German punters wagered 7.8 billion euros last yearImage: picture-alliance / Sven Simon
Online sports betting
May 26, 2010
Don't bet on Germany fully liberalizing its state-run gambling monopoly anytime soon. But there is a good chance the country will amend its restrictive gambling legislation to boost revenue and its control of the sector.
Another World Cup soccer tournament is just around the corner. Events like these are not only exciting to watch; they're also a fun and sometimes lucrative event for gambling.
In a couple of weeks, soccer fans across Germany will be placing their bets. Some will go down the legal path and use one of the country's sports betting monopolies such as Oddset. Numerous others, however, will place bets, illegally, with private online companies registered outside the country.
Why? The answer is pretty simple: These operators offer more options and better odds.
Germany's State Treaty on Gambling was approved in 2008 for several reasons. One of them was to curb what many policymakers felt was a growing incidence of gambling addiction. Another, which critics say is the main one, was to ensure the state receives a good chunk of the revenue.
Essentially, the law bans web-based betting, with the exception of wagers on horseracing, and severely restricts other forms of gambling to state-run operators, including Oddset. It also forbids advertising these services.
To what extent the legislation has stifled gambling is unclear. But it has put a hole in state coffers. Since the introduction of the gambling treaty, the market for unregulated gambling, such as online betting, has blossomed.
Of the 7.8 billion euros that Germans wagered in 2009, only 240 million euros went to the state-owned sports betting operators and 250 million to the horseracing operators, according to new market research by Goldmedia. Some 94 percent of the market went to private companies outside Germany.
"In search of better online options"
Goldmedia analyst Michael Schmid points out that younger generations are attracted to online sports betting services.
"Germany is a big market but offers from the state-run operators aren't very attractive," he said. "More players will continue to leave the country in search of better online options. This segment will grow."
Some estimates put the number of German online gambling fans as high as 2.2 million and growing.
In another study, Professor Ulrich Schmidt from the Kiel Institute for the World Economy calls for Berlin to completely liberalize the betting market and allow state-owned operators to compete with private companies.
"We're losing revenue in Germany," he said. "Why leave this to private companies outside the country? Why not allow them to operate here and pay taxes? In a world of online services, where customers can roam relatively freely, monopolies are vulnerable."
The Olympic Sports Federation has also called on Germany to end its sports betting monopoly.
Empty state coffers
The State Treaty on Gambling comes up for renewal next year. Numerous politicians, with an eye to empty state coffers, are discussing the need for change. Some would like to see Germany follow in the footsteps of the United Kingdom and abolish the gambling monopoly completely.
The European Commission has also taken issue with the German ruling. Under European Union law, governments are allowed to legislate against gambling if, for instance, they are concerned about addiction. But critics say the German law is primary designed to protect state-owned gambling providers from private-sector competition.
Perhaps the World Cup that starts next month is too early for Germans to start thinking about placing bets online in the country. But the European Football Championship is another opportunity just two years away. And who knows how desperate the German government will be for additional revenue streams by then.