Why the Online Gambling Industry Should Be Legalized?

Man counting money in front of laptop


The black and grey market for online casinos is booming, so the industry should be legalized. However, there are strict rules. For years, federal states, state lottery companies, and private gambling providers have been arguing about how gambling should be regulated or whether it should not be liberalized completely. Several court cases have been conducted – and at the end of last year, a solution to the conflict seemed a long way off. Now the federal states have surprisingly agreed on the cornerstones for a reform: According to this, online gambling such as online poker and online casino like QQSlot, which were previously prohibited in Germany, should be allowed in the future. But what exactly does this mean for the gambling industry? Here we explain what you need to know now.

Why do we need a new gambling regulation?

For decades, the German gambling market was strictly regulated – the state had a monopoly on lotto and sports betting, and the business with gambling machines such as the one-armed bandits, for example, was also open to private providers. Above all, however, digitization has shaken up the market: More and more providers of online gambling, many of them from abroad, are now jostling on the billion-dollar market – even though the State Treaty on Gambling prohibits this. Only the state of Schleswig-Holstein took a special path and granted licenses for selected providers, but otherwise, online gambling was illegal. For the state gambling providers, this had serious consequences: The German Lotto and Totoblock, which could also only become active online to a limited extent, had to suffer setbacks in revenues – which also worries the state, because a large part of the revenues of the lottery companies benefits social purposes, such as sports promotion.

What should change now?

Since the black and grey market for online gambling is booming, the pressure on the political leaders in the countries grew: The concern about the slump in sales, but also about the difficult to control market, in which player protection is hardly possible, apparently made them rethink. According to the new draft, online casinos and online poker will be allowed in the future – but subject to conditions. The protection of minors and players is to be improved as well as the prevention of gambling addiction. As early as the beginning of March, the prime ministers are to approve the new state treaty in principle. After ratification by the parliaments of the federal states, the treaty is to enter into force on 1 July 2021.

How big is the online gambling market?

The market for online gambling has been growing extremely for years: According to Statista, gross gaming revenues of 42 billion euros were achieved worldwide in 2017. Due to the flourishing black and grey market, figures for Germany are difficult to determine. According to the survey of the gambling supervisory authorities of the federal states, however, around 1.8 billion euros were sold in licensed online casinos alone, which corresponds to an increase of 36 percent compared to the previous year. The big players in the market include sports betting providers such as Bwin and Tipico, and it is estimated that there are more than 700 smaller providers who offer their products mostly from e-gambling platforms, which are often licensed in Malta or the Isle of Man. If German players use these foreign providers, they have so far made themselves liable to prosecution. But they do it anyway – also because this is hardly sanctioned by the local authorities.

What types of online gambling are affected?

The future regulated online gambling will include digital variants of poker, sports betting, and roulette. The so-called slots, i.e. virtual coin slot machines, have not yet appeared in the draft law. But especially the operators of these slot casinos have invested a lot of money in the German market in recent years and signed so-called streamers on platforms such as Twitch and Youtube. They broadcast their games live and reach a larger, often very young audience.

What does this mean for banks and payment services?

Online payment services and banks are not yet allowed to approve transactions of German players to online casinos. Banks generally reject transfers of this kind, but PayPal and other payment services were usable despite the ban. However, if the recipient is an online casino, the transaction is unlawful and can be contested – even by the sender. This has led to players demanding their lost money back several times in the past and winning in court. Reclaims of this kind are no longer possible with the new regulation and banks can also carry out transactions with licensed online casinos in the future.

How should player protection and addiction prevention be ensured?

To protect players, the stakes in online gambling are to be limited to 1,000 euros per month. From the point of view of experts, this is a rather high sum – especially since winnings made in the game can be used additionally. In addition, all locked gamblers should be recorded in a lock file. The lock file is to be maintained by a cross-border gambling supervisory authority, which is to be recreated in the course of the reform.

In addition, all providers should be obliged to set up a gaming account for each player. In addition, they must keep all relevant game data available to the supervisory authority for control purposes – also with the aim that manipulations of games become recorded. Gambling addiction experts consider the measures to be sensible in principle but criticize the idea of competition, which is introduced by the reform. “The number of licenses will be unlimited, which in turn means that two or three dozen or even more companies will compete for the 1,000 euros maximum stake of customers,” says Tobias Hayer, a gambling addiction expert at the University of Bremen. The companies would then do everything possible to address customers and retain them permanently. “In case of doubt, marketing and advertising are more important than player protection.”


ALSO READ: 5 Business Lessons You Can Learn from Online Casinos