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One Country, Two Sets of Laws – Sports Gaming Summit at Schwielowsee: Gaming providers expect a chaotic year – will further federal states follow the Schleswig-Holstein model?

March 21, 2012 News & Reports

Potsdam/Werder, in March 2012. One question has continuously been hovering in the background: What will Brussels say? Anticipating a statement from the European Commission on the so-called E-15 Draft for a new inter-state treaty on gambling (GlüStV) which has been initiated by all German federal states with the exception of Schleswig-Holstein, more than 100 top representatives from the gaming sector, media and sports met at Schwielowsee near Potsdam for the Sports Gaming Summit organised by the trade magazine Sponsors http://www.sponsors.de to discuss the current market and legal situation.

Whilst Schleswig-Holstein, with its gaming act (GlüG) – which has already been approved by the EU Commission – places the focus on a liberalisation and simultaneous regulation of the market, and on regulating by law the revenue for organised public sports, is currently still working on the specific design of a supervisory regulation and will shortly issue the first licenses, the draft prepared by the other federal states sticks with restrictive regulations, for instance completely excluding the online poker market and casino games, and providing for an arbitrary number of licenses to be issued to gaming providers. The original draft provided for seven licenses, the second draft provides for 20 – one country, two gaming law regimes. The majority of the participants expressed their concern that Germany will, in the near future, probably not be able to establish a nationwide gaming law regime which complies with European law. Dr. Henrik Bremer from the law firm Bremer Grimm Heller said that it can be expected that the first licenses with a term of six years will doubtlessly be issued in Schleswig-Holstein before the state elections, once the conclusive administrative preparations have been completed.

E-15 Draft: a poisoned system

In view of the present developments, the industry expects “A Year of Chaos”. This is how Jörg Wacker, director of bwin, expressed his expectations. The spirit of the E-15 Draft was characterised by Dr. Wulf Hambach, founder and managing partner of the Munic law firm Hambach & Hambach http://www.timelaw.de as “not even with regard to its concept being suitable to actually generate competition, due to the original parameters of the enormous tax burden of 16.67 per cent on turnover, and seven licenses.” Hambach referred to the Draft as a “poisoned system” under which providers will be not able to operate, and create profitable offers. This is the exact draft act for which the federal states were already shown a red card in the summer of 2011. In the wake of this decision, neither the deadline set by the EU for a revision, 18 August, was met, nor was the new draft, which was submitted at the end of the year, competitive, as the system, and thus the “spirit of the act” remained unchanged. Furthermore, it is a questionable procedure to submit a new draft in the course of ongoing notification proceedings. Hambach also criticised the course of action of the federal states who had presented their original draft in Brussels without the legislative reasoning. As Brussels will not change the traffic lights to green for the E-15 Draft, the situation will probably soon become even more obscure: In a note to protocol on the E-15 Treaty, Hesse and Lower Saxony made their approval of the E-15 Treaty subject to a “conclusively positive assessment” by Brussels. The act prepared by the CDU and FDP parties in Kiel, on the other hand, is designed in a manner to ensure that it can be incorporated into an inter-state treaty on gaming with the other federal states. The announcement made by Martin Staelmeier, head of the office of the Rhineland-Palatinate Minister President, in August, stating that the E-15 Treaty will have been signed by Easter 2012, has already been overtaken by reality.

In Hambach’s opinion, the technical challenges associated with the Schleswig-Holstein model in view of the frequently expressed concerns regarding an increase in money laundering, are certainly manageable. At the Sports Gaming Summit, Burkhard Ley, director of Wirecard Bank which as a universal bank is controlled by the German financial services authority (BaFin) and has developed technical mechanisms serving to prevent money laundering and fraud in electronic payment transactions, explained the technical possibilities for the prevention of manipulation, money laundering and addiction risks. The regulating executive order in Kiel provides for online gaming providers being obligated to process electronic payment transactions via a universal bank. According to Hambach, this means that BaFin is also involved. “A higher level of money laundering prevention cannot be achieved.”

Legal guarantee: Public sports will benefit

Dr. Dirk Quermann, CEO of the Gauselmann subsidiary Merkur Interactive GmbH, views the present developments outside Schleswig-Holstein with little optimism. He criticised in particular that the E-15 Draft completely ignores the players’ wishes: It makes little sense for a private provider to apply for such a license, as it will not be possible to create offers which are under demand by the players. The Kiel model now for the first time allows the providers to legally enter the German market with online offers, and to provide players with attractive games.

For Dr. Erhart Körting (SPD), former Minister of the Interior in Berlin, one of the decisive questions is whether the number of 20 licenses provided for by the GlüStV will be upheld before the European Court of Justice. He thinks it may be likely that the treaty will not be concluded and that “the 15 states, depending on their political orientation, will pass their own gaming regimes”. Some of the federal states are already on the starting blocks in this respect. For him, it is important that the revenue from gaming offers is used to promote public sports and social projects. Dr. Miachel Vesper, Secretary General of the German Olympic Sports Association (DOSB), stressed the necessity of a uniform solution, also against the background of the new act on horse race bets and lotteries (Rennwett- und Lotteriegesetz) which is being discussed at present by the Bundestag. He, just like Frank Bohmann, manager of the Toyota Handball Bundesliga and representative of the initiative professional sports (IPC), emphasised that a certain part of the revenue from the sports betting business should go to public sports. Vesper says: “No sports betting without sports.” This is just what Schleswig-Holstein has provided for. “For the first time ever, there is a financing guarantee in an act in favour of public sports”, Professor Dr. Martin Nolte from the Deutsche Sporthochschule http://www.dshs-koeln.de explained. Overall, the scientist holds that the Schleswig-Holstein model is much closer to reality with regard to player protection, prevention, utilisation of tax revenue and advertising possibilities.

The fact that sports clubs in the north of Germany have long since tied up sponsoring packages with providers from the industry also became clear during the industry meeting in Brandenburg. For instance, the major handball clubs THW Kiel and SG Flensburg-Handewitt advertise bwin and bet-at-home respectively. At the beginning of the year, VfB Lübeck, a regional league football team, was able to enter into a naming rights agreement for Lohmühle stadium with the world’s largest online poker provider Pokerstars, who is now holding gaming licenses in eight European countries. Up until the issue of the Schleswig-Holstein license, Pokerstars intends to continue to provide a free play-money site at the URL www.pokerstars.de, as this – after consultation with the state media authorities – is possible even without a licence. Kevin O’Neal, director business development at Pokerstars, sketched the sponsoring strategy “small name, big potential” with regard to the VfB Lübeck engagement, which he said also worked out for the present poker world champion Pius Heinz. The strategy is to rely on the one hand on illustrious names, such as tennis legend Boris Becker, a devoted poker player who can genuinely communicate this, but also on the supposed underdog who can be successful in the sport (of poker) as a born fighter.

Summarising the Schwielowsee meeting, the industry continues to be on the move. Brussels will at least not be able to give the go-ahead. Possibly, this may lead to a patchwork of gaming regulations, owing to the German federal system. Schleswig-Holstein has broken new ground, and will also benefit on the fiscal side. Then, if not earlier, other federal states will follow suit, or at least move closer to the Kiel model. (Andreas Schultheis)

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