BAD START FOR ONLINE GERMAN GAMBLING

28 December 2007

2008 could start with prohibition - but a challenge will follow


The fresh start to a new year is usually a time for optimism and energy, but that will not be the case for online gambling in Germany, where a ban on the business could be on the cards from January 1st 2008 as part of an inter-state agreement that preserves the country's state monopolies for lotteries and most forms of betting.

All 16 German state legislatures voted in mid-December to approve the new anti-online betting laws, which the states negotiated after the Federal Constitutional Court overturned earlier rules, reports Bloomberg's business news service. The new rules ban any form of Web-based gambling or brokering of betting games over the Internet....and individual German states may order Internet service providers to block the websites of illegal betting operations and banks to stop money transfers.

The definition of illegal gaming includes placing a bet from German territory over the Internet with a company based outside Germany, directly attacking the manner in which most countries conduct online gambling business.

Major betting companies like Bwin Interactive Entertainment, Fluxx and Tipp24 have been critical of the accord, and intend to challenge it. Tipp24 said last week that it regarded the regulations "as clearly contrary to law and will sue for its rights if necessary."

Bwin sued four German states in October seeking to continue offering online bets after the rules come into effect. The cases are pending. Bwin operates a site under a license originally issued by the communist East German government before unification and another portal under a Gibraltar license.

The company claims that both permits prevail over the new online-betting ban and will continue to operate its sites.

"We think that in the second half of 2008 the European Court of Justice will have stopped this futile effort to keep us out of Germany," Hartmut Schultz, a spokesman for Vienna-listed Bwin, said in an interview this month.

The European Commission, the European Union's regulator, called on Germany to reconsider the total ban on online betting, saying the step was disproportionate. In April, Germany rejected that demand, arguing the rules were needed to protect citizens from the dangers of gambling, despite its own prom,otion of state gambling monopolies.

"I am pretty sure the Commission will escalate the process and send a formal warning the day after" [the new law takes effect], Wolfgang Kubicki, leader of the Free Democrats opposition party in the Schleswig-Holstein Parliament, said last week. "Berlin will have something in the mail on January 3."

The Commission can sue EU member states to force them to comply with EU laws regarding the free movement of services between member nations.

At least 13 of Germany's 16 states had submitted the ratification documents for the ban to take effect by last Thursday, said Eric Braum, a spokesman for the Hesse government, which monitors the process. "That's the required majority and we expect to have all the rest coming in by New Year's Eve," he said.

The new regulations will also outlaw advertising of gambling over the Internet and on television, stating that advertising in print and other media could no longer "directly invite, incite or prompt" customers to play; it may only "inform" about the possibility to do so.

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