The Federal Court of Justice of Germany (BGH) faced a crucial hearing this past month, tasked with determining whether unregulated gambling operators should be mandated to refund player losses. This anticipated hearing, however, was unexpectedly scrapped when the defendant, an Austria-based sports betting operator, decided to withdraw its appeal.
This abrupt development follows a significant ruling in a regional court last week concerning player reimbursement lawsuits. The regional court’s decision has now mandated that all German civil courts, including the BGH, are required to either suspend such cases or submit them to the European Court of Justice (ECJ). This wide-ranging directive was spearheaded by the renowned German law firm Hambach & Hambach.
As a direct consequence, pivotal issues relating to online sports betting and online casinos in the context of EU law are slated to be addressed by the ECJ. The European court stands as the final arbitrator on such matters, and its forthcoming decisions will thus set substantial precedents within the European gambling regulatory landscape.
The BGH has found itself under scrutiny amidst these developments, with criticisms aimed at its perceived reluctance to refer cases to the ECJ. Observers point to a ruling from March, where the BGH neither suspended nor submitted a sports betting case, which sparked concerns about potential legal ambiguities. The absence of a definitive EU law decision until regional courts’ involvement further complicated the situation.
Partners at Hambach & Hambach, Claus Hambach and senior associate Phillip Beumer, have expressed apprehensions about the potential ramifications of ruling in favor of player reimbursements, warning that it could set a problematic precedent within Germany.
“Mass media reports have already picked up on the Federal Court of Justice’s latest note,” stated Hambach & Hambach. “According to representatives of the ‘player claim industry,’ this might now lead to a deluge of complaints and subsequent court cases.
. Given the prevalent media reports and advertising, there is a tangible possibility of an influx of financed claims, extending now to sports betting losses as well as casino losses.”
Adding fuel to the fire, Hambach & Hambach voiced concerns that reimbursing players for their losses may inadvertently bolster the black market’s growth.
“Germany’s already substantial black market could grow even further. Should players be refunded for their losses with unlicensed operators, it would likely incentivize them to gravitate more towards these unregulated spaces, essentially creating a gambling environment devoid of risk.”
A study conducted by the University of Leipzig in 2023 highlights the severity of the issue, revealing that nearly half of all online gambling in Germany transpires through offshore operators. The study found the channelisation rate—a measure of gambling activity within regulated environments—stood at just 50.7% for online spaces. Alarmingly, it indicates that three-quarters of the online gambling revenue is generated by the black market, leading to a missed opportunity of hundreds of millions in tax revenue for the German state.
In response to these revelations and the potential ripple effects of legal decisions, both the German Online Casino Association (DOCV) and the German Sports Betting Association (DSWV) have urged the German gambling regulator (GGL) to take immediate action. They recommend making onshore operators more appealing to players, thus driving demand towards regulated platforms.
The unfolding situation in Germany could echo widely across Europe, influencing regulatory practices and the handling of unregulated gambling operations within the EU. As the ECJ prepares to take on these pressing issues, the gambling industry—both legal and illegal—awaits the implications that such judicial decisions could usher. The hope is that, through a concerted effort by regulators and industry stakeholders, a more balanced and legally sound framework can emerge, potentially mitigating the black market activities and safeguarding player interests more effectively.
