Recent Developments in German Gambling Law

1. Recent Developments in German Gambling Law • Categories of Gambling: Market segments and regulation • German Interstate Treaty on Gambling • Recent Developments

2. Categories of Gambling: Regulation • Gaming Machines: • Gambling machines (Geldspielgeräte) in amusement arcades and restaurants are regulated by federal law by means of the § 33 Commerce Regulation Act (Gewerbeordnung) and the technical specifications by the Gaming Regulation (Spielverordnung). • Slot machines (Glücksspielgeräte) in casinos are regulated by the Federal State Implementation Laws (Ausführungsgesetze der Bundesländer) coordinated by the Interstate Treaty on Gambling • States regulate casinos by their Federal State Laws on Casinos (Spielbankengesetze der Bundesländer)

3. Categories of Gambling: Federal and State Law • Gaming Machines: • Gambling machines (Geldspielgeräte): Federal Law • -> Regarded as a commerce law issue • Slot machines (Glücksspielgeräte): Federal State Laws • -> Regarded as a police law issue

4. Categories of Gambling: Availability • Gaming Machines: • 220.000 gambling machines (Geldspielgeräte) in 8.000 amusement arcades and in 60.000-70.000 restaurants and hotels • 8.600 slot machines (Glücksspielgeräte) in 82 casino saloons (Automatensäle) • Source: AWI: Unterschiede zwischen gewerblich betriebenen GGSG und Slot machines in den Spielbanken

5. Categories of Gambling: State Monopoly Lotteries • Lotteries: • State lotteries “6 aus 49” (Super 6, Spiel 77, Glücksspirale) offered by the each of the States • Scratch cards offered by the States • Class lotteries offered by the northern States (NKL) and the Southern states (SKL) • Social lotteries (Fernsehlotterien) offered in collaboration with the public television channels (ARD and ZDF)

6. Categories of Gambling: Availability • Lotteries: • State lotteries including scratch cards offered in 26.000 shops • Class lotteries offered in some of these shops and via mailing by private lottery collectors (Lotterieeinnehmer) and the internet • Social lotteries (Fernsehlotterien) offered at the post offices, banks and some shops and via the post and the internet

7. Categories of Gambling • Casino Games: • Roulette • Card Games (Baccarat, Black Jack, Poker) • Illegal Internet casinos (turnover not known) • ->No legal internet casinos

8. Categories of Gambling • Sports betting: • horse betting offered by private bookmakers • soccer betting offered by the state lotteries (ODDSET) • sports betting offered in about 6000 illegal betting shops (estimated turnover 0,5 to 1 billion Euro) • and via internet (bwin etc.): regarded as illegal in at least some states (estimated turnover 1 to 1.5 billion Euro) • Estimated market share of ODDSET 10% • -> 90% of the market is illegal

9. Categories of Gambling • Contests: • price competition games offered by private television channels (50 cent games) • price competition games offered by companies (in general without charge)

10. contests 0% sport betting 6% casino games 18% gaming machines 45% lotteries 31% The German Market for Gambling: Gross Sales (2005) 31.6 Billion Euro

11. sport betting 4% contests 2% casino games 4% gaming machines 32% lotteries 58% The German Market for Gambling:Net Sales (2005) 8.4 Billion Euro

12. The German Market for Gambling: Recent Developments • Gross sales gambling machines: increase from 2,35 billion Euro in 2005 to 3,25 billion Euro in 2008 (+38%) • Net sales (Bruttospielertrag) casinos in Baden-Württemberg: decrease from 106 million Euro in 2005 to 75 million Euro in 2008 (-29%) • Share of slot machines in casino net sales: 75%

13. The German Market for Gambling:Recent Developments Source: Dr. Norman Albers (Deutscher Buchmacherverband Essen e.V.): Warten auf den Wettbewerb Deutschland im Jahr Zwei des neuen Glücksspielstaatsvertrage: Die Sicht der privaten Sportwettenanbieter

14. Number of Players: TNS Infratest Source: A survey of 8000 people as to their participation in gambling in the last 12 months. See Stöver (2006)

15. Money Spent by Players Source: Own calculations

16. State Revenues: 4.43 Billion Euro Source: Institut der Deutschen Wirtschaft (2006)

17. Interstate Treaty on Gambling • -> Result of the decision of the Federal Constitutional Court on sports betting on March 28, 2006.

