The German state of Hesse began preparations for the issuance of sports betting licenses, by imposing a restrictive operating model that threatens to withhold up to 70% of the revenue generated by authorized sports betting operators.
The licensing rules for sports betting that were agreed by the German states have raised concerns in the iGambling industry because they mean a big financial blow. The licensing process will begin in January 2020 and will even cover current licensed operators.
During an informal meeting that brought together two hundred sports betting operators and representatives of the gaming industry, the German state of highest judicial authority in Hesse (the Darmstadt Regional Council) explained how the sports betting licenses will be granted and the requirements to obtain them.
The legislation will be temporary, as it will only be in force for a year and a half from January 2020. Subsequently, a permanent model will be developed to replace the existing State Treaty, as well as the liberal normative framework of Schleswig-Holstein.
The Treaty was signed by the Minister-Presidents of each of the 16 federal states of Germany, but for its entry into force it must be ratified by all state governments before December 31 of this year.
Interested game companies must submit a new license application, whether they have a previously approved one or not. Applications that meet all the requirements will be processed from January 2 of next year.
Then there will be an initial evaluation in which the Council could request additional information or documents, before initiating an in-depth investigation into the applicant for the operating license.
At the time of receiving the license, applicants or authorized operators must close all non-sports betting activities that are open in the market. On the other hand, gambling bets will not be allowed and a 5% revolving tax will be charged on the licensee’s turnover.
In addition, customers will have a monthly spending limit of € 1,000 and operators must enter an in-depth social responsibility plan (‘Sozialkonzept’). That is, a specific plan to ensure that customers bet responsibly, according to the particularities of each business.
The requirements include being integrated into the national OASIS self-exclusion system, training company personnel and adopting addiction prevention measures. To announce the operators must apply for another advertising license, from the government of the district of Düsseldorf in Nordrhein-Westphalen.
The options for operators
On these licensing rules, Regulus Partners said that operators will have to deal with significant structural problems in their business and predicted that Germany would be “very unlikely as a profit center for anyone.”
According to Regulus, operators will have three options. The first is to comply with the State Treaty, although it’s wagering revenues fall by up to 70% and wait until July 2021 for the approval of a more favorable regulatory system.
The second would be to only partially comply with these agreements, accepting the betting license but ignoring the prohibition of games in order to maintain the winnings. But this seems unlikely with the preparations of Hesse and Niedersachsen to defend the Treaty.
A third option, suggested by Regulus, is for operators to continue their dot.com operations and challenge the Treaty.
“This would be tempting and I could expect to play a long game while keeping revenue at least until 2021 with some level of legal coverage.”
The danger is that problems would be generated in US and UK jurisdictions, surely leading to the loss of operating licenses in these markets.
For the time being, operators and suppliers in Germany, as well as high rollers, will have to prepare to suffer large losses of short-term income, Regulus concluded.