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Kiel Gaming Act gets support from Denmark and from the Liberal Party – Social Democratic Party (SPD) continues its collision course with Brussels

November 14, 2011 News & Reports

By Dr. Wulf Hambach

Copenhagen/Kiel, in October 2011 – Flashback: 17 December 2010 was a cold pre-Christmas day – whilst outside an icy wind blew around the Kiel parliament building, the conservative-liberal coalition government engaged in a heated debate with the social democrats in the plenary hall. The agitated discussion was triggered during the first reading of the Kiel model act, which is based on the Danish model for the regulation of gaming. It was this path-finding look towards the north which the fathers of the Kiel draft, Christian Democratic Union (CDU) economics expert Hans-Jörn Arp and FPD chief strategist Wolfgang Kubicki, were accused of by the SPD. The criticism in the Kiel parliament was that they had bet on a dead horse. The reason: In autumn 2010, the EU Commission had admitted for examination an EU state aid complaint due to the low taxation of online games in comparison to terrestrial games. In this context, the Danish reform project, which had obtained international praise, initially got caught in the web of the terrestrial casino lobby.

Objections of the SPD were swept away by the EU Commission

Ten months later: During a conference in Copenhagen (03/10/2011) http://www.denmarkonlinegaming.com/, organised by the Danish gaming supervisory authority on the topic “Licence Application Proceedings in the Area of Online Gaming”, the institution’s head, Ms. Brigitte Sand, commented with great satisfaction on the recent decision from Brussels – the Commission had withdrawn the complaint of the terrestrial gambling machine industry against the relatively low tax rate of 20 per cent on the gross proceeds, i.e. the tax rate which also is being used in the Kiel model. The EU Commission’s line of argument: High taxes for Danish online providers would undermine the effects of the liberalisation. The Commission held that the low tax rate for online games was to be considered as a state aid, but was in compliance with EU law, as the positive effects of the liberalisation of the market outweighed the associated distortion of competition. Thus: The objections relating to EU state aid law which were raised by the SPD against the Kiel model during the December reading have recently been brushed away by the EU Commission. The head of the Danish authority yesterday used a line of argument which was similar to the one used by Arp and Kubicki, i.e. that the huge black market in the area of online sports bets and online casinos has to be countered by attractive legal offers – this is the only way to effectively channel the gaming instinct towards attractive online gaming offers with modern player protection devices. The providers of online games can now file their applications with the Danish authority up until 17 October.

Back to Germany: Here, it is the Free Democratic Party (FDP party) which advocates the route taken by Schleswig-Holstein with regard to the regulation of gaming, also in other German states. As early as mid-September, the spokesman for legal politics of the FDP parliamentary party in the parliament of Saxony, Carsten Biesok http://www.carsten-biesok.de, commented on the unilateral passing of a gaming act by the Kiel coalition government by saying that the decision in Kiel was “a clear signal to the leaders of the states’ negotiation teams to finally move up a gear and agree on a new inter-state treaty on gaming”. Should agreement on a new inter-state treaty not be possible shortly on the German state level, Biesok said, the state of Saxony would be forced to follow the example of Schleswig-Holstein and pass its own gaming act.

In a comment in the internet and blog newspaper Freie Welt http://www.freiewelt.net, Christian Dürr, head of the FDP parliamentary party in Lower Saxony, recently put another log on the fire, and demanded that the states no longer block a reasonable solution. “Discussions must take place between all German states”, Dürr said. “Our objective still is a uniform nationwide regulation. We should try to avoid a patchwork of laws. However, if the SPD in particular continues to refuse its consent to a legally safe solution, we will, as a last resort, be forced to give preference to a solution among individual states.” He thinks that the proposed regulations of the other states do not comply with EU law. The EU Commission criticised the latest suggestion of these states as recently as in July 2011. This is why the concept will have to be revised. The Schleswig-Holstein act, on the other hand, has been given the go-ahead.

Regulatory politicians demand: Online poker must be retrieved from the grey market

Dürr says that some homework has yet to be done with regard to regulatory politics: “The tax rates must be designed in a manner which allows companies to work profitably. We intend to make providers leave the grey market and establish themselves legally in Germany. France has shown how it doesn’t work: In that country, the model failed due to excessive tax rates and a wrong basis for the calculation of the tax. We also think it is reasonable to retrieve online poker from the grey market as well, and to allow legal offers.” He says that in the past the liberals have always argued from a regulatory policy point of view, and will continue to do so. “This topic is not about developing a sharper profile, but about a reasonable solution for consumers and, ultimately, also for taxpayers and charities”, Dürr stresses.

The newspaper Chemnitzer Freie Presse http://www.freiepresse.de  reported some time ago that, in the “race for the betting millions” in Germany, the liberals in Saxony are prepared to break up the uniform route taken by the states, and to follow their own paths. This is not surprising, as the Kiel act is clearly more liberal than the new suggestions which were discussed during the annual conference of the state secretaries in Quedlinburg at the end of September. Casino games, including poker, are, for instance, intended to remain prohibited. However, according to the FDP legal expert Biesok, there is no reason “to fall behind the level set by Schleswig-Holstein”.

If nothing is changed in the gaming draft with regard to online poker, the finance ministers of the states will allow the billions of turnover forecast for the future to bypass the German treasury, as they are in an area of illegality and a grey market. A regulation of the market may curtail the proliferation in this area. For this purpose, certified providers and clear rules are required. From the point of view of regulatory politics, the only convincing regulation is the Schleswig-Holstein act for the revision of the inter-state treaty on gaming. A glance across the border to neighbouring countries shows that this can initially only be a – doubtlessly important – step in the right direction. In August last year, the Dutch government commission explicitly advocated the legalisation of online poker. The legalisation and regulation of online poker is even more important than the legalisation of sports bets. According to the expert advisory committee for games of chance on the internet, the legalisation should be limited to poker, as poker is the only format for which demand exists and which is suitable for such steering mechanisms. Poker is homogeneous with regard to its rules and has a simple tax structure, as the provider is not subject to gaming tax. The addiction risks are smaller in comparison with other casino games.

The fact that most German states are still barking up the wrong tree can be seen in the users’ actual gaming activities. At the moment, they mainly demand online poker and online live bets. This means that it is necessary to channel the gaming instinct in these areas – which after all comprise four million players -, by means of legalisation and regulation. The plans suggested by the SPD to furnish existing German casinos with licences for online poker are unrealistic. Casinos have their strengths in the offline area. However, only providers with international experience and a global background, such as Pokerstars, have the technical know how and years of market experience in order to be able to present good offers for which there is demand in the online community.

When at the end of October 2011 the Minister Presidents of the German states meet – in Schleswig-Holstein of all places – in order to consult on the topic, the spirit of Denmark and Kiel should guide the fortunes of the heads of the states regarding the revision of rules for online gaming: The head of the Danish authority commented on the request by the monopolists to ban online poker (with so-called international liquidity): “Our players would not be pleased with a BAN of their most popular games.”

Source: iGaming Business


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