The Circular Resolution was supposed to usher in a new era in the never-ending history of gaming law and has been hailed as a milestone by the heads of the federal Länder as well as by elements of the gaming industry. The initial euphoria is increasingly giving way to headaches among all the actors involved, however.
At their annual conference held on 3 November 2020, the heads of state and government of the Länder signed the Interstate Treaty on Games of Chance (hereinafter referred to by its German acronym: „GlüStV“), which is to enter into force on 1 July 2021. Reporting in the media is now suggesting that a major step towards the entry into force of GlüStV 2021 has been taken and that the transitional provisions of the Circular Resolution from 9 September 2020 are therefore also justified, which among other things means that the organisation of online gaming has been tolerated since 15 October.
But the truth of the matter is that nothing has changed in de facto terms since the signing. GlüStV still has to clear the hurdle of approval by parliaments in at least 13 of the German Länder before it can enter into force. Ratification by the heads of government of the Länder does not change anything with regard to the legal effects of the Circular Resolution (which is still only an administrative provision and has no further significance beyond this). GlüStV 2021 continues to be merely – to stick with the terminology used in the circular resolution – a „presumably future“ law.
Ratification is only one of several necessary steps in the legislative process. The most important step before a law enters into force in a democratic constitutional state – approval by the parliaments of at least 13 of the 16 Länder by 30 April 2021 – has not yet taken place. Opposition is already being voiced by the SPD in several of the German Länder. To view ratification by the heads of government of the German Länder as confirmation that GlüStV 2021 will actually enter into force therefore only demonstrates ignorance of the course of the law-making process. Moreover, the regulations laid down in the gaming law will not be finalised until the Länder parliaments have provided their approval, as the draft GlüStV 2021 allows a great deal of discetionary latitude for them in some areas. For example, with regard to the organisation of online casino games, the Länder are free to decide whether to grant licences. Legal certainty with regard to future gaming law will therefore only be possible at best once the Länder have decided how they intend to use their latitude.
In addition, ratification will have no effect on the substantive legal situation or on the Circular Resolution from 9 September. Ratification will not turn the Circular Resolution into a sort of official acquiescence which has any external effect.
As the author has already elucidated in a previous article (https://www.isa-guide.de/isa-law/articles/211100.html), the Circular Resolution is merely an administrative provision which has no effect on the outside world and does not change the substantive legal situation. In the article cited above, it is discussed in detail why the Circular Resolution in particular does not replace an official licence and why the organisation of online games of chance without an official licence is still punishable under § 284 of the German Criminal Code (StGB). The fact that the Circular Resolution suggests that it changes the substantive legal situation is highly dangerous. This is because it suggests legal certainty for both operators and players that the organisation of and participation in online games of chance is exempt from punishment if the service on offer is within the limits of GlüStV 2021. This is not the case. The Circular Resolution is solely a – questionable – instruction to employees of government authorities and is also highly dangerous for them, since if they actively tolerate the offering of online games of chance without official permission as a result of the Circular Resolution, they themselves become liable to prosecution, as will be explained in the following. To sum up: The Circular Resolution would have us believe that it is now legal under national law to operate an online casino, even if the operator of the casino does not have permission to do so, but is already complying with the requirements and provisions of the future GlüStV. This is not the case and constitutes a trap for operators that could lead to criminal penalty, but also for players and employees of government authorities, as has been confirmed by recent events:
- It has now been confirmed: The Circular Resolution does not change the substantive legal situation
The author’s legal opinion on the Circular Resolution has now been confirmed by a Minor Interpolation from the FDP in Lower Saxony to the Land government and by the Public Prosecutor’s Office in Frankfurt am Main, which has initiated investigations against the organisers of officially prohibited gambling, as well as by an expert opinion from the Research Services of the German Bundestag.
a) Minor Interpolation by the FDP
On 24 September 2020, Christian Grascha, a member of the FDP, (Niedersächsischer LT Drs. 18/7555) submitted an interpolation to the State Chancellery of the Land of Lower Saxony, enquiring inter alia whether the Circular Resolution made the requirement of a German licence and a tolerance for the organisation of online gaming superfluous. The Ministry of the Interior and Sport of Lower Saxony replied on behalf of the federal Land government on 30 October 2020 that the Circular Resolution of 8 September 2020 merely represented „a political agreement among the German Länder on how the limited resources of the gaming supervisory authorities are to be used in the interim period until the probable entry into force of a new interstate treaty on 1 July 2021“ (cf. Lower Saxony LT Drs. 18/7783). It is made clear that online gaming is still prohibited under the current Interstate Treaty on Games of Chance:
„With a few exceptions (lotteries and sports betting, see § 4 (5) GlüStV), online gaming remains prohibited in accordance with the applicable Interstate Treaty on Gaming (§ 4 (4) GlüStV 2021).
