European Court Ruling Benefits the Maltese E-Gaming Industry

The highest EU Court has ruled that Germany’s monopolistic online gambling laws breach EU Law, and are inconsistent and do not justify the use of state monopolistic practices. The Court stated that the regulations were not designed to protect public interest.

When ruling on three cases referred to it by German courts, the European Court of Justice (ECJ) found that while state monopolies can under some circumstances be justified, Germany’s actions in promoting gambling are inconsistent with its claimed goal of protecting its nationals from the dangers of the consequences which could derive from online gambling use.

“The German rules on sporting bets constitute a restriction on the freedom to provide services and the freedom of establishment,” the Court found, adding: “The public monopoly of the organisation of sporting bets and lotteries in Germany does not pursue the objective of combating the dangers of gambling in a consistent and systematic manner.”

The ECJ ruling has decided against the EU Member States that have been restricting their gaming and lotteries’ market to keep out the online gaming industry, an area in which Malta has become a leader.

The suit was filed by several foreign betting companies attempting to break into the German gambling market. The Court held that while monopolies are sometimes justified, Germany’s “intense advertising” in its gaming operations cause the regulations to fall outside the intended scope of consumer protection. Due to the broad scope of the regulations, the Court determined that the German gambling laws were not compatible with EU Law on service provisions and games of chance.

In this ‘landmark’ judgment, the ECJ ruled that the German state monopoly on most forms of gambling was “unjustifiable” and had to be ended at once because it was neither consistent nor systematically applied. This can pave the way for online betting companies based in other EU Member States, such as Malta, to penetrate the lucrative German market.

The Court’s conclusions that “German rules do not limit games of chance in a consistent and systematic manner”, among others, confirmed the authority’s contention that online gaming raised questions on compatibility with the EU Treaty.

Under German rules, only the country’s federal states or companies run by them could offer most gambling services. This monopoly in the past brought billions of Euros into state funds and was partially used for social, cultural and sporting projects.

A number of private firms, (including one based in Malta), challenged the German rules, arguing they were inconsistent because Germany exercised a monopoly on most forms of gambling but not on other forms, such as slot machines and casinos.

Following its recent judgments in similar cases over the past years, the ECJ had been expected to throw out the case, as it had already ruled that gambling monopolies, in a number of other EU States were legal.

The ECJ has now ruled that since “the German rules do not limit games of chance in a consistent and systematic manner… the monopoly ceases to be justifiable”. Germany had to end the monopoly immediately.

The ECJ is expected to rule on a similar case challenging Austrian gambling restrictions in the near future.

This ruling is likely to benefit Malta, which hosts a large number of E-Gaming companies with markets across the world.