Latest Germany Ruling

Early in February this year, an announcement was released that Germany is about to outlaw all online gambling activities, making it illegal to gamble and operate a gambling business in German territory. The press release stated clearly that “German authorities are targeting casino operators working from outside Germany and offering gambling service to German citizens”.

What does it all mean about the future of the German market and the future of the industry in general?

This new move by the German government is very reminiscent of the 2006 US legislation against online gambling. While it did send shocking waves all across the industry, the legislation failed to bring it down to its knees. So far, with all the sanctions and restrictions inflicted on online gaming since its early days, it just keeps growing and increase profitability.

So where’s the soft spot?

Enforcing such regulations can be made in several aspects:

  1. Prosecute operators: Legally act against companies who are violating the regulations. While this may be easy to do within Germany, it might prove a lot harder to accomplish worldwide. Germany must act rigorously to produce legal cooperation from other countries which harbor many online gaming operators. These countries include Malta, British Isle of Man, Gibraltar, Belize and others. Prosecuting operators there is an illusive task.
  2. Act against the end-users (players): Pinpointing players who play in online casinos and pressing charges against them is almost impossible. This challenge is as big as prosecuting every person who downloads a commercial song for free in mp3 format. A different route is to simply block users’ access to specific gaming sites. Some countries like China and Italy have adopted this behavior, denying access to specific URLs from their territory. While this definitely makes the operators’ life harder, they still found ways to circumvent that. In Italy, an organization called AAMS is actively blocking new gaming URLs as new ones pop up. However, the operators always stay one step ahead by redirecting traffic from other domains. These actions by AAMS may make it more difficult to market gaming sites in Italy, but it certainly doesn’t stop it.
  3. Block payment processing: Countries which ban online gambling like the US, Italy and now Germany, can approach major payment processing companies and prohibit them from accepting gaming related transactions. Visa, Mastercard, banks and other processing companies are much more likely to oblige to national authorities. This is where regulations have the biggest bite. Dealing with processing issues is the most difficult task for gaming operators. Since the beginning of the millennium, long before the US legislation passed in congress, gambling operators faced difficult payment processing for credit cards in the form of transaction rejection. Every transaction has a specific code attached to it ,which describes the transaction type. Types could be “recreational”, “travel”, “apparel”, “electronics”, “services”, “adult” and of course – “gambling”. When credit card companies tagged a transaction as “gambling”, it was rejected. This means that when players tried to deposit, as much as 60% of the payments were denied. But the gaming industry found various solutions to this problem in the form of eWallets (similar to the world’s most famous eWallet – PayPal). Companies like Neteller, Click2Pay, FireCash and others offered a safe, secure environment for players to deposit funds using their credit cards, but without the infamous “gambling”code. In fact, over the years many payment processing solutions appeared and disappeared like mushrooms after the rain. Some are closed faster than others while some prevail and become industry leaders (e.g. Neteller). But the reality remains: Online gaming will always find a new way to collect (and pay) money to its customers.

Having said all that, what is the real impact of the new German law? It’s difficult to say. While this may be worse for public companies which suffer losses to their stock value, industry professionals are not panicking – They’ve seen these things happen before. The industry is adaptable because it’s profitable; new solutions are always developed to answer ongoing needs. If the Germans are determined to enforce their law and cause the operators to cease their activity, then a lot of pressure will be created to find a legal, practical solution to process payments from German players.

Only time will tell how big an impact the new law will have. Let’s wait and see!

One Response to “Latest Germany Ruling”

  1. XXLKlintonLobby Says:

    H. Klinton vs. Obama. How you think who will win elections?

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