As the new coalition government in Germany is about to take office, combating the rampant illegal gambling market has become a key target in its governance agenda.
Although this goal is only briefly mentioned in the coalition governance agreement, industry insiders generally believe that this move may mark a major turning point in Germany's gambling regulatory policy.
New Alliance Commits to Combating Illegal Market with States
According to the coalition governance agreement announced on April 9, the future federal government promises to work together with the 16 federal states to "strengthen the fight against illegal gambling." This policy will officially advance after the new government takes office on May 6.
The new government faces challenges not only in the gambling industry. Economic slowdown, population aging, and a bloated bureaucratic system continue to drag down national development. To revitalize the German economy, the coalition government plans to launch a 500 billion euro infrastructure fund, optimize the tax system, and encourage workforce participation.
Illegal Gambling Market Surprisingly Large, Lack of Regulation the Main Cause
According to data from the intelligence platform Yield Sec, the illegal gambling market in Germany is continuously expanding. In 2023, about 1620 unlicensed operators were active in the German market, reaching over 13.5 million users. By 2024, this number is expected to grow to 1926 operators, affecting 15.8 million people, accounting for one-fifth of the national population.
Yield Sec estimates that in 2023, about 4 billion euros of Germany's total gambling revenue came from the black market, accounting for 54%. However, CEO Ismail Vali believes the real percentage could be as high as 88%. Compared to other countries, German consumers are nearly five times more likely to access illegal gambling sites.
Legal Market Restrained, Illegal Platforms Take Advantage
Since the "Interstate Gambling Treaty" took effect in 2021, German gambling regulation has been standardized, but due to decentralized regulatory authority to the states, cumbersome approval processes, and heavy tax burdens, legal operators face many constraints. For example, online slot machines are prohibited from using the word "casino," and both betting amounts and frequencies are strictly limited.
In contrast, illegal platforms are not subject to any regulatory constraints, can offer up to nine times the product variety of legal platforms, and require no real-name verification, unlimited betting, or any self-protection mechanisms.
Can Federal Intervention Break the Interstate Deadlock?
Legal expert Wulf Hambach believes that the involvement of the federal government could be a key step in pushing for gambling regulatory reform. For a long time, some state governments have held conservative attitudes towards gambling, opposing the relaxation of regulations, such as the Interior Minister of Bremen calling for a complete ban on gambling advertising.
However, at the federal level, especially parties like the CDU, the attitude is relatively rational. Hambach points out: "National-level pressure may force local governments to re-examine the status quo, especially in terms of financial support and combating cross-border crime, the federal role is crucial."
Industry Calls: Build a Strong Legal Market
The German Online Casino Association (DOCV) and the German Sports Betting Association (DSWV) both welcome the new government's mention of illegal gambling, but at the same time emphasize that political promises alone are not enough.
DOCV Chairman Dirk Quermann states that the government should cooperate with the industry to turn political visions into real actions. His proposals include:
Changing the tax on virtual slot machines from a betting amount tax to a GGR tax;
Removing the 1 euro limit per bet;
Relaxing the 5-second limit per spin;
Using IP blocking and other technical means to combat illegal sites.
DSWV also proposes five suggestions, including establishing a national prosecutor's office, combating advertising platforms and black market alliances, and strengthening enforcement measures.
Both associations agree: Only by strengthening the legal market can the black market space be truly compressed.
Fiscal Pressure Drives Policy Shift?
Germany faces a severe fiscal shortfall, and the gambling sector, especially the illegal market, could be a potential source of revenue. Tipico gambling director Christian Heins estimates that if the government effectively regulates the illegal market, it could bring about 1 billion euros in new revenue each year, and possibly recover billions of euros in tax revenue losses from previous years.
Heins also points out that illegal platforms have frequently infiltrated mainstream sports events and marketing activities, and if the government does not act quickly, it will miss the best opportunity to regain market control.
Conclusion: A Turning Point, or a Missed Opportunity?
The German gambling industry is currently at a critical crossroads. If the federal government can fulfill its promises, coordinate states to advance reforms, strengthen the legal operating system, and accurately target illegal platforms, Germany has the potential to establish a healthier, fairer, and more transparent gambling market.
However, if political consensus cannot be reached in time, the expansion of the illegal market will continue to devour the living space of the legal industry, which is a policy failure the new government cannot afford.
