June 18, 2010

German football fans resort to foreign-based sports betting services

The World Cup is currently the top source of online sports betting, and many football fans and gamblers across Germany are placing their bets with private online companies registered outside the country. Since 2008, when Germany's State Treaty on Gambling was approved to reduce gambling addiction, online gambling through private providers has been prohibited and advertising of gambling services banned. Along a broad spectrum of regulatory policies in Europe, Germany falls into the category of an extremely restrictive regulatory model.

A new study shows the negative effects of the restrictive reform. Among them are sharp revenue declines, more use of gambling offers from abroad, and high fiscal slumps for the German state - totalling EUR2.4bn since 2005.

Altogether, the gross gaming revenue in Germany for 2009 amounted to EUR10.3bn, including both the regulated market (services that are permitted) and unregulated segments (private services, either having an unclear legal status or being forbidden). In 2009, the share of the unregulated market was one-fifth. If current trends persist, the share will reach almost a third in 2015.

Significant market shares are captured by foreign providers. At 94 percent, the foreign market share is by far the largest in the betting segment. Of EUR7.8bn in revenue, only about EUR240m went to regulated providers such as Oddset/DLTB football sweepstakes.

Massive revenue declines for state-run gambling providers can be observed. Wager revenue for the regulated lotto market fell by about EUR1.8bn from 2005 to 2009. Wager revenue for the sports betting service Oddset experienced the strongest decline, with a decrease of 60%, since 2005.

Senior Consultant Dr. Michael Schmid says, "Today, we find an extremely controversial political discussion. The upcoming renewal of Germany's State Treaty on Gambling in 2011 provides an opportunity to correct the law's undesirable effects, especially in the rapidly-expanding online gambling segment."

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