It should be noted that „§ 4 (4) GlüStV 2021“ was quoted here by mistake and that the reference was of course intended to be made to § 4 (4) GlüStV 2012.
The reply of the Ministry of the Interior and Sport of Lower Saxony furthermore states that the Circular Resolution only encourages prioritisation in enforcement, but that the legal obligations under the Interstate Treaty on Games of Chance remain unchanged.
Here as well, it is evident: even the state itself makes it clear that the Circular Resolution does not change the substantive legal situation per se (nor would this be possible at all in this manner).
b) Research Services of the German Bundestag
An expert opinion of the Research Services of the German Bundestag dated 3 November 2020 also comes to the conclusion that the Circular Resolution does not affect the substantive legal situation, as the current Interstate Treaty on Games of Chance cannot be changed by administrative action. Research Services emphasise that, as the Länderparliaments have not yet voted on GlüStV 2021, GlüStV 2021 merely constitutes an uncertain future amendment to the law. Therefore, the gaming supervisory authorities should not base their decision on whether or not to intervene against operators of illegal online gaming solely on their compliance with the „presumably future“ rules of GlüStV 2021.
Furthermore, the report states (cf. elaboration by the Research Services of the Bundestag, WD 3 – 3000 – 210/20, p. 6)
„In terms of content, the Circular Resolution aims to take into account arrangements laid down in the draft Interstate 2021 Treaty on Games of Chance already here and now. However, it is questionable whether this already constitutes inadmissible anticipation. There are various forms of cooperation between federal Länder: In addition to legally binding interstate treaties and administrative agreements, there are also legally non-binding cooperation agreements. The latter differ from the interstate treaties and administrative agreements in that they are „not ready for application“ within the Länder themselves, but require further normative acts to implement their regulatory content, e.g. through the issue of administrative regulations. The Circular Resolution is not a binding administrative agreement, but rather a non-binding cooperation agreement. The informality of the agreement, its designation as a „Circular Resolution“ and the fact that it is communicated solely by the heads of the state and senate chancelleries indicate that the Circular Resolution itself should not, nor can it yet, be legally binding for the gaming supervisory authorities of the Länder. The way in which it is published also argues against the binding nature of the Circular Resolution, as the text has not been published in the official gazette of the Länder, but can only be accessed via the websites of some of the Länder ministries of the interior. As a non-binding cooperation agreement, the Circular Resolution cannot change existing gaming law and as such is not justiciable“.
The report concludes that the Circular Resolution can only be implemented as discretionary administrative regulations that are effective within government authorities – but this would not change the fact that the current Interstate Treaty on Games of Chance would still have to be implemented.
It follows from this that the Research Services of the German Bundestag also adopt the view that the Circular Resolution is highly questionable and problematic, since it seeks to bring about a legal state of affairs „through the back door“, circumventing the legislature, which is constitutionally impossible. One can fully concur with this view.
c) Investigations by the Public Prosecutor’s Office in Frankfurt am Main
Finally, on 5 November 2020, it became known that the Public Prosecutor’s Office in Frankfurt am Main was investigating several operators on suspicion of illegally organising gambling (including Tipico).
The point of departure in the investigations is that several operators are said to have offered online casino games for money nationwide without having a licence for such. In this context, statements of position were also made pursuant to the Circular Resolution: Senior Public Prosecutor Noah Krüger stated to the NDR and the SZ that the circular resolution was merely an administrative agreement which could not override the provisions of the German Criminal Code in its capacity as higher-ranking law, thus confirming the legal view adopted in the article cited in the foregoing (The Circular Resolution and other rumours): As the author already explained therein, the Circular Resolution has no effect on § 284 of the German Criminal Code – a suspension of criminal prosecution or even any change in the definition of the offence laid down in § 284 of the German Criminal Code cannot be achieved by the Circular Resolution, which does not even begin to meet the requirements of a law.
