A pivotal lawsuit in Germany aimed at reimbursing gambling losses has been referred to the European Court of Justice (ECJ). The Federal Court of Justice of Germany (BGH) was initially scheduled to decide on whether unregulated operators should refund player losses earlier this month. However, this hearing was canceled after the defendant, an Austria-based sports betting operator, withdrew its appeal.

Last week, a regional court decision on player reimbursement lawsuits mandated that all German civil courts, including the BGH, must either suspend proceedings or submit them for review. This action, spearheaded by the German law firm Hambach & Hambach, ensures that online sports betting and casino issues related to EU law will now be heard by the ECJ. The European court will ultimately make the final ruling on these cases.

The BGH has faced criticism for its perceived reluctance to refer cases to the ECJ. During a March ruling on a sports betting case, the BGH neither suspended nor submitted a referral, which some saw as a hesitation to seek an overarching EU law decision. This could have led to ongoing legal confusion without a decisive EU court ruling until regional courts intervened.

Potential Precedent of Reimbursement Rulings

Claus Hambach, partner at Hambach & Hambach, along with senior associate Phillip Beumer, cautioned that a decision to reimburse players could establish a problematic precedent in Germany.

“Mass media reports have already picked up on the above note by the Federal Court of Justice,” stated Hambach & Hambach. “According to representatives of the ‘player claim industry’, this might now result in a deluge of complaints and court cases.”

They warned that such an outcome could be driven by significant advertising and media coverage, indicating that financiers appear ready to continue backing these claims, potentially extending to sports betting losses, not just casino losses.

Hambach & Hambach expressed concern that reimbursing players might inadvertently bolster the black market. “Germany’s massive black market will even grow further. If players are reimbursed for losses with unlicensed operators, this will only incentivise them to bet with unlicensed operators as the case law basically established betting without a risk of loss.”

Challenges with the Black Market in Germany

A 2023 study by the University of Leipzig highlighted the prevalence of offshore operators in Germany’s online gambling market, revealing that nearly half of all online gambling occurs with these unlicensed entities. The channelisation rate in Germany’s online gambling space stands at just 50.7%, with the study estimating that the black market accounts for three-quarters of online revenue. This situation results in the state missing out on hundreds of millions in tax revenue.

In response, both the German Online Casino Association (DOCV) and the German Sports Betting Association (DSWV) have urged the German gambling regulator (GGL) to make onshore operators more attractive to bettors. By improving the appeal of regulated platforms, these associations hope to draw players away from the black market and ensure that gambling activities contribute to the national economy.

As this lawsuit progresses to the European Court of Justice, its outcome could significantly impact the regulatory landscape for online gambling in Germany and potentially across the European Union. The final decision by the ECJ will be crucial in shaping the future of player reimbursements and the fight against the black market in the gambling industry.

Source: “Germany loss reimbursements lawsuit to be sent to European court”. iGamingBusiness. May 20, 2024.

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