-- has already been the subject of legal disputes in the past. And the interpretations of today's court opinion ("that are not organized by the Free State of Bavaria can continue to be considered prohibited and can be stopped by means of regulatory laws") diverge widely. Other interpretations of the verdict:

"The Federal Constitutional Court's decision has no effect on the sports betting business of our German business."

--BetandWin, holder of a license issued by the former GDR).

"The market will not change much."

--(Holger Frister, spokesperson of Sportwetten Gera, license issued by the former GDR).

"In this regard Oddset is particularly pleased that the court has now clarified that the organization of bets by private enterprises and the brokering of bets that are not organized by the Free State of Bavaria will continue to be prohibited and can be stopped by means of regulatory laws."

--(Wolfgang Feldner, marketing director, state monopoly Oddset).

Perhaps the Federal Constitutional Court was not quite sure what its precise wording implied, but licenses issued by the former GDR are not "organized by the Free State of Bavaria" and can thus also be prohibited. If one follows closely the exact wording of the court's opinion and replaces the word 'Bavaria' with 'North-Rhine Westphalia,' one can see that the Federal Constitutional Court today also implicitly restricted the national validity of the licenses issued by the former GDR and has restricted brokering to them.

Wulf Hambach, another German lawyer with several gambling operators in his legal portfolio, does not see a bright future for German state owned sportsbetting. He stated:

The retention of the monopoly can be better equated with the relapse of Oddset into the stone-age of sports betting. After all, it is not Oddset or the sports betting legislature that writes the laws of the sports betting market, rather the sports betting market itself, whether this be the German, the European or the global market. In today¹s media age, a sports betting provider under such strong operative limitations would have severe difficulties surviving.

Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.