The Public Prosecutor’s Office emphasised that gaming operators must therefore expect criminal consequences until they possess a licence – this applies in particular to companies that enter the market without a licence banking on purported toleration through the Circulation Resolution.
- Employees of government authorities make themselves liable to prosecution
The following is interesting: Employees of the gaming supervisory authorities could also have to assume criminal liability through the Circular Resolution. Criminal sanctions must also be feared by employees of government authorities who, as a result of the Circular Resolution, actively tolerate the organisation of online games of chance without official authorisation.
As already explained in detail in the article on the Circular Resolution cited above, the authorities do have discretion as to which operators of unauthorised gambling they take action against.
If the employees of government authorities inform operators – for example in response to a query – that they can now organise online gaming without a licence, this may constitute active acquiescence and incitement or aiding and abetting under § 284 of the German Criminal Code. This is also problematic if the authority provides similar information to players: According to § 285 of the German Criminal Code, such players make themselves liable to prosecution by participating in officially unauthorised gaming, which is why active official toleration of participation in officially unauthorised gaming could also have criminal consequences for employees of government agencies for incitement or aiding and abetting.
- Players make themselves liable to prosecution
It should not be ignored that the Circular Resolution cannot prevent players from making themselves liable to prosecution under § 285 of the German Criminal Code by participating in gaming that is not permitted by the authorities. The Circular Resolution and the reports on it suggest the opposite to players: for example, Tagesschau reported on 9 September 2020 under the headline „To date prohibited, in future permitted“ that the German Länderhad agreed to tolerate online gaming. Also the online service with Internet pages having a „.de“ domain which has been in existence since 15 October can only confirm players in their assumption that online gaming is now being legally offered in Germany. The average consumer cannot see from the reports or the service that it is actually an illegal service and would make them liable to prosecution if they make use of it.
However, as the Circular Resolution does not change the substantive legal situation, this means that players are liable to prosecution even by participating in online gaming tolerated by administrative practice (§ 285 of the German Criminal Code). The fact that the author considers this regulation in the Criminal Code to be unconstitutional (see the article „The criminalisation of gaming by §§ 284 et seq. of the German Criminal Code (StGB) from a constitutional criminal law perspective“) of course does not change this, because as long as a criminal law is valid, the behaviour prohibited therein is punishable under criminal law: Anyone who takes part in online gaming without an official licence – and an official licence cannot replace the Circular Resolution – is thereby deemed to take part in a public game of chance organised without official authorisation and can be prosecuted under § 285 of the German Criminal Code.
It would, however, not be completely far-fetched to plead the existence of a prohibition error in the event of possible criminal prosecution as a player. According to § 17 of the German Criminal Code, a person is deemed to act without culpability if they lack the insight that they are doing something wrong when they commit the offence and they could not avoid making such mistake. On the basis of the content of the Circular Resolution and public reporting and the online service having a .de domain set up by the market leaders in the terrestrial sector, it is difficult or impossible for players who are not well-versed in the law to recognise that participation in the online gaming on offer nevertheless meets the definition of a criminal offence laid down in § 285 of the German Criminal Code: The Circular Resolution and media reporting on it have lent players an illusion of legal certainty which makes it almost impossible for them to recognise which service is illegal. In addition, the detailed reporting on the „toleration“ provided for in the Circular Resolution has also led to players who previously only played terrestrially to believe that online gaming is now legal, and has thus tempted them to use online services. One could accuse the authors of the Circular Resolution as well as the journalists and editors who are responsible for the incorrect reporting of incitement to participate in illegal gambling.
