Why Are So Many Restrictions in Germany for Online Casinos?

For a long time, German players couldn’t legally play in online casinos or bet on sports. The German government refused to update its laws regarding online gambling until 2021. It prioritized such a move after seeing how well the market is doing in Europe and how big of a financial boost it can provide.

With the new Interstate Treaty on Gambling, everything changed overnight. It provides licensing conditions, gambling advertising, and new tax rules. The Glücksspielstaatsvertrag is one big move forward for the German casino industry, providing new licensing possibilities for third-parties. It went live in the summer of 2021, triggering an influx of new online casinos on the market.

Is Online Gambling Legal in Germany?

Yes, it is. It was a long road to get there, but the Interstate Treaty on Gambling 2021 finally legalized online sports betting and gambling. Here’s what the Glücksspielstaatsvertrag covers:

• Lottery
• Online poker
• Online casino games
• Sports betting
• Horse betting
• Virtual slot machines

All gambling providers must have a license to operate, with the Saxony-Anholt administration office whitelisting best online casino and sports betting sites. The licenses are issued for five years and must be renewed after. Only a small number of casinos were regulated in the first wave, with the 16 federal states deciding if they want to legalize new casinos themselves.

When talking about licenses, we should note that only German licenses are valid in the country. Some providers have an EU license which grants them operation, but Germany requires a valid German license in order for operators to provide their services. Even lotteries require a license, so the law is pretty strict, which brings us to the next section.

Less Restrictive Than Before, but Cautionary

German gambling laws were pretty restrictive for years. It was pretty clear that a change was needed in the industry. The popularity of online casinos didn’t avoid Germany, with players seeking to play slots and casino games elsewhere. The great thing about online casinos is that they’re usually international and can offer their services to selected markets. But, with the laws being restrictive and people fined over gambling on the web, it was challenging for players for a while.

The change finally arrived in mid-2021, when the government finally decided to introduce new regulations. It followed a ruling in early 2020 when the heads of German states decided to approve new regulations for online gambling and online poker. It was the spark that triggered the big shift coming with the Glücksspielstaatsvertrag. And, while the new regulatory framework was welcomed by players with open arms, it was obvious that there were many restrictive elements built into it.

What Are the Restrictive Elements?

Most of these restrictions are there to provide player protection and gambling addiction prevention. They have the best intentions at heart, but they heavily restrict the market. These restrictive elements including spin-stake limits, limits on sports betting stakes, and strict advertising laws. While the change was needed, players found themselves looking for German online casinos without limit pretty soon after the law went live.

With the Bundesliga being as popular as it is, punters are irked about in-play betting limitations. If you’re an Esports fan, no luck on extensive betting on exciting CS:GO matches. In-game bets online in Germany are limited to final result and next scorer, which only partly apply to Esports and other sports too. Obviously, these two markets are aimed at football punters, which is a shame since German punters love betting on other sports too.

And it’s not just online sports betting that’s affected. German online casinos have thousands of fun slot games, but the bet you can place on one of those is limited. Deposits are limited too, with a €1,000 cap per month. And don’t think that’s just on paper. Authorities have measures in place that monitor these activities, so providers must comply with the laws. If a provider is caught bypassing these laws, license withdrawal and other sanctions are probable.

Licensing Information

Under the new Interstate Treaty, only licensed providers in Germany can operate legally online. These licenses issued by the government are valid for five years, after which they should be renewed. By default, German law defines gambling as a game of chance. Activities describes as games of chance are evaluated by these elements:

• Consideration is given for a chance to win
• Valuable consideration
• The determination of winnings is primarily a matter of chance

If a provider covers these three elements, it falls under the ‘game of chance’ category and can be issued a license. Of course, it doesn’t come that easily. Authorities inspect the provider in depth before granting a license. The only problem is that this is an Interstate Treaty, so various aspects of the licensing process is evaluated within individual states. The licensing laws are modelled after land-based gambling.

The new laws obviously needed a new regulator that grants the licenses. It was introduced in 2021 and based in Saxony-Anhalt. This governing body is responsible for issuing licenses and putting the laws to work. Only applicants based and operating in the EU and the European Economic Area can get a license. The process is lengthy and includes a thorough review of the applicant’s services and games due to the restrictive elements of the law.

Advertising Guidelines

Casino PR is a key aspect of its marketing. Ads pop-up on any site that partners with a casino, prompting players to register and start playing. European countries are trying to counter that with a variety of restrictive techniques. These might come in the form of a timeframe for gambling ads, which is the case in Germany. To put it simply, online gambling ads in Germany are banned between 06:00 and 21:00. This is done to reduce the impact on young players and prevent possible gambling addiction in the future.

Sports betting ads are restricted too. In some countries, sports betting advertising is available on a live broadcast. The Interstate Treaty doesn’t allow it, stretching it as far as not permitting sports betting adds immediately before or after the event. Jersey sponsorships are permitted, but individually, players are not allowed to advertise sports betting companies.

Of course, the law puts a strong accent on misleading gambling ads. Companies should pay great attention not to advertise gambling as a solution to financial problems. SMS and direct telephone call advertising—known as targeted advertising—is also heavily restricted. While companies hate this aspect of the law, lawmakers and German residents support it. These ads guidelines have one goal – preventing the dangers of gambling addiction. So far, they’ve delivered results, so this restrictive element of the Glücksspielstaatsvertrag is not that controversial.

A Long Road Ahead

The changes introduced by the Interstate Treaty have been a long time coming. However, things weren’t as rosy as expected initially. Reaching this state was difficult, as many German states had pretty different views on online gambling. States such as Schleswig-Holstein have called for a liberalized market and laws, while other states have opposed it. There are 16 states in the German federation, so some opposing views were expected. Schleswig-Holstein eventually decide to issue six-year licenses, with Bwin and Ladbrokes among the earliest receivers. Others followed, but following the initial licensing, the state decided to stop issuing licenses. It adopted all the legislation in place and things are in limbo at the moment.

Taxation Rates and Laws

The type of taxes the government imposes on gambling operators is determined by the products they’re ‘selling’. Tax rates in land-based casinos (subject to gross revenue) vary from 20% to 80% depending on the state. Additional levies—such as progressive tax rates—might be imposed too depending on the casino’s economic capabilities. Slot machine operator rates are affected by state legislation varying from 12% to 20%.

The Interstate Treaty also introduced new amendments to existing tax laws regarding online poker, sports betting, and virtual slot games. All played bets are levied by a tax of 5.3%. But, as the included tax is factored out of the base, the effective tax rate is 5.03%. While many industry bodies and gambling companies have heavily criticized the new tax structure, the government is sticking with it.

Online slots, sports betting, lotteries, and online poker are exempt from VAT. This ensures one-off taxation, while online casino games remain subject to VAT. As you can see, any operator that offers licensed gambling in Germany is subject to tax.

What’s Next?

There are still plenty of challenges to overcome in the industry. In 2022 and beyond, the accent will be put on developing a new attractive catalogue of permitted bet types for online sports bettors. Improving the acceptance for Esports betting is another thing probably coming sooner rather than later.

In the casino sector, the challenge is implementing various obligations and requirements. Several federal states have already prepared bills to grant online casino licenses, which will keep market participants on their toes. The Interstate Treaty on gambling introduced some welcome changes, but there’s still a long road ahead for the market to be truly liberated.