What new German regulations mean for the gambling industry

Starting in early 2020, many gambling service providers had high hopes from Germany’s promise to liberalize its gaming/gambling regulations. Back in January, the new licensing procedure came into force, with applicants being able to receive their corresponding permissions soon after. However, later in March after many years of negotiations, the failed draft for the law or liberalization the federal states had begun to agree on what was touted as a more liberalized law scheduled to be enforced from July 2021.

The celebrations were short-lived with disillusionment soon following for many gaming service providers. The first step to that disillusionment was even before the first license would be granted, the Administrative Court of Darmstadt has seized the issuing of licenses with immediate effect back in April. The assertion was that instead of reform which was anticipated, it would mean uncertainty for the industry.

Germany’s Fragmented Approach to Online Gambling Regulation

One of the most concerning issues associated with Germany’s new gambling regulation has to do with allowing the 16 federal states to define their own regulations for online casinos. Not only does this lead to a perceived inconsistent regulatory environment, but it leads to a great deal of uncertainty for players and online casinos alike.

The piecemeal approach by Germany will leave each state to create its own mini-casino market, and that will then have varying degrees of further channelling. The biggest issue, though is inconsistent regulation across the industry.

Successful regulation has three important ingredients, the first being that the market should offer favorable options so that players choose regulation options over unlicensed ones. The second being a regulatory framework that’s predictable and transparent doing this ensures that operators are motivated to get a license. The third being that companies should be assured of profitability in the regulated market. Unfortunately, the current regulation does not contain any of these ingredients.

Strict Caps on Deposits and Player Accounts

The new regulation stipulates that players be compelled to create a multi-provider player account. What that means is that a single account can be used to play across various platforms by different providers. However, the account creation process will require that a player provide their true credentials, have it verified by the online casino and only then can they start playing.

Right off the bat, it is the type of stipulation that will almost eliminate small casinos. The implementation of the regulation is near impossible for startup casinos that have a limited budget. However, the further nail in the coffin if you may is that a player can’t play the offerings of different providers at the same time. What that will mean in the long-term is that players may eventually stick to the platform or online casino they originally signed up with, and that stifles competition.

The new regulation also sets the monthly deposit limit at 1k EUR  for a player. The limit is applied to a player and not a specific casino. What that means is that a single 1k Eur deposit is the max a player can utilize across all regulated platforms. The regulation may render most high-stakes games pointless. Furthermore, all of this will be monitored by a “competent body” which is yet to be formed! It is pretty clear that all of this will make online casinos less profitable.

Finally – Advertising

While it makes sense for online casinos not to aim their advertising at minors or as a way of solving financial problems, the ban on advertising from 6 am to 9 pm is strange. If anything the hours in between are peak advertising hours for both online and electronic advertisements. Again, this approach is going to have dire consequences on smaller, less known online operators which we suspect Germany is trying to eliminate from the equation with their latest regulation.

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