Proposed changes to the German State Treaty on Gambling have been criticised by the European Commission for continuing to breach European law.
The incompatibility of the proposed changes, which were introduced to address earlier issues of incompatibility with EU law, are detailed in a document seen by Gaming Intelligence and come just eight days before the Minister Presidents of Germany's sixteen federal states are due to sign the new treaty.
The changes were designed to lift the previous 20 licence cap on sports betting concessions, which had led to numerous legal challenges and ultimately derailed the licensing process.
The EC said that the proposed changes fail to address the country's sizeable unregulated online casino and poker market, leaving consumers without effective protection. It criticises the states for offering "no viable solutions" to the ongoing issue of how to tackle unlicensed poker and casino offerings, only looking to enforce payment-blocking measures.The EC notes there is no evidence that such measures are effective in protecting minors or other vulnerable groups.
It also highlighted "possible contradictions" in the proposal for sports betting, noting that all operators that passed the initial stage of the 2012 Treaty licensing process would be allowed to continue to serve German players while new licence applicants would have to wait until the new treaty comes into force. This is likely to once again lead to immediate legal challenges as operators would face unequal terms.
The Commission also notes that by allowing as many operators into the market as are eligible, Germany has fundamentally changed the economic conditions under which licensees will do business.
However, it has not changed the operating terms set out in the 2012 Treaty. As a result the Commission urges the states to alter these to reflect the significant size of the market.
This has provoked a furious response from German state lottery association the Deutsche Lotto- und Totoblock (DLTB), a vocal opponent of casino and poker regulation.
DLTB co-chair and Lotto Hamburg managing director Torsten Meinberg accused the EC of going beyond its remit by describing online casinos targeting German players as "unregulated" rather than "illegal."
"The gambling market is subject to clear rules in Germany, which help to protect consumers and combat addiction," Meinberg said. "The EU Commission also expressly acknowledges this is a priority.
"It is wrong, however, if the EU Commission speaks literally of a situation with 'unregulated' online casinos. The EC is wrong when it writes that the online casino market is unregulated - internet casinos are prohibited in Germany, as is playing on these sites."
Meinberg says the comments are particularly "irritating" as the EC appears to be advocating an expansion of gambling regulation, something that is beyond its remit.
"This is not the responsibility of the European Commission, because it does not fall within its scope," Meinberg added. "This is solely the responsibility of the German states."
The EC opinion puts the German Minister Presidents into a complicated position, as they are effectively being asked to approve legislation next week that could well be challenged before the European Court of Justice.
"Things are more chaotic than ever before," an individual involved in the process told Gaming Intelligence. "You have to be actively working towards consumer protection standards now, rather than in the future. According to the EU, only Schleswig Holstein's legislation is doing this. They have to push for major reform now. There's no way out."
Germany's Telecommunications and Media Association (DVTM) agrees that reforms are now inevitable due to the importance of consumer protection.
"The DVTM Codex [code of conduct] states that all members must meet the EC's recommendations for consumer protection standards," association chair Renatus Zilles said. "This recommendation was set out in July 2014, and all DVTM members, including online poker and casino operators, are already in compliance with this requirement. We simply cannot ignore consumer protection controls - the EC's position is clear."Gaming Intelligence