German State Treaty Poses Major Financial Risk for Sports Betting in Germany

• The German state of Hesse is nearing the finishing line in preparations to start issuing sports betting licenses
• Restrictive operating model threatens to require up to 70% of revenue generated by sports book operators
• Licensing process set to begin in January, 2020 and will require even already licensed operators to undergo licensing

German states have stepped into an agreement for the rules under which they would go about issuing sports betting licenses – to begin at the start of 2020 – yet again, but the degree of imposed restrictions in the newly created operating model threatens a major financial hit for those inclined to operate sports wagering establishments.

A Temporary Operating Model

The German state of Hesse’s foremost judicial authority, the Regional Council of Darmstadt, held an informal meeting on Tuesday, August 13^th, which brought together more than 200 representatives of the sports betting and gambling industry. There the Council presented their plans on how to go about the issuance of sports betting licenses, what the process will look like and what requirements will come into force.

Application processing is set to start on the January 2^nd, 2020, when sports betting operators will be required to submit the necessary documentation along with applications – regardless of whether or not they have been previously licensed back in 2012 in Germany’s first attempt to issue such licensing; or otherwise, by the breakaway regulatory model of the state of Shleswig-Holstein – and then declare their satisfaction over the fact that the application is complete.

Rules and Requirements

It will follow that operators will then be required to design and write out concrete plans for how to go about handling matters related to social responsibility, reasonable regulated gambling, dealing with problematic cases and providing proper staff training for addiction preventive measures. A so called Sozialkonzept. These will be required of each and every business. Furthermore, in order to be able to advertise their business, an additional license for advertising would need to be issued by the Düsseldorf District Government in Nordrhein-Westphalen.

Upon receipt of a sports betting license applicants, or licensees at that point, will be required to shut down any other non-sports betting market activities respectfully. In-play wagering will not be permitted, a 5% turnover tax is to be imposed and lastly – customers will be limited to spending €1,000 per month.

Nonetheless, as detailed and thought throughout as the newly announced legislation may seem, it will regulate over sports betting matters only until the end of June, 2021. As for now, a more permanent model is still in development and is intended to replace the current State Treaty, as well as the liberal approach of the state of Schleswig-Holstein following the above date.

Any questions?

In regards to the newly unfolded German model, the Regulus Partners – a consultancy focused on gambling oriented industries internationally – pointed out that the provided restrictions would be cause enough for major structural difficulties for sportsbook operators.

According to the agency, right now operators are facing three viable paths. One would be to start preparations early, the second – to partially comply but challenge the requirement for closing down gaming activities; and the third – to remain online and challenge the treaty.

All things considered, German based operators and suppliers, as well as high-rollers shouldn’t get their hopes up, at least for the short term.