Hot on the heels of the news that Spain was set to overhaul some important aspects of its online gambling regulations — including provisions that could entice some operators to leave the market — Germany is now making big waves in the EU with its own online gambling legal plans.
What’s going on
“Germany’s states decided on Wednesday to award seven nationwide concessions for sports betting companies starting in 2012, which could open the market to competition, but said they would continue to restrict online casino-style gambling,” reports Matt Scuffham for Reuters.
Germany’s always been a holdout in the greater EU online gambling market. Online gambling is nominally prohibited there, but, as New Europe reports, “significant revenues are still generated (Germany remains, after the UK, the second-largest online market in the EU).”
The new proposals are sort of a step in the right direction, but are causing controversy all the same. They include plans to “tax sports betting from next year at 16.67 percent of turnover, ban in-game wagers and only allow online casino products to be offered by operators with an existing land-based licence,” Matt Scuffham at Reuters continues.
The states in Germany making these proposals are essentially in control of Internet gambling within their jurisdictions. The agreement from earlier this week could be signed into law by June; in defending the move, lawmakers have said they’re “protecting customers from fraud and addiction by keeping lotteries, sports betting and other kinds of gambling limited to only state-run operators,” Scuffham adds.
What it might mean
The plans have been making huge headlines in the EU online gaming and financial sectors, particularly because of what they’ve done to stocks of igaming companies operating in Germany — like the newly launched bwin.party, the world’s largest online gaming brand and a merger between igaming powerhouses bwin and PartyGaming.
“Shares in London-listed online betting groups bwin.party digital entertainment PLC (BPTY.LN) and Betfair PLC … slumped again Thursday amid concern over plans by the German government to regulate its online sports betting and casino markets,” reported the Wall Street Journal.
The drop for bwin.party “was the most since the U.S. barred Internet- gambling financial transactions in 2006, sending PartyGaming tumbling,” according to Bloomberg’s David Altaner.
“Right now the German online market is unregulated so companies like bwin.party and Betfair, both of which operate from tax-light Gibraltar, can run their international Web sites and aren’t required to pay any tax in Germany,” the Wall Street Journal article adds.
It gets more serious: Bwin.party said the proposed changes to German gambling laws and taxes “would make it impossible for it to be competitive in the country,” the Reuters report continues.
“Implementation of the principles presented by the minister-presidents yesterday is just as likely to fail as the outgoing monopoly model in Germany,” bwin.party chief executive Norbert Teufelberger said in a statement.
“A proposed tax rate of 16.67 percent on the stakes placed in sports betting would make it impossible to offer a competitive product. Furthermore, excluding poker and casino products from this licensing model will continue to drive consumers into the black market.”
Bwin.party is stating that the German proposals aren’t in compliance with EU law and violate market requirements, although certain states within Germany vary in their plans. Shares in bwin.party are in freefall after the announcement.
The Financial Times has an excellent analysis of the financial impact of Germany’s new proposals; check it out here.