Raising the stakes: Germany and Russia introduce sweeping changes to domestic sports betting and gambling law regimes

Sports betting legislation has recently been approved in each of Germany and Russia, but pushing in very different directions. In Germany, a new interstate treaty on gambling liberalises the online gambling market with licensing extensions, but subjects gambling operators to significantly tighter restrictions with a view to protecting consumers. Meanwhile, new Russian legislation seeks to divert profits from the sports betting industry to subsidise Russian sport, requiring operators to pay a percentage of turnover to national sports bodies and creating a new sports betting regulator and centralised hub for processing betting payments.

In this post, we consider some of the key developments in sports betting law in these jurisdictions. See here for our earlier update on UK developments.

Germany

German gambling law has been quite the rollercoaster to follow in recent years. Persistent criticism from the European Commission, turbulent proceedings concerning sports betting licenses and a layered web of federal legislation are just some of the factors contributing to its complexity.

The saga of the German Interstate Treaty on Gambling (Glücksspielstaatsvertrag, or GlüStV) started with its initial entry into force in January 2008. With most of the gambling related matters falling within the competence of the German federal states, the framework had to first be negotiated and agreed upon between all 16 state governments, each with their own political interests. As a second step, the GlüStV was then implemented and bolstered by state legislators.

Following lengthy discussions, in March 2020, the federal states agreed on a brand new inter-state treaty (Glücksspielstaatsvertrag 2021, or GlüStV 2021), set to supersede the current version of the GlüStV as of 1 July 2021. The GlüStV 2021 cleared its final hurdle in April 2021: following its formal (and mandatory) notification to the EU, the treaty had to be ratified by at least 13 federal states by 31 March 2021 and by the state of Saxony-Anhalt as the seat of the joint supervisory authority for gambling.

What to expect from the GlüStV 2021

The previous version of the GlüStV already introduced the issuance of sports betting licences. After turbulent proceedings (including a temporary moratorium on licence issuance due to discrimination and a lack of transparency) the first licences were issued in the autumn of 2020.

The GlüStV 2021 now further progresses the (formal) liberalisation of the online gambling market in Germany, including by introducing a framework for operators to obtain licences for online poker and virtual slot machines. The treaty includes strict requirements on eligible games and their design, e.g. on the height of stakes, stacks and blinds or the number of playable sessions and tables.

The award of licences for online casino games remains outside the scope of GlüStV 2021 and will be subject to separate regulation from individual federal states. The GlüStV 2021 only provides for certain boundaries in relation to eligible organisers, permissible games as well as the possibility of interstate cooperation. Gambling operators will in all these cases have to safeguard geographic accessibility limits to ensure compliance with likely incoherent state legislation.

More generally, the GlüStV 2021 will come with further restrictions for online betting and gambling, including:

• The introduction of a cross-provider deposit limit of EUR 1,000, supported by a player blocking system and centralised player file, which has already led to severe data protection concerns. It will also result in additional administrative complexity and potentially eat into revenues for online gambling providers.

• The separation of different types of gambling on websites, waiting periods between games and the ban of parallel cross-provider gambling.
• The new treaty consolidates existing restrictions on gambling-related advertising, including adverts addressing vulnerable groups (e.g. children or gambling addicts), prime-time bans of online gambling adverts on TV, radio and internet platforms, and a ban on certain sports betting adverts before or during live sports broadcasts.

Despite the widespread criticism and the continuing patchwork of rules between federal states, the new GlüStV will provide more legal certainty for online betting and gambling operators and other businesses active in the gambling sector, such as payment services providers.

Russia

In contrast to gambling, which is only permitted in five special “gambling” zones in Russia (primarily located outside of major cities), sports betting is generally allowed subject to licensing and certain other requirements (e.g. minimum charter capital thresholds) being met by the betting companies.

In December 2020 a new law was adopted in Russia enhancing the current regulations on gambling and sports betting. The key novelties are:

• Payments to Russian sports federations: betting companies must now pay national sports federations and professional sports leagues 1.5% of their quarterly turnover (i.e., all wagers received in that quarter) from organising bets on sporting events, in any case no less than RUR 30 million (c. USD 400,000) per quarter.

• New regulator: a new gambling regulator was introduced – the “Unified Regulator for Gambling”, a public law company incorporated in the Russian Federation. The new regulator – will be primarily responsible for collecting and transferring payments from betting companies to Russian sports federations. It will also be tasked with monitoring and identifying unlicensed operations and upholding industry standards for licensed operators.

• Unified centre of betting accounting: a Russian credit organisation was appointed by the President of Russia to be the unified centre of accounting for all betting activities. All betting companies must enter into an agreement with this unified centre which will act as a centralised hub for accounting and transferring wagers and pay-outs between customers and the betting companies, as well as facilitating the transfer of payments from betting companies to sports federations and leagues.

The rationale behind the new law is to find an additional source of financing for the Russian sports industry, which is claimed to have been dramatically damaged by the COVID-19 outbreak, among other factors. The law will enter into force in September 2021.

Comment

These developments are emblematic of an ongoing global trend of enhanced regulation in sports betting and gambling laws. While new legislation arguably brings greater clarity to existing legal frameworks, it appears likely that operators will need to be mindful of further sweeping legislative developments and newly established or empowered regulators across the world.

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