Illegal gambling remains a challenge despite tough regulations in Germany

Currently, Germany is known to have one of the most strictly regulated gambling markets on the Old Continent. More than two years ago, in July 2021, the country implemented its new Interstate Treaty on Gambling, a law that effectively legalizes and at the same time regulates different online gambling activities. The gambling legislation in Germany has undergone many changes, helping it shape the sector by providing safe and legal gambling services while also ensuring the protection of the consumers.

Robust gambling regulations safeguard consumers in Germany

Germany established a licensing system that enables operators to legally offer their services to customers in the country. Online gambling operators that want to offer slots, poker or sports betting can submit their application for a license. Securing such a license enables them to enter the competitive market, a major difference from the former monopoly-style regime.

Besides allowing operators to offer their services to customers in Germany, the gambling regulation established strict rules that seek to protect the players. Such rules ensure that gamblers online have access to self-exclusion tools, deposit caps and other player protection methods. Not unexpectedly, licensed gambling operators in Germany must verify the identity of their customers and prevent attempts for fraud or underage gambling, something that is common in many regulated gambling markets across the globe.

Mirroring restrictions in other European countries, the rules in Germany include a deposit limit of €1,000 along with a €1 wager limit for online slots and a minimum of 5-second duration for each spin. Further restrictions include prohibition for specific games such as progressive jackpot titles, live bets and live casino titles.

Besides the aforementioned mandatory identity checks, licensed gambling operators in Germany need to comply with the country's strict restrictions related to advertising. Those restrictions faced a backlash from licensed operators in the country that previously argued the gambling regulator, Gemeinsame Glücksspielbehörde der Länder (GGL), did not have the authority to enforce them. GGL was designated as the gambling regulator in the country as of January 1, 2023.

Gambling advertising restrictions currently prohibit ads from broadcasting during live sports events. Moreover, Germany features a complete ban on gambling ads for radio and TV programs between 6 AM and 9 PM. The ads that are allowed to appear have to comply with strict rules, including responsible marketing practices. Ultimately, all those efforts seek to protect consumers from excessive gambling and foster a responsible gambling environment.

Similar to other regulated gambling markets, licensed operators in Germany are subject to taxes. The current tax rate is set at 5.3%. Unlike jurisdictions where taxes are applicable on the gross gaming revenue, Germany's tax applies to wagers.

Over-regulation benefits illegal gambling operators

Despite the robust regulatory framework, the gambling sector in Germany faces different challenges. An ongoing challenge for the sector is the growing share of illegal and black market gambling operators. Last month, the trusted news outlet, Glücksspielwesen.de, released details regarding the 8th Federal Congress of Gambling, an important event for the gambling sector in the country.

The event saw approximately 130 participants who discussed the challenges the regulated gambling sector in Germany is facing. Not surprisingly, the growth of the illegal sector was one of the hot topics of the new event with Mathias Dahms, from the German Sports Betting Association (DSWV), Georg Stecker, a representative of the German Slot Machine Industry, and Simon Priglinger-Simader, a member of the German Online Casino Association (DOCV), warning that over-regulation only boosts the illegal gambling sector. The trio criticized the stringent regulations in the country, saying that they "almost inevitably" support the illegal and black market operators.

Half of the iGaming activities take place via the illegal sector

The results of a new study, released last week, supported the concerns about the growing illegal online gambling sector. The DSWV released details regarding the study which warned that the German State Treaty on Gambling "misses targets." The new study was led by Gunther Schnabl, an economist with the University of Leipzig. It uncovers a worrying trend about the growth of the illegal online gambling sector despite the regulatory framework in the country.

The study warned that approximately half of the online gambling activities in Germany take place via the illegal market. As a result, states across the country are losing tax revenue. "The reason for this development is an enormous black market offering on the Internet, which can be accessed with just a few clicks and is advertised around the clock," explains the new study. Moreover, the research acknowledged that the tough regulations for the German gambling market make it "unattractive to players."

In light of the results of the new study, the DOCV and DSWV, urged for changes to the established gambling framework. The duo encouraged the country's gambling regulator to accelerate its licensing processes. Moreover, the two Associations encouraged increasing the competitiveness of the legal gambling market and the enforcement of advertising bans for illegal gambling operators.

Furthermore, the DOCV and DSWV proposed changes to the tax rate applicable for online gambling and a review of the Interstate Gambling Treaty for the implementation of different objectives. The duo encouraged effective cooperation between gambling industry stakeholders and the gambling regulator, GGL. Finally, the two Associations called for changes to the advertising opportunities for legal gambling operators.

While illegal gambling remains a challenge in Germany, it is clear that stakeholders in the sector have already identified this issue. The aforementioned proposals can help improve the sector in the country and help channel more users to legal gambling operators.

In turn, such processes can ensure the protection of the consumers who can benefit from responsible gambling tools, including bet and deposit limits, as well as self-exclusion. Having more customers use legal gambling operators can also accumulate valuable tax revenue for Germany as well. Still, whether or not the country will make meaningful changes to its gambling sector remains to be decided by its lawmakers and its gambling regulator.

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