Victory for Wagering on Athletics: A Deep Dive into the Ince Matter and Its Impact on German Gambling Regulations

## Victory for Wagering on Athletics

Matthias Spitz, a legal expert at Melchers Law Firm, discusses the recent turn of events in the continuing story of sports wagering in Germany.

The European Court of Justice (CJEU) has disrupted the status quo with its February 4, 2016, judgment in the Ince matter (C-336/14). This verdict is a triumph for gaming firms possessing EU authorizations.

The CJEU elucidated that EU member nations cannot pursue measures against athletic betting enterprises if a practical monopoly persists and securing a permit is essentially unachievable. This holds particularly true for legal proceedings. This decision bolsters the legal footing of all EU and authorized companies functioning without a permit in such circumstances.

Focusing on Germany specifically, the judgment underscores the states’ inability to substitute the state’s control over sports wagering with a clear and impartial licensing framework, as mandated by EU regulations. Despite the licensing process being a core component of the Interstate Agreement on Gaming (“Interstate Agreement”), no permits have been granted thus far.

**Historical Context**

The Ince matter was presented to the CJEU by a Bavarian local court in 2013. The court inquired about the feasibility of imposing legal penalties for managing a gaming operation without a permit. In essence, the state attorney filed criminal accusations against Sebat Ince for operating her local betting establishment without authorization.

The antiquated Interstate Gambling Agreement, established in 2008, prohibited the authorization of independent sports wagering establishments. Nevertheless, a nationwide licensing system for sports betting commenced when a modification to the Agreement became effective in July 2012. This procedure was underway when legal action was taken against Ms. Ince.

The Bavarian Regional Court presented the case to the European Court of Justice (ECJ), emphasizing the deficiencies in the licensing mechanism. The ECJ, in its verdict, pinpointed three significant areas of concern regarding German gambling regulations.

**”Deceptive Licensing Mechanism”**

The ECJ’s decision dealt a blow to Germany’s highest administrative tribunal, the Federal Administrative Court. Despite the ECJ’s unambiguous declaration in its 2010 “Winner Wetten” ruling that the restrictive Interstate Agreement, which upheld an (illicit) state monopoly, could not be enforced during the interim phase, the Federal Administrative Court in 2013 permitted regulators to proactively ban gambling activities unless operators demonstrably satisfied all the essential criteria that a national operator would be required to meet when seeking a license. To circumvent enforcement, numerous betting firms endeavored to secure provisional licenses in what the ECJ deemed a deceptive licensing process.

These permits were allegedly never formally sanctioned by German regulatory bodies. Advocate General, Melchior Wathelet, labeled this action as a rather opportunistic maneuver back in 2015. He essentially stated they were handling the regulations carelessly.

The European Court of Justice was not particularly pleased with the situation either. They essentially conveyed that one cannot simply exploit this interim phase, where everyone is anticipating regulatory adjustments, to circumvent EU legislation. It’s akin to claiming, “Since the previous regulations are essentially obsolete, and the updated ones are not yet implemented, anything is permissible!” The Court emphasized that penalizing gaming providers for continuing operations without a license is unacceptable if the current regulatory framework contradicts EU law and is under evaluation.

Furthermore, the Court highlighted that prolonging the prohibition on internet gambling is a significant matter. They argued that it should have been communicated to the European Commission in advance due to its impact on the entire EU market. After all, operators throughout Europe require notice if regulations are modified to adapt accordingly.

Bavarian authorities, often perceived as somewhat overconfident, appear to have exceeded their authority with their self-declared leading role in this situation. The Court essentially reprimanded them by stating that disregarding these notification requirements could render these regulations unenforceable in legal proceedings.

## The German Sports Wagering Permit Saga: An Unending Tale?

Should the path to securing a sports wagering permit in Germany be transformed into a literary piece, “The Unceasing Narrative” might be the most suitable label. This national tender, pledging to grant up to 20 sports betting permits, was legally grounded in a unique provision within the Interstate Treaty known as the “experimental clause.” The German federal states contended that this clause was designed to assess and gauge the degree to which the German sports betting sector could be opened up.

Nevertheless, this hastily commenced tender process, launched in August 2012, instantly ignited apprehensions regarding its openness. European Court of Justice case law, such as the Engelmann case (C-64/08), clearly dictates that tender resolutions must be rooted in pre-established, impartial, and non-biased criteria. The German licensing procedure, however, was overturned by German courts for failing to satisfy these benchmarks and for its lack of clarity.

In a pivotal judgment, an appeals court even deemed the Gambling Board – the decision-making entity of Germany’s primary gambling regulator – unconstitutional because it created a “third tier” body between the German federal and state governments, which is not stipulated in the German constitution (Hessian Higher Administrative Court, ruling of October 16, 2015, case number 8 B 1028/15). As a result, no permits have been granted to date, and applicant operators should not be held accountable for the procedural deficiencies.

The European Union’s highest court, in a case involving a gambler named Ince, determined that Germany’s approach to licensing sports wagers, using what they called an “experimental clause,” failed to address the inconsistencies between the country’s limiting policies and European Union regulations. This is due to the fact that the unlawful state-controlled monopoly persisted, and the governing entities lacked the ability to effectively take action against unauthorized sports betting activities.

Despite these rather evident problems, rumors circulating suggest that discussions among the German betting commission indicate a lack of urgency to implement changes. Nevertheless, this recent judgment considerably bolsters the legal position of independent sports wagering providers in Germany, particularly given the current absence of suitable regulations in the market.

Matthias Spitz, a partner at the German legal firm Melchers and a prominent figure in global gaming law (affiliated with IMGL), is closely monitoring the situation.