SECURITY DEPOSITS
(Staatsvertrag zur Neuregulierung des Glücksspielwesens in Deutschland) (ISTG) 2021 was introduced as the fourth version of the German online gambling treaty. Before this, each Federal State of Germany had its own regulation. Despite being in place since 2012, the previous treaties failed to unify all German states, leading to uncertainty among both players and operators. With the Gemeinsame Glücksspielbehörde der Länder (GGL) now regulating since January 2023, a more consistent landscape is being persued, however, some argue it added confusion. For example, each state can still decide whether or not they will provide licenses for the provision of casino games, or if this type of license will remain exclusively in state hands. 2 Consequently, while regulation has become more uniform, exceptions to the rules have made navigating the German online gambling landscape a challenge for operators. Rethinking security deposits On top of the labyrinthine regulatory environment, when it comes to the licensing process, operators face another challenge. ISTG 2021 requires all license applicants to provide a security deposit of EUR five million or higher (up to EUR 50 million) to the GGL. 3 GlüStV 2021 (translated) states: „The granting of the permit requires that the applicant provides security in the form of an unlimited, self-liquidating bank guarantee from a credit institution located in the European Union or in a contracting state of the Agreement on the European Economic Area, to ensure payment claims of the players and state payment claims. The security deposit amounts to five million euros. It may be increased by the authority granting the permit up to the amount of the expected average turnover for one month, but no more than 50 million euros.”
The security deposit is required despite the fact that, during the application process, operators are already thoroughly vetted as to their financial stability. As such, having to deposit EUR 5 million or more to the GGL seems excessive, while outstanding player amounts can be secured in more effective ways. Insisting that all companies, no matter their size or financial position, pay a uniform deposit creates an unfair advantage for larger companies over smaller ones that may not have access to such large amounts of cash. Furthermore, the security is required to cover state payment claims, not just player protection. In that case, one might wonder why such a high level of background research is involved in the application process when an applicant could simply put forward cash. Germany claims that its regulation, similar to other regulated jurisdictions, aims to guide players away from the black market towards the regulated market. Unfortunately, the current numbers on the German market do not show much progression in that regard, a situation that is caused in part by a limited number of licensed operators and a
less attractive offer for players. 4 Practical case study
Frustration at the current challenges of operating in the German market have drawn criticism. Despite this, the GGL, in contrast to many other regulators, has shown that they are willing to listen to the industry. When a joint group of industry professionals and lawyers presented the GGL with a new method for providing the security deposit, they found that the regulator was open to discussion and showed a keen interest. The method presented to the GGL entails a new form of guarantee, designed to be proportionate for all companies, big or small, which combines a foundation (stichting in Dutch) 5 for the safeguarding of player funds with a bond insurance
2 Hofmann, J., Spitz, M. and Hamburg, M. (2023). Gambling Laws and Regulations Germany 2024. ICLG. Global Legal Group. Available at: https://iclg.com/practice-areas/gambling-laws-and-regulations/germany 3 Staatsvertrag zur Neuregulierung des Glücksspielwesens in Deutschland 2021, 4c.3. Available at: https://www.gluecksspiel-behoerde.de/images/ pdf/201029_Gluecksspielstaatsvertrag_2021.pdf. 4 Deutscher Sportwettenverband (2023). New study: State Treaty on Gambling misses targets. DSWV. Available at: https://www.dswv.de/ neue-studie-glucksspielstaatsvertrag-verfehlt-ziele/. 5 A stichting is an orphan entity in the Netherlands, closest English translation being foundation. It is most commonly compared to an anglo-saxon trust, without capital or owners, that may be used for multiple purposes. In this it is not used as a trust with a trustee, or even an entity that may use the funds it holds for investments, but solely as an entity managed by a board of directors and supervisory board members to hold third party
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IMGL MAGAZINE | APRIL 2024
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