Germany: Sports Betting Regulation
By Dr. Fabian Masurat and Jan Feuerhake, Taylor Wessing, Hamburg, Germany
The regulation of sports betting in Germany is primarily governed by the Interstate Treaty on Gambling 2021 (ISTG 2021), which came into force in July 2021 and has been a significant turning point in Germany’s gambling framework.
This Treaty aims to strike a balance between allowing licensed operators to offer sports betting and protecting players from gambling addiction and fraudulent activities.
- Legal Framework and Licensing
The ISTG 2021 is a nationwide legislation to harmonize the regulation of sports betting across all 16 federal states of Germany. Under the ISTG2021, sports betting operators must obtain a licence from the competent gambling authority in Germany, the Joint Gambling Commission of the Federal States (GGL). The GGL is responsible for overseeing the licensing process and ensuring that operators comply with the law. The most important aspects of the common requirements can be found here.
Online sports betting operators must be licensed by the GGL and comply with a range of regulations, including limits on player spending, time restrictions to prevent excessive gambling, and the implementation of player self-exclusion mechanisms.
Technical compliance for operators in Germany includes integration into the technical platforms of the regulatory authorities to ensure transparency, data reporting and compliance with legal standards. The relevant systems include:
- Connection to central files where player data and gaming activities are logged.
- The LUGAS system, which acts as a central data hub and monitors real-time data from operators.
- And the OASIS system, a centralized exclusion system that must be integrated by operators to ensure that banned players are excluded from gambling services.
All operators are obliged to check the status of each player against OASIS before granting them access.
- Taxation
In Germany, online sports betting is subject to an unusual tax structure. Instead of taxing the net revenue, the legally required tax of 5.3% is based on the stakes. This results in a relatively high effective tax rate for operators. All operators are required to register with the competent German tax authority. After registration, operators are required to submit tax returns monthly.
- Advertising and Responsible Gambling
Advertising for sports betting in Germany is regulated under the ISTG 2021. Operators are required to comply with the advertising guidelines, which are aimed at protecting especially minors and vulnerable individuals. The focus is on responsible gambling, and all operators are required to display responsible gambling messages prominently on their platforms and during advertising campaigns.
Furthermore, advertising must not create the impression that betting is a risk-free activity, a reliable source of income or a solution to financial problems. It must avoid misleading language, the glorification of gambling or the suggestion of a guaranteed win. Additionally, advertising must not be directed at minors (under 18 years of age) or other vulnerable people. Furthermore, advertising must not appear on websites that are primarily aimed at minors. Any promotional content involving influencers (if allowed in the respective setting) must also comply with regulations and responsible gambling guidelines.
Also, sponsorships of sports teams or events are also permitted, provided the sponsorship agreements align with advertising requirements, including clear messages about responsible gaming.
The GGL has the authority to impose penalties on operators that breach these advertising regulations.
- Anti-Money Laundering (AML) and Fraud Prevention
As part of Germany's commitment to preventing financial crime, operators are subject to strict anti-money laundering (AML) regulations. Operators are required to implement substantial AML systems, including customer due diligence, monitoring of transactions, and reporting of suspicious activities. These systems are designed to detect and prevent illegal activities, such as money laundering and terrorist financing.
Operators must also conduct enhanced due diligence on players involved in high-value transactions or who demonstrate other risk factors associated with money laundering. This may include verifying the source of a player's funds or conducting additional background checks.
Failure to comply with these AML requirements may result in significant penalties for operators, including fines and suspension or revocation of their licences.
- Future Outlook
Although the ISTG 2021 has created a regulated sports betting framework in Germany, the industry still faces challenges. One of the main issues remains the black market, where unlicensed operators offer sports betting without complying with the German legal framework. These operators can create risks for consumers as they often do not adhere to the same standards of inter alia responsible gambling or anti-money laundering compliance.
The GGL has increased its efforts to fight illegal operators. In doing so, the GGL relies mostly on prohibition orders and payment blocking.
The sports betting market in Germany is expected to continue growing in the future. As the market develops, a focus on responsible gambling and compliance with anti-money laundering regulations will remain key to the industry's long-term success.
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