The Hearing before the Federal Constitutional Court in the Case of Sports Betting

Rechtsanwalt Martin Arendts, M.B.L.-HSG

Arendts Rechtsanwälte
Perlacher Str. 68
D - 82031 Grünwald (bei München)
The line of reasoning of the Free State of Bavaria and the other defendants of the state monopoly is relatively simple. Very self confidently the Bavarian under-secretary proclaimed that only the state could guarantee gaming without manipulation. With the state monopoly the „market model“ of commercial profiteering was dismissed. Private operators pursued a „rampant expansion“. Only the legal ODDSET offer can prevent „illegal offers“ by private operators (which does constitute a certain circular argument).

The president of the State Lottery Administration in Bavaria (Staatliche Lotterieverwaltung), Mr. Horak, also referred to social control when placing wagers in a receiving office. This was a room „familiar“ to the customer. In addition, the lottery administration printed an „addiction flyer“ referring to the Federal Agency for Health Protection. Advertising for state gambling simply constituted sovereign administrative action (this caused some exhilaration with the court). The state had to advertise so intensely in order to keep up with the private operators.

The complainant’s (Mrs. Irene Katzinger-Köth’s) and the supporting bookmakers associations‘ line of arguments proved to be more sophisticated. The complainant, a former stock broker, acting as a bookmaker for many years, referred to the inconsistent state behaviour. According to the states‘ presentation gambling was not desired, whereas state operators constantly offered new products (like „Quicky“) and advertised them massively. With regards to this inconsistent behaviour the case was also about restoring credibility.

She was unable to further exercise her profession as a bookmaker when limited to offering horse bets (legal in accordance with the RWG, a federal act dating back to 1922). Her turn-over with horse betting had declined by about 70%. Since she had – probably as the only bookmaker – not conveyed any sporting bets with regards to the court’s authority, she was now in the red (as she mentioned in her final statement).

For the bookmakers associations attorney-at-law Bongers referred to deficits in the execution of the constitution. Horse betting and sports betting were the same economically as well as from a point of view of their structure. After all one could simply extend the application of the RWG, which has been in place for over 80 years to sports betting. For sports betting one could apply the same criteria for dependability. In addition, sports betting did not pose an elevated risk potential. Therefore the unequal treatment were not justified.

With regards to addiction prevention the complainant referred to structural problems. The responsible minister of finance and the fiscal administration normally pursued other goals than the reduction of state revenues. There were almost 27,000 receiving offices (in comparison there are only about 12,000 post offices in Germany). The state operators enlarged their offer constantly by offering new products. New customer groups were addressed. The state gaming offer is being advertised for massively, even more massively than products of other private companies. More than 2% of the turnover is being spent for advertising ODDSET (including sponsoring).

With regards to consumer protection and hazard prevention the complainant referred to the missing regulation concept. In the end, a fox is set to keep the geese if the supervision is left to the ministry of finance. The consumer could be protected sufficiently by implementing licensing requirements such as the personal dependability of the bookmaker and by compulsory information and transparency requirements. Consumer self-protection could be achieved by limiting the wager. Insolvency protection could be reached by obliging bookmakers to offer security (as implemented in the Austrian model) or by creating a security fund (as for banks and investment service companies). Protection against betting fraud was the very own interest of private bookmakers. They had implemented an early warning system which has already proved its worth.

The execution of games by private operators under supervision of a supervising body and stipulations to be complied with issued with the license were definitively milder means and therefore to be considered during the examination of the proportionality of the state monopoly. One did not want a “law free zone” but a stringent and transparent regulation equivalent to the successful model of the RWG.

Regarding the financing of projects of the general welfare, the complainant pointed out, that this could not constitute a justification for limiting the freedom to choose one’s profession. State could generate funds by other means. Insofar the „purpose yield model“ could be imagined.

With respect to the special questions related with conveying bets the bookmakers associations pointed to the fact that receiving offices for the state gaming offer did not possess a license either. Insofar the private betting offices followed the state model. At the same time, conveying was, under criminal law, not operating and therefore not liable to prosecution. For the rest, it was more than questionable to continue to use the penal provision of Art. 284 German Criminal Code as a general provision in order to justify administrative action (notably orders of prohibition).

The future will show if and in how far the Federal Constitutional Court will follow the invoked arguments. As we have already mentioned in our last newsletter „German Gaming Law updated“, the Federal Constitutional Court regards the state behaviour as contradictory after all. In fact one can hardly present sports betting as absolutely normal in advertisements and on the other hand argue that this behaviour is socially undesired. Nonetheless, the court sees the problem of an amplification of the addiction problem as a result of liberalisation. Therefore in my opinion, the complete liberalisation of sports betting seems unlikely.

The Federal Constitutional Court might more likely instruct the legislator to enact a regulation in conformity with the constitution. This would constitute a term of expiration for the state monopoly. At the hearing it was discussed what such a future legal regulation could look like. The complainant and the bookmakers associations pointed out that it were not up to them to develop such a solution. In accordance with the legislator’s prerogative the design of the future regulation will be left to him. However, admitting private operators pro forma while not issuing licenses in practice (as suggested by the representatives of the state monopoly off the hearing) would probably not be sufficient. Such a regulation would be unsustainable with regards to constitutional as well as with Community Law.