Criticism of the ‘standstill’ in the German gaming market from the industry

This year's ‘Gaming in Germany’ conference took place in Berlin in November. Every year, members of the gaming industry come together for this event to discuss the German market. Problematic topics are always up for debate. The 2024 edition was apparently particularly controversial. As can be read in the international trade press, the two major German industry associations clearly criticised the development or non-development of the local iGaming landscape: according to them, illegal offers are on the rise.

This year's ‘Gaming in Germany’ conference, which took place at the prestigious Hotel Adlon Kempinski in Berlin, had the promising motto ‘Moving forward in a highly regulated market’. However, the optimism of the motto was in stark contrast to the discussions on site. The focus was on the opportunities for regulated iGaming in Germany. However, as reported by the international trade press, the discussions were dominated by frustration and criticism.

• The leading German industry associations in particular, i.e. the German Online Casino Association (DOCV) and the German Sports Betting Association (DSWV), used the stage to address alarming weaknesses in the German gambling system. From the perspective of the regulated providers that have been officially operating in Germany since the introduction of the State Treaty on Gambling in 2021, there has been no real progress. Instead, the hurdles are becoming ever greater, with illegal operators increasingly establishing themselves.
• Legal experts such as Jörg Hoffmann, Senior Partner at the law firm Melchers & Melchers, described the German market as stagnating - a term that was used several times during the conference. Hoffmann aptly summarised the situation by speaking of a ‘standstill’ in the regulation of online gambling. The criticism is aimed at key elements of the current legislation, including the tax structure. While most European countries tax winnings, Germany levies taxes on stakes. This leads to regulated providers having poorer payout ratios compared to illegal platforms, which drives many players to unregulated offerings.

⚠️ The German gaming sector is often described as potentially Europe's largest iGaming market. However, it is primarily unregulated providers that are currently benefiting from the immense opportunities, according to press reports.

✋ Industry representatives emphasised that the strict regulations are systematically slowing down the regulated market. The ‘disruptive factors’ restrict the growth and competitiveness of local providers: This emerged from various statements at the conference.

❌ The meeting was also intended as a platform for suitable solutions. However, these were criticised rather than constructively promoted.

The result: a disappointing summary that once again highlights the need for action by the German authorities and politicians.

Industry associations certain: Germany is increasingly playing in the illegal sector

According to leading industry associations, the ‘over-regulation’ of the German gambling market is leading to a dangerous trend: more and more players are switching to illegal platforms.

• Dirk Quermann, President of the German Online Casino Association, spoke of ‘sobering’ revenue figures at the ‘Gaming in Germany’ conference: Between 2022 and 2024, the revenue of licensed online casinos would have decreased significantly. At the same time, the number of licensed online slot providers remains alarmingly low at just 39 - especially in comparison to other European markets of a similar size.
• Mathias Dahms, President of the German Sports Betting Association, emphasised the severity of the situation: the turnover of licensed providers fell from 9.4 billion euros in 2021 to 7.7 billion euros in 2023.

Both organisations emphasised that a decline was unlikely due to falling demand for gambling. The falling figures would rather signal the migration of players to unregulated offers. Despite this worrying development, the Joint Gambling Authority of the federal states (GGL) does not appear to fully recognise the seriousness of the situation.

Debate on the channelling rate: official figures vs. third-party studies

A central point of criticism at the Berlin conference was also the question of how successful the current regulation actually is in channelling players to licensed offerings.

According to the GGL, the channelling rate - i.e. the proportion of users who are active with legal providers - is a whopping 90 percent. However, this optimistic assessment contradicts other studies, the results of which were presented during the conference.

• Schnabl study: On behalf of DOCV and DSWV, a study was conducted at the University of Leipzig in 2023 under the direction of Professor Gunther Schnabl, which revealed that only around 50 per cent of gaming time in Germany is spent on regulated platforms. We reported in December 2023 that the DOCV called for drastic changes to the GlüStV following the survey.
• Data from Yield Sec: The analysis platform Yield Sec estimated the share of the black market in Germany at just under 47 per cent in the same year.

A study by H2 Gambling Capital, one of the largest market data, information and consulting companies for the gambling industry, also points to significant discrepancies: According to the study, the average spend on online gambling per adult in Germany in 2023 was just €23 - a fraction of the amounts recorded in comparable markets such as the Netherlands (around €95). According to H2, this drastic outlier figure suggests that a significant proportion of German players' online gaming budgets is channelled into unregulated offerings.

Players are actively looking for illegal alternatives

As part of ‘Gaming in Germany’, the numerous restrictions for German players were also addressed in more detail: The strict requirements on the legal market, such as the 1 euro betting limit per spin, the monthly maximum deposit limit of 1,000 euros or the mandatory 5-second rule, seem to drive many users to unregulated offers where they have more freedom.

• An analysis by a large international information and advertising site for online gambling revealed that around 18,000 search queries are made every month specifically for platforms that do not have a licence in Germany.
• This contrasts with only 1,500 search queries for licenced offers.

Of course, only a relatively small window of the total volume of searches was considered here, but the difference is astonishing and may well have a certain significance.

GGL: Studies and need for reform

The GGL recognises the need to analyse the black market in more detail.

• Ronald Benter, Director of the authority, explained at the congress that a new investigation into the actual channelling rate had been commissioned. This should clarify the discrepancy between the official figures and the third-party data.
• A review of the State Treaty on Gambling is also underway, although the results are not expected until 2026. The interim report on the evaluation of the GlüStV has already provided initial indications of upcoming changes.

Conclusion

Image source: https://www.gamingingermany.com/conference2024