With Press release In a January ruling, the Federal Court of Justice has announced that the hearing on the “reimbursement of losses from illegal sports betting” will take place on March 7, 2024. The proceedings are attracting great interest from affected players and their legal representatives.
Just in December 2023, the Federal Government Commissioner for Addiction and Drug Issues in the Gambling Atlas summarized that about 1.3 million Germans have a gambling disorder:
"Around one in thirteen gamblers develop health, financial or social problems as a result of participating in slot machine games, sports betting and other gambling. In many cases, these problems are so severe that families are destroyed and livelihoods are destroyed.“
and further:
"And in the case of sports betting in particular, advertising should be restricted as soon as possible. Sports betting spots before, after and during sports coverage, even in the afternoon and early evening programs, simply have to stop. Nobody wants that, nobody needs that and it is not good for anyone.“
Gamesright – Pioneer in sports betting reclaims
The litigation funder Gamesright is known as official 05 partner of the first division football club Mainz 05. He has already referred around 2,000 German gamblers to specialized lawyers. Gamesright offers the purchase of repayment claims and finances their enforcement, even in cases involving repayments of less than 5,000 euros. With a number of cases from 2021, Gamesright is a pioneer in sports betting reclaims. One of these cases is now being heard before the Federal Court of Justice. The case, which at first glance seems inconspicuous, is the culmination of a long dispute between sports betting providers, licensing authorities and players. How did this come about?
Established case law for slot machine games
Everyone probably knows the large state-run casinos and the dusty-looking slot machines in restaurants. Many games of chance can be permitted in special facilities under strict conditions. However, this does not apply to slot machine games on the Internet, often referred to as online casinos. These were banned without exception until mid-2021 and are still banned without permission to this day. After countless disputes in administrative and European law about the effectiveness of this ban, the main issue was soon whether players could demand their deposits back. After initially inconsistent case law with what was probably the first ruling in October 2020, the higher regional courts now agree that players are fundamentally entitled to a refund. The providers should not have accepted their money. They could not and did not have to know that the players should not have been allowed to deposit it either.
In Austria, this has been clarified by the Supreme Court, in Germany there has not yet been a corresponding decision by the Federal Court of Justice. The latter has just suspended such a decision with its decision of 10 January 2024 – I ZR 53/23. In accordance with the Press release about the reimbursement of losses from prohibited online poker games (a casino game, as opposed to slot machines and sports betting), which have been permitted since 2021. The reason for the suspension is a Malta submits seven questions to the European Court of JusticeThe BGH is waiting to see what happens. The matter has a bad taste, as the defendant provider is said to have initiated the lawsuit in Malta in order to slow down a possible wave of repayment claims.
The Federal Court of Justice has not suspended the sports betting proceedings at issue here.
This is probably because things are a little different with online sports betting. Until 2008, there was a sports betting monopoly in Germany. The state ("Oddset") was allowed to offer sports betting online, unlike private operators. The European Court of Justice ruled that if one provider has this right, everyone must have it. The legislator considered this opening to be irresponsible (see Gambling Atlas) and banned online sports betting completely in 2008, including for the state.
Despite this, sports betting companies offered their bets excessively over the Internet, mostly from other European countries. This was difficult to deal with. In order to put a stop to the illegal sports betting business, the federal states agreed on the 1st State Treaty on Gambling (GlüStV) in 2012. This was intended to carefully test the liberalization of online gambling and initially to steer online sports betting, as the most important sub-market, into regulated channels. Single and combination bets were to be permitted, but not, for example, bets on events during ongoing games, so-called event bets. In addition, providers were not allowed to accept bets of more than 1,000 euros per month from players. The legislator had the addictive potential and player protection in mind. Up to 20 providers were to be able to receive special permits for sports betting on the Internet for experimental purposes.
A number of providers who were not considered successfully appealed against this restriction to 20 concessions and prevented the licenses from being awarded. constitutional concerns against the effectiveness of the law (the lack of democratic legitimacy as a state matter) and secondarily (only in the event of effectiveness) concerns under European law against the transparency of the concession procedure.