18. Decision of the Federal Constitutional Court on Sports Betting: The Case • With an authorisation under the Racing Betting and Lottery Act (Rennwett- und Lotteriegesetz), the complainant ran a betting office in Munich, in which, as a bookmaker, she commercially took and arranged bets at horsesraces. In July 1997, she registered with the State capital, the city of Munich, an extension of her business to arranging sports bets. The city, in consultation with the Bavarian State Ministry of the Interior, refused this, referring to the comprehensive prohibition against public games of chance, which carried sanctions, contained in § 284 of the Criminal Code. • The complainant took legal action against the city at the Administrative Court (Verwaltungsgericht), with the goal of obtaining a declaratory judgment that organising fixed-odds sport bets with the exception of horse-racing bets did not require permission. During the proceedings, she made an application for the grant of permission, which was rejected by the defendant, and she then added to her statement of claim an application in the alternative that the defendant be judicially obliged to grant permission to organise or arrange sports bets.

19. Decision of the Federal Constitutional Court on Sports Betting: The Case • Horse betting is regarded as a commercial law issue and any (reliable etc.) person applying for a licence has a right to get a licence • Other sports betting is regarded as a police law issue and only the Federal States are allowed to offer sports betting opportunities • The Federal States are responsible for education and science and police • Sports betting (except horse betting) is forbidden under the criminal law (Strafgesetzbuch)

20. Decision of the Federal Constitutional Court on Sports Betting: The Verdict • Taking into account the provisos that are contained in the grounds, it is incompatible with Article 12.1 (freedom to choose an occupation) of the Basic Law (Grundgesetz) that under the Act on the Lotteries and Betting Organised by the Free State of Bavaria (Gesetz über die vom Freistaat Bayern veranstalteten Lotterien und Wetten, Staatslotteriegesetz – State Lottery Act) of 29 April 1999 sports betting in Bavaria may be organised only by the Free State of Bavaria, and only bets of this kind may be arranged commercially, and yet the monopoly is not consistently geared to the goal of combating the dangers of addiction. • The legislature is ordered to pass new provisions for the organisation and arranging of sports betting, taking into account the constitutional requirements that follow from the grounds, by 31 December 2007.

21. Decision of the Federal Constitutional Court on Sports Betting: The Verdict • -> The legislature is constitutionally obliged to amend the legislation on the area of sports betting, exercising its framing discretion under legal policy. If the legislature wishes to retain a state betting monopoly, it must orient this strictly to the goal of combating betting addiction and restricting the passion for betting.

22. Decision of the Federal Constitutional Court on Sports Betting: Implications • A state monopoly on sports betting is compatible with the fundamental right of occupational freedom only if it is consistently geared to the goal of combating the dangers of addiction • Not only Bavaria but all other Federal States have similar regulations • The verdict is valid for all the Federal States Lottery and Betting regulations

23. German Interstate Treaty on Gambling • Result of the decision of the Federal Constitutional Court on sports betting on March 28, 2006. • An effort towards a comprehensive and unified framework for lotteries, casino games and betting. • Consistently geared to the goal of combating the dangers of addiction. • Horse racing betting and gambling machines as well as games of skill (contests) and fun games are not covered by the new regulation, but casino games including slot machines are.

24. German Interstate Treaty on Gambling • Commerce Law of the Federal State: Horse betting and gambling machines • Police Law of the States: Sports betting, lotteries and casinos • -> Federal and State regulation authority in conflict

25. Controversy between the Federal States • Against the single vote of the prime minister of Schleswig-Holstein, that is 15 : 1, it was decided to have the Treaty signed by the prime ministers in an circulation procedure at the beginning of year 2008, in order to have it subsequently be notified to the European Commission. • Finally all States signed the German Interstate Treaty including Schleswig-Holstein • German Interstate Treaty in force since 1. January 2008

26. German Interstate Treaty: Provisions • An effort towards a comprehensive and unified framework for lotteries, casino games and betting. • Consistently geared to the goal of combating the dangers of addiction. • Consistent and systematic regulation: Horse racing betting and gambling machines as well as games of skill (contests) and fun games are not covered by the new regulation, but casino games including slot machines are.

