On the day Donald Trump was re-elected as the President of the United States, Germany's troubled coalition government collapsed in a dramatic fashion, sparking concerns of early elections next year.
However, for the German regulated igaming operators who have been in the market since 2021, there has been little change over the past three years.
At a gambling conference in Berlin, operators and legal experts expressed their regret about the ongoing challenges faced by the regulated market. Major complaints include strict limitations on product offerings, taxation on stakes instead of winnings, limits on bets and deposits, and stringent advertising regulations.
Jörg Hoffmann, a senior partner at Melchers & Melchers, summarized the situation regarding the stagnation of German online gambling regulation.
"Since we last met here last year, not much has changed," he said. "I think it's business as usual."
As the name suggests, the German Interstate Treaty on Gambling (2021) was ultimately a compromise among numerous politicians from the country's 16 federal states. This means that, just like the original treaty took years to be agreed upon, the political deadlock has solidified its status quo.
Stagnant Market
Germany's two most prominent trade bodies believe that overregulation has led to a stagnation of the German gambling market.
Dirk Quermann, president of the German Online Casino Association (DOCV), described the "alarming" data indicating that revenues will "significantly decline" from 2022 to 2024.
Despite Germany being the largest economy in Europe, the number of licensed online slot operators is only 39—far fewer than other similar jurisdictions.
"Several large multinational companies are avoiding the market," Quermann stated.
Mathias Dahms, president of the German Sports Betting Association (DSWV), also told a similar story. According to Dahms, gambling revenue from licensed sports betting in Germany plummeted from €9.4 billion in 2021 to €7.7 billion in 2023, indicating a concerning long-term trend.
Both industry organizations believe that this decline is not largely due to a reduction in gambling. It is more about a strong trend of moving from the legal market to the illegal market. Nevertheless, they are still struggling to make regulators aware of the scale of the current issues.
How Big is the Black Market?
One of the biggest questions in the debate around the German gambling market is how successful—or unsuccessful—the channeling efforts have been.
According to data released by the Federal Gambling Regulatory Authority (GGL), attempts to channel players to licensed operators have largely been successful. GGL's data shows that black market operators only make up 10% of the German market, while regulated operators hold a 90% market share.
These figures directly contradict numerous other studies and estimates, which suggest that illegal operators hold a larger market share within Germany.
One such study—the 2023 Schnabl study commissioned by DOCV and DSWV—based on the time internet users spend on various gambling websites, found the channeling rate to be only 50%. Meanwhile, Yield Sec, a platform mapping the real-time growth of the global gambling market, last year estimated the black market size at 47%.
Searching for Unlicensed German Gambling Venues
Intelligence and data consulting firm H2 Gambling Capital conducted more recent research on the market and compared its findings with those of GGL.
Looking at the average gambling expenditure per adult in 2023, H2 found significant differences between physical gambling expenditure and online gambling expenditure, as well as between Germany and other similar markets.
In 2023, Germans spent an average of €93 on physical gambling (comparable to €95 in the Netherlands), but the figure for online gambling was unusually high, with an average expenditure of only €23 per person. This suggests that a large portion of players' online gambling budgets is being spent in the unregulated market.
Josh Hodgson, a senior partner at H2 Gambling Capital, explained, "We believe the gap between the legal market in Germany and other regulated markets is too large, making it impossible for there not to be a substantial illegal market."
Similarly, there are indications that German players are actively seeking unlicensed operators to circumvent strict controls, such as a €1 bet limit, a €1,000 monthly deposit limit, or a 5-second spin delay on slot machines.
In one month, the affiliate website iGaming.com recorded 18,000 explicit internet searches for unregulated products, while searches for licensed products were only 1,500.
GGL has noted these disparities. At the German Gambling Conference, GGL director Ronald Benter acknowledged the gap and announced that the regulator has commissioned a study to determine the true channelization rate. Additionally, a review of the Interstate Treaty on Gambling, which will be released in three years, is also underway.
However, industry stakeholders are skeptical about the time required for these studies and whether they will bring about meaningful changes.
A Small Step Forward
For German licensed operators, there have been some signs of progress over the past year or so, giving them a glimmer of hope.
For instance, the Sports Betting Association DSWV has been working closely with GGL to expand the list of products operators can offer, with 200 new sports markets to be added this year.
In the future, the process of adding new markets might also become faster.
As communication channels between the industry and regulators remain open, industry bodies believe that GGL should play a more forceful and proactive role in promoting legislation that can facilitate channelization.
For DOCV's Quermann, this would involve advocating for the abolition of the 5.3% stake tax, which makes regulated slots far less competitive than unregulated ones.
Many wonder whether the regulator can play such a proactive role, free from the shadow of government politicians. This could be the decisive factor in whether the German industry thrives or merely survives.
