The Court of Justice of the EU (the "Court of Justice") has delivered a judgment in a series of joint cases that questioned the legitimacy of the organisation of betting and lotteries in Germany, stating that the current state monopoly on gambling is "unjustifiable" and against EU laws.
In Germany, jurisdiction over gambling is shared by the federal State and the individual Bundesländer (Länder). In most cases the Länder have a regional monopoly for the organisation of sporting bets and lotteries which is run by public monopolies, while bets on horse racing and the operation of gaming machines and casinos are licensed by the Länder to private operators.
The German public gambling monopoly was governed by the German treaty on lotteries (Lotteriestaatsvertrag), and later, the German treaty on games of chance (Glückspielstaatsvertrag), which disallows all organisation or intermediation of public games of chance on the internet. Eight online gambling providers challenged this law in various German administrative courts, who in turn asked the Court of Justice to rule on the compatibility of the German restrictions on games of chance with European Union law.
In previous cases, the Court of Justice has held that restrictions on gaming activities might be justified by imperative requirements in the public interest, such as consumer protection and the prevention of both fraud and incitement to squander money on gambling. Such restrictions on the EU principles of the freedom to provide services and the freedom of establishment can only be justified on the condition that they are suitable for ensuring the achievement of the said objectives by contributing to limiting betting activities in a consistent and systematic manner. The said restrictions need to be both suitable and must be limited to the restrictions necessary for that purpose. The Court of Justice has held that the national courts need to ensure that the consistency and the systematic manner of the restrictions are safeguarded.
In its judgment this week, the Court of Justice ruled that in the present cases, the German rules do not limit games of chance in a consistent and systematic manner. Germany had undermined its consumer-protection argument by letting state-run gambling companies engage in "intensive advertising campaigns" and by permitting a proliferation of privately operated automated gambling machines, which the Court of Justice said were highly addictive.
The Court of Justice held that: "In such circumstances, the preventive objective of the state monopoly can no longer be pursued, so that the monopoly ceases to be justifiable".
The Court of Justice went on to state that the national rules are contrary to the fundamental freedoms of the EU and cannot continue to apply during the time necessary to bring it into conformity with EU law.
Although this statement in isolation may sound as if the state monopoly on gambling is a thing of the past, the Court of Justice stressed that Member States have a broad discretion in determining the level of protection against the dangers emanating from gambling. Member States are not required to recognise authorisations issued by other Member States in that area and may also prohibit internet gambling.
It remains to be seen whether this judgment will lead to an opening of the German lottery and betting on sports events or whether the German monopoly will rather limit its advertising campaigns and introduce stricter controls on casino gaming and gaming machines in order to control gambling in a consistent and systematic manner.
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