27. An effort towards a comprehensive and unified framework for lotteries, casino games and betting State casino laws State lottery laws casinos owned by Federal States German Interstate Treaty Federal State monopolies private casinos licensed by the Federal State Federal State monopolies on sports betting Commercial horse betting Federal horse betting law

28. Consistently geared to the goal of combating the dangers of addiction • Each year about 5.000 persons with the main problem pathological gambling in therapy • Estimated 87.000 to 297.000 pathological gamblers in the German population • Estimated 1.300.000 to 1.700.000 alcohol addicts and estimated 3.500.000 to 5.000.000 nicotine addicts in the German population Quelle: Becker, 2008

29. Gambling Addiction Quelle: Becker, 2008

30. Consistently geared to the goal of combating the dangers of addiction • The category of gambling, id est gambling machines, causing the greatest danger of addiction is not part of the German Interstate Treaty of Gambling • Gambelli decision (67): “First of all, whilst in Schindler, Läärä and Zenatti the Court accepted that restrictions on gaming activities may be justified by imperative requirements in the general interest, such as consumer protection and the prevention of both fraud and incitement to squander on gaming, restrictions based on such grounds and on the need to preserve public order must also be suitable for achieving those objectives, inasmuch as they must serve to limit betting activities in a consistent and systematic manner.”

31. Consistently geared to the goal of combating the dangers of addiction • Several German courts have submitted a request for clarification to the European Court of Justice (Vorabentscheidungsersuchen) • Sport betting companies claim that the German Interstate Treaty on Gabling is not compatible with EU law • German Federal Constitutional Court states in October 2008 that the German Interstate Treaty on Gambling is compatible with the German Basic Law (Grundgesetz)

32. German Interstate Treaty: Provisions • Introducing a distinction between “particularly dangerous” and “low risk” lotteries according to the event frequency (more or less then two draws a week) • Player identification and verification prescribed for “particularly dangerous” lotteries • Education of the staff involved in lottery ticket sales • Mandatory gambling risk information labelling for lottery tickets • Stimulating, encouraging, soliciting advertising prohibited, advertising may inform only to the extent needed for game participation

33. German Interstate Treaty: Provisions • Prohibition of online gaming and betting • Prohibition of television sponsoring and advertising with exceptions for the traditionally broadcasted draw of the lottery numbers and for social lotteries • Blocking of Financial and Internet Service Providers

34. German Interstate Treaty: Provisions • Extending the barring scheme already available for casinos games to casino slot machines and “particularly dangerous” lotteries and sports betting • Information to the public about the risk of gambling • Mandatory information on gambling help hotlines • Introducing an advisory committee (Fachbeirat) and a gambling supervisory body (Glücksspielaufsichts-behörde) • Strengthening the Federal State supervisory bodies

35. Recent developments • Schleswig-Holstein decided on October 2009 to resign the German Interstate Treaty on Gambling and privatize casinos • Selling homes by a lottery designed as a skill game allowed but not as a chance game • Pressure on gambling machines (evaluation of the Gaming Regulation (Spielverordnung) in work)

36. Consistent and systematic regulation: options discussed • Including gambling machines into the state monopoly, id est into the Interstate Treaty on Gambling (Glücksspielstaatsvertrag) • Proposal of the advisory committee (Fachbeirat) to restore gambling machines to amusement machines

37. Proposal of the Advisory Committee (Fachbeirat) • Advisory Committee (Fachbeirat) created by §10 German Interstate Treaty (Glücksspielstaatsvertrag) • Independently advising States on gambling addiction issues • Consisting of experts mainly representing associations providing help for addiction

38. Proposal of the Advisory Committee (Fachbeirat): Restoring gambling machines to amusement machines • Change the Commerce Regulation Act (Gewerbeordnung) • Maximum stake 0,20 Euro • Minimum time per play 60 sec • Maximum loss per hour 7 Euro • Maximim gain per hour 30 Euro • No converting into points • No light or sound effects • Mandatory information on probabilities to win

39. Options discussed • Introducing entrance control for and extending the ban register to gambling machines • Removing gambling machines from restaurants

40. Thank you very much for your attention