- No without a licence, yes with a European licence
Despite the excitement surrounding the Circular Resolution, it should not be forgotten that, in the author’s legal opinion, the organisation of online games of chance with a licence from another Member State of the European Union may not be prosecuted under § 284 of the German Criminal Code. According to the legal opinion here, a player who participates in online games of chance offered on the basis of a licence from another Member State does not make himself liable to prosecution under § 285 of the German Criminal Code:
When applying the administrative accessory provisions of § 284 and § 285 of the German Criminal Code (StGB), the offence of „without permission“ must be interpreted in such a way that an official permit is required under German law in accordance with § 4 (1) of GlüStV. According to § 4 (4) GlüStV, the current legal situation in Germany – which the Circular Resolution cannot change – does not permit the organisation of online gaming. Moreover, as the ECJ established in its Markus Stoß ruling (ECJ, ruling handed down on 8 September 2010 C-316/07), there is no obligation to mutually recognise licences issued by other Member States to organise games of chance, as in the absence of harmonisation of gaming under EU law, each Member State should be able to establish its own licencing system to regulate the organisation of games of chance.
The fact that the existence of a licence from another Member State nevertheless prevents prosecution under § 284 and § 285 of the German Criminal Code is due to the fact that Union law also has primacy in the application of criminal law. In concrete terms this means: Although Member States may independently regulate the granting of licences to organise games of chance, such a licensing system is only lawful if it is non-discriminatory and proportionate from the perspective of Union law, which requires a systematic and coherent limitation of games of chance. If the Member State’s gaming regulations do not satisfy these requirements, and German law cannot be used as a yardstick because of its inadequate formulation of prohibitions under national law as a result of an infringement of the freedom of establishment or freedom to provide services on the grounds that it is contrary to Union law, licenses to organise games of chance granted by other Member States must be taken into account.
From the perspective Union law, there are considerable doubts as to the lawfulness of the total ban on the organisation of online games of chance laid down in the current Interstate Treaty on Games of Chance (e.g. Fischer, § 284 StGB, marginal 2c; Gaede, NK-StGB, § 284 marginal 22 with additional references). In view of the fact that an online service which is supposedly heavily regulated in favour of player protection and channelling already disproportionately encroaches on the freedom of service and establishment of operators from other Member States (see https://www.isa-guide.de/isa-law/articles/209506.html and https://www.isa-guide.de/isa-law/articles/209875.html), a total ban on the organisation of online games of chance is all the more contrary to EU law.
In the context of criminal prosecution of the organisation of gaming that is not permitted by the German authorities, existing official permits from other Member States must therefore be recognised.
Criminal proceedings must hence be initiated against parties who organise online gaming without official authorisation from an EU Member State, based on the current legal situation and application of § 284, § 285 of the German Criminal Code in conformity with EU law. This means, first of all, operators who wish to organise games of chance with a non-European licence and, secondly, parties who organise games of chance without any licence, placing their hopes in the Circulation Resolution and its supposed toleration effect.
- Reliability of operators
As GlüStV has no substantive legal effects, the sanction of non-compliance with the technical regulations for the offer of online gaming as provided for in the Circular Resolution is also without consequence. The Circular Resolution establishes that operators who do not comply with the expected future regulations of GlüStV 2021 as of 15 October 2020 will be classified as unreliable and subsequently excluded from future licensing and approval procedures (the „bad actor clause“). However, the Research Services of the German Bundestag has stated quite correctly that, due to the legality of the public administration, the Circular Resolution cannot justify any deviating administrative action that would be contrary to the applicable GlüStV. Moreover, since the GlüStV 2021 is merely a draft law on which the Länder parliaments still have to vote, the Circular Resolution cannot put GlüStV 2021 into force in advance or even be used as a benchmark. Operators who do not comply with the technical regulations of GlüStV 2021 even after 15 October 2020 must therefore not be classified as „unreliable“ notwithstanding the Circular Resolution – the bad actor clause of the Circulation Resolution is hence an empty threat.
It should thus be kept in mind that both operators and players urgently need to be warned not to allow themselves to be deceived by the Circular Resolution into believing that they could invoke national law and operate gaming services without a licence simply because they already comply with the requirements and provisions of the planned 2021 Interstate Treaty on Games of Chance. The only remaining option is to invoke European law; under current national law, the operation of online games of chance is still not permitted under § 4 (4) GlüStV and is therefore punishable under § 284 of the German Criminal Code (and therefore participation in it under § 285 of the German Criminal Code).
Frankfurt am Main, 11/13/2020
Dr. Nik Sarafi
Attorney at law (Rechtsanwalt)