The total ban on online sports betting from 2008 was valid until 2020
The situation, which providers like to call a "grey area", continued. Providers from Malta, Gibraltar and Curacao in particular dominated the market for online sports betting, which is prohibited by law, without German permission. In 2018, an agreement on the "Second State Treaty to Amend the State Treaty on Gambling" failed, and was not ratified by all federal states.
The Third State Treaty on Gambling Amendments lifted the restriction to 20 providers in 2020. In 2020, providers were able to submit new applications independent of the failed award procedure. However, the law again encountered serious concerns, particularly with regard to the transparency of the approval process. After these concerns were resolved, the first concessions for online sports betting were awarded in October 2020.
Sports betting in the midst of society
Although some providers had applied for permission in 2013, they were unable to obtain it by the end of 2020. Unfortunate would be an understatement. Regardless of this, many providers were already offering their online bets while the total ban was in force. This did not change in 2013, whether they had applied for a permit or not. They operated their prohibited online bets in German and advertised them extensively in Germany, knowing that they were prohibited without a license. In doing so, they were Celebrities, football stars, clubs and associations supported. Online sports betting, a controversial A fundamentally forbidden business in which a lot of money is at stake. This money comes from the players, 1.3 million of whom have a gambling disorder (see above).
There is a struggle over the consequences. As with online casinos and online slot machines, several higher regional courts have now ruled in favor of players when it comes to sports betting. The difference between deposits and withdrawals must be reimbursed.
Decisions against this provider
The provider, against whom the case is now being heard before the Federal Court of Justice, recently lost a ruling by a higher regional court. The proceedings were financed by Gamesright. The provider withdrew an appeal before another higher regional court after the court announced that it would reject it. Another higher regional court has just announced that it intends to reject an appeal by the same provider. No one appeared for the provider at the most recent hearing before a higher regional court and a default judgment was requested. The lawyers provided by Gamesright are therefore successfully taking action against this provider. In contrast, there are no known higher court rulings in favor of this or any other online sports betting provider.
What is the issue before the Federal Court of Justice?
At the beginning of 2022, when there were very few decisions in sports betting cases, the Geislingen auf der Steige District Court ruled in the first instance and dismissed the lawsuit. The value in dispute is "only" 3,719.26 euros from the period 2013 to October 2020. The reasoning does not take up a whole page: the lack of a permit did not constitute an obstacle to offering sports bets, which follows from a decision of the Higher Administrative Court for the State of North Rhine-Westphalia of January 23, 2017, 4 A 3244/06. The provider also participated in the licensing procedure. The Wiesbaden Administrative Court (5 K 1388/14 WI) affirmed the right to a license.
The District Court disregarded the plaintiff's arguments that in a specific month the provider had accepted deposits of more than 1,000 euros, which violated Section 4 Paragraph 5 Number 2 of the GlüStV (old version).
The appeal proceedings before the Regional Court
The plaintiff has appealed against the ruling before the Ulm Regional Court. The decision of the Higher Administrative Court is clearly not supported by the ruling, as it concerned a case from 2005 and the legal situation under the GlüStV 2012 was long out of date.
The district court overlooked the fact that the Hessian Administrative Court declared the judgment of the VG Wiesbaden ineffective with its decision of December 8, 2021. The Hessian Administrative Court had already previously determined in its decision of October 11, 2019 that the action for a permit would have no prospect of success.
It is also irrelevant whether the sports betting provider would have had a fundamental right to be granted a license. In fact, the license could not have been granted and was not granted as a result of the ruling. A possible right to be granted a license does not replace the granting of a license itself. In addition, the defendant not only offered individual sports bets without a license, but also live and event bets. These offers went beyond the offers requested in the license award procedure and are generally not approvable. The provider also accepted deposits of more than EUR 1,000.
The Regional Court has dismissed the appeal
It stated that the violation of the ban under Section 4 Paragraph 1 Clause 2 Case 1 GlüStV aF by an organizer by organizing online sports betting does not lead to the invalidity of the contract for online sports betting. The substantive requirements for granting a license were met in favor of the provider (in this case it was probably referring to the judgment of the Administrative Court of Wiesbaden, which does not apply to third parties and has been overturned, see above). There was no permissible authorization procedure because it violated European law. With regard to the legal consequences of the objections under European law, the case law of the Higher Administrