Earlier this month, the Federal Court of Justice of Germany (BGH) was scheduled to address whether unregulated operators should be required to refund player losses. However, this highly anticipated hearing was abruptly cancelled after the defendant, an Austria-based sports betting operator, withdrew its appeal. This development has significant implications for the future of online gambling regulation in Germany.
In a notable ruling last week, a regional court mandated that all German civil courts, including the BGH, must suspend or submit player reimbursement lawsuits to the European Court of Justice (ECJ). This decision follows the efforts of the German law firm Hambach & Hambach, which has been at the forefront of navigating these complex legal waters. Consequently, issues related to online sports betting and online casinos in the context of EU law will now be deliberated by the ECJ, which will ultimately render the final verdict on these matters.
Criticism has been directed at the BGH for its apparent reluctance to refer cases to the ECJ. This criticism stems from the BGH’s actions—or lack thereof—in a March ruling concerning a sports betting case, where it neither suspended nor submitted the case for ECJ consideration. This hesitation could have led to prolonged legal ambiguities, as a comprehensive EU law decision was pending the involvement of regional courts. The BGH’s inaction raised concerns about future legal consistency and clarity in the gambling sector.
Potential Precedent of Player Reimbursements
Hambach & Hambach’s partner Claus Hambach and senior associate Phillip Beumer have voiced concerns that a ruling in favor of player reimbursements could establish a problematic precedent in Germany. According to Hambach & Hambach, mass media coverage of the Federal Court of Justice’s note has already sparked interest among representatives of the “player claim industry,” potentially leading to a surge in complaints and lawsuits.
The firm warns that extensive media coverage and advertising could further embolden financiers to support claims for sports betting losses, in addition to casino losses. This scenario could flood the courts with reimbursement cases, posing significant challenges to the legal system and the gambling industry at large.
The Impact on Germany’s Black Market
Hambach & Hambach also cautions that reimbursing players might inadvertently boost the black market for gambling in Germany. They argue that if players are refunded for their losses with unlicensed operators, it could incentivize further betting with these operators. Essentially, the case law would create an environment where gambling without the risk of loss becomes a viable option, thereby exacerbating the already substantial black market issues.
Germany’s Black Market Challenges
A 2023 study by the University of Leipzig revealed that nearly half of all online gambling in Germany takes place with offshore operators. The channelization rate in Germany, which measures the proportion of gambling conducted through regulated channels, was found to be a mere 50.7% for online activities. The study estimated that the black market accounts for three-quarters of online gambling revenue, leading to significant tax losses amounting to hundreds of millions of euros for the state.
In response to these findings, both the German Online Casino Association (DOCV) and the German Sports Betting Association (DSWV) have urged the German gambling regulator (GGL) to take measures to attract players to onshore operators. They argue that making regulated operators more appealing to bettors is crucial for reducing the black market’s influence and increasing state tax revenues.
The unfolding legal developments and their potential ramifications underscore the complexities of regulating the online gambling industry in Germany. As the ECJ prepares to weigh in, stakeholders across the sector will be closely watching for a resolution that balances regulatory enforcement with the need to curb black market activities.
