World Regulatory Briefing Germany:

Conference Report

20 Apr, 2012

Rita Gyaraki, GamblingCompliance

Ahead of fast approaching deadlines, the dynamic and ambiguous state of the German

regulatory environment was discussed by regulators and industry representatives last week at

Clarion Events' World Regulatory Briefing in Frankfurt. Rita Gyaraki from

GamblingCompliance gives her take on the event.

GamblingCompliance attended the World Regulatory Briefing in Frankfurt, Germany, on

April 12, 2012. The conference, which ran under the title “German roadmap to regulation —

the first-ever, all-inclusive focus on 16 German states’ plans for igaming,” was attended by

around 160 industry representatives. With the European Commission’s answer to the

Interstate Treaty revealed just a few weeks ago and such important deadlines approaching as

the May 6 elections in Schleswig-Holstein and July 1, 2012 set for the ratification of the

Interstate Treaty, the conference was perfectly timed among/before fast paced

developments.

The questions everyone was asking were whether the Interstate Treaty will come into force or

if it will still be stalled in state parliaments and whether Schleswig-Holstein will join the

Interstate Treaty at the last minute.

Martin Stadelmaier, the head of the chancellery of Rhineland-Palatinate and a leading

coordinator of the new Interstate Treaty on Gambling, seemed to be confident that, after the

elections, Schleswig-Holstein will join the Interstate Treaty. He was also confident that the

treaty will be ratified in 13 out of 15 state parliaments by the end of June 2012, despite the

fact that two states, North Rhine-Westphalia and Saarland, will be unable to ratify it by the

set date due to upcoming elections.

The European Commission, in its answer to the German states, noted that currently it does

not have enough information to decide on the compliance of the treaty with EU law;

therefore, it welcomes the readiness of the German states to prepare an evaluation of the

treaty and present it to the commission. As Stadelmaier noted at the conference, there will be

a full and thorough evaluation of the treaty prepared, the results of which will be presented in

five years. The evaluation process will start as soon as possible and will be conducted at more

stages focused specifically on the areas which the commission has pointed out.

Present at the conference was Guido Schlütz, senior official responsible for gambling in

Schleswig-Holstein’s Ministry of Interior. He revealed that as of the beginning of April 2012

the ministry had received 22 applications for betting, including applications for exclusive

online betting and applications for the combination of online and terrestrial betting. Schlütz

also revealed that currently the ministry has a two-digit number of applications for online

casinos as well. As the state official confirmed to GamblingCompliance, the privatisation

project of the state’s six casinos, which are the only operators which will be entitled to offer

banked games online, was stopped due to the lack of interest, namely the lack of bids, which

did not reach the government’s expectations.

Allegations were addressed to Schlütz that Schleswig-Holstein is delaying the licensing

process on purpose, to enable the state to give up its own Gambling Act and join the

Interstate Treaty without having to pay expensive compensation to already existing

Schleswig-Holstein licensees. Schlütz countered these allegations, stating that: “I have got a

law, I will execute it until that law is in force.” Although the gambling industry is looking at

the date of the election as the date by which at least some licences will have to be in place in

order to secure the fate of Schleswig-Holstein’s Gambling Act, Schlütz did not seem to

consider the May 6 deadline as momentous. In his opinion, even if the new government is

against the current Gambling Act, an eventual withdrawal act would take until

October/November 2012 to pass the parliament.

In response to the question as to whether the first Schleswig-Holstein licences will be issued

by the end of this month, Schlütz said that this is a question which depends on the quality of

applications as well. He commented:

“We get applications on a daily basis. To put it nicely, the quality varies a lot. The slimmest

application form we got was a postcard, but we also got a storage box full of nine or ten ring-

binders from one applicant.”

He referred to the currently incomplete and low number of staff as a reason behind the

current delay.

Christian von Boetticher, MP of the ruling Christian Democrats in Schleswig-Holstein, said

that he is confident that the first Schleswig-Holstein licences will be issued by the end of

April 2012.

Representatives of the gambling industry were all of the opinion that under the treaty in its

current form it will be really hard to create an attractive games offering and it will fail to

channel players towards legal sites.

As William Hill Head of International Wilhelm Huber noted:

“We do not really see a profitable business model behind it and it is very hard to operate in

such a market.

“The same product we offer in the UK would not make any profit in Germany, if we want to

comply with the requirements of the 15 states Interstate Treaty, we will need to offer a

completely different product in Germany than what we currently do internationally.

Therefore, the customer will have a worse product at a worse price.

According to Dr. Peter Reinhardt, head of Central Europe at Betfair, “to cut off poker and

online casino means to cut off nearly 60 percent of the total market, so immediately we create

a black market of 60 percent”.

Betfair confirmed that it is among the applicants for a Schleswig-Holstein licence. William

Hill and Sportingbet also stated that they are interested in it and currently they are finalising

their submissions. In reply to the question as to whether they will operate throughout

Germany in possession of their Schleswig-Holstein licence, Dr. Peter Reinhardt from Betfair

noted:

“How we deal with customers in other states, this we will have to see. This is a legal question

more than a business decision.”

The uncertainty around the Schleswig-Holstein act did not seem to deter operators. As

Reinhardt noted, they “rely on the existing law, which was passed in the parliament”.

However, general opinion was that the legal turmoil was a long way off coming to an end.

Ian Ince, Sportingbet’s head of regulatory affairs, said he has “a feeling this is going to drag

and drag and drag”.

Ahead of parliamentary elections, Schleswig-Holstein’s state parliament will vote on the

opposition’s second “seek and destroy” act between April 25 and 27, 2012.