German gambling monopoly (Lotto/Toto/Oddset/Keno) illegal

In Germany, responsibilities in the gaming sector are divided between the federal government and the Länder. In most of the Länder, there is a regional monopoly on the organisation of sports betting and lotteries, while the organisation of horserace betting and the operation of slot machines as well as casinos is entrusted to private operators who have a licence for this purpose. With the State Treaty on Lotteries in Germany, which came into force on 1 July 2004, the Länder have created a uniform framework for the organisation of games of chance, with the exception of casinos. Following a ruling by the Federal Constitutional Court, this treaty was replaced by the State Treaty on Games of Chance, which entered into force on 1 January 2008. According to this treaty, any organisation or brokerage of games of chance on the internet is prohibited.

In the present cases, several German courts ask the Court of Justice to rule on the compatibility of the gambling regime in Germany with Union law.

In Joined Cases C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07, the Verwaltungsgerichte (Administrative Courts) of Gießen and Stuttgart must rule on disputes between sports betting intermediaries and the German authorities, which have prohibited those intermediaries from offering, in Hessen and Baden-Württemberg respectively, sports betting organised by the Austrian companies Happybet Sportwetten and Web.coin, the Maltese company Tipico, the British company Happy Bet and the Gibraltar-based company Digibet. These companies have licences to organise sports betting in their respective home countries.

In Case C-46/08, the Schleswig-Holstein Administrative Court has to decide whether the Land Schleswig-Holstein was right to reject the application of the company Carmen Media Group to be allowed to offer its sports betting services in Germany via the internet, even though this company already has an "off-shore licence" in Gibraltar, where it is based, which allows it to organise betting only outside Gibraltar.

Finally, in Case C-409/06, the Verwaltungsgericht Köln (Cologne Administrative Court) has been seised of a dispute between a sports betting intermediary acting on behalf of the Maltese company Tipico and the German authorities. That court seeks to ascertain from the Court of Justice whether the principle of the primacy of Union law over national legal orders allows Member States to continue to apply, by way of exception, during a transitional period, rules on a State monopoly on sports betting which entail unlawful restrictions on the freedom of establishment and the freedom to provide services.

The Court finds, first, that the German legislation on sports betting constitutes a restriction on the freedom to provide services and the freedom of establishment. It points out, however, that such a restriction may be justified by overriding reasons relating to the public interest, such as the avoidance of incentives to spend excessively on gambling and the combating of gambling addiction. However, the national measures aimed at achieving these objectives must be suitable for their realisation and may only provide for such restrictions as are necessary for this purpose.

In that regard, the Court considers that the Member States are free to create State monopolies in an effort to control gambling and the operation of games. In particular, such a monopoly is more effective in controlling the risks inherent in the gambling sector than a system in which private operators would be allowed to organise betting subject to compliance with the legislation in force in the relevant area.

Next, the Court points out that the fact that, of various types of games of chance, some are subject to a State monopoly and others are subject to rules under which private operators are granted a licence cannot, in itself, call into question the coherence of the German system. Indeed, these games have different characteristics.

Nevertheless, in the light of the findings made by the German courts in the present cases, the Court considers that they have reason to conclude that the German legislation does not limit games of chance in a coherent and systematic manner. On the one hand, the holders of the State monopolies conduct intensive advertising campaigns in order to maximise the profits from the lotteries, thereby departing from the objectives which justify the existence of those monopolies. Secondly, with regard to games of chance such as casino or slot machine games, which are not subject to the state monopoly but have a higher addictive potential than the games covered by the monopoly, the German authorities operate or condone a policy encouraging participation in these games. Under these circumstances, the preventive objective of the monopoly can no longer be effectively pursued, so that the monopoly can no longer be justified.

Moreover, the Court points out that national legislation relating to that monopoly which infringes the fundamental freedoms of the Union may not continue to be applied even during the period necessary to bring it into conformity with Union law.

Finally, the Court states that the Member States have a wide margin of appreciation in determining the level of protection against the risks posed by games of chance. Therefore, and in the absence of any Community harmonisation in this area, they are not obliged to recognise the authorisations granted by other Member States in the gambling sector. For the same reasons and in view of the dangers posed by games of chance offered on the Internet compared to traditional games of chance, Member States may also prohibit the offering of games of chance on the Internet.

NOTE: By way of a reference for a preliminary ruling, the courts or tribunals of the Member States may, in proceedings pending before them, refer questions to the Court of Justice on the interpretation of Union law or on the validity of a Union act. The Court of Justice shall not rule on the national dispute. It shall be for the national court or tribunal to rule on the case in accordance with the decision of the Court of Justice. That decision shall similarly bind other national courts or tribunals before which a similar issue is raised.

Judgments in Case C-409/06 Winner Wetten GmbH v Bürgermeisterin der Stadt Bergheim, in Joined Cases C-316/07, C-358/07, C-359/07, C-360/07, C-409/07 and C-410/07 Markus Stoß and Others v Wetteraukreis, Kulpa Automatenservice Asperg GmbH and Others v Land Baden-Württemberg, and in Case C-46/08 Carmen Media Group Ltd v Land Schleswig-Holstein and Others.


Source: Press release of the Court of Justice of the European Union


Goldberg Attorneys at Law

Attorney at Law Michael Ullrich, LL.M. (Information Law)

Specialist lawyer for information law (IT law)