Betting to Win Billions in the Grey Zone

Billions of euros are won and lost on the field of sports betting -- a field that is theoretically controlled by the state in Germany. But the practical reality looks a bit different. It's where many private providers score big, but legally speaking, it's a grey zone.

Convoluted legal situation

June 22, 2006 was a dark day for private betting services in Germany. The National Administrative Court in Leipzig publicly announced that those who had received permission from the state during German reunification to organize private betting were not allowed to open shop in the rest of the country.

On the one hand, the betting monopoly lies in hands of the state, but on the other hand, the federal states can allocate betting licenses to private providers. The legal situation is even more unclear for betting services located outside the country that operate via the Internet.

In other words: The state-run betting monopoly no longer exists.

Relatively few state providers

In 2005, some 3.6 billion euros (4.6 billion dollars) were turned over in sports betting in Germany. Only a ninth of the total volume (400 million euros, 512 million dollars) came from state-run betting service "Oddset".

The private betting services, however, aren't worrying too much about the latest statement from the National Administrative Court. Markus Meyer, director of the betting service "betandwin" is confident that the liberalization of the industry is only a matter of time.

Strict requirements

Whether the state betting monopoly collapses or holds its ground has to be decided by the end of 2007 at the latest, a deadline the National Administrative Court set for the lawmakers in March. Either a legally overseen authorization for private betting companies will be put in place or the state monopoly will maintain its mandate to fight gambling addiction and curb betting enthusiasm, according to the court's statement.

The situation is tricky -- and not only because it's not clear at first glance why private betting services are supposed to be more dangerous than state-run organizations.

Hope for transparency

Companies that earn money from sports betting advertising have a foremost obligation to legal clarity. Rainer Huether, director of Deutsches Sport Fernsehen (German Sports Television), for example, revealed that sports betting ads make up 25 percent of the broadcaster's total commercial spots.

Huether is hopeful for a clear decision: "It doesn't matter to me which direction it goes, although we would naturally prefer a decision favorable to liberalization."

An effective decision would be a way to get a grip on issues like addiction and sponsorship, said Huether. "We would be very interested in that ourselves. But we desperately need unambiguous regulation."

Support for amateur athletes

Andreas Eichler, General Secretary of the German Olympic Sports Association, also hopes for an explicit framework for the betting industry. He referenced financial support for amateur sports from state lottery funds, a portion of which comes from the money bet on sporting events.

The German Olympic Sports Association takes in at least 500 million euros (640 million dollars) annually from gambling. These funds are passed on to amateur and charitable sports organizations, not professional athletes.

"Without this support, the very subsistence of sports would be endangered. For this reason, every reform is coupled with our demand to ensure that sports sponsorship is maintained without this framework," said Eichler.

State monopoly still in place

Following the latest meeting of minister presidents, it appears that the state-monopoly will remain politically intact. Law enforcement funds are to be implemented in the fight against illegal sports betting, which is already being done to some extent.

Recently, private betting services have been shut down again and again. Only three federal states -- Baden-Württemberg, Rhineland-Pfalz and Schleswig-Holstein -- have advocated limiting licenses for private providers.

FDP spokesman for sports politics Detlef Parr also believes authorization for private betting services should be restricted. Parr is the former director of a Düsseldorf high school and also a license for coaching soccer. He said a liberalization of the betting market would lead to higher revenues for sports.

Considering the European dimension

As far as sports betting is concerned, sports in Germany gain relatively little: Around 17 million euros (21.7 million dollars) in sponsorship currently come from betting, but that is from a total volume of more than half a billion euros.

Regardless of how sports betting in Germany is legally regulated in the future, the European dimension must be taken into account. And that leads down a path of greater liberalization, since freedom for subsidiaries and providers is an EU principle.

In 2003 the European Court of Justice set down guidelines, according to which a state betting monopoly can only be justified if there is a compelling, objective reason for it. That could effectively mean the containment and restriction of gambling as a result of the June court decision.

Want to bet that the sports betting conflict will last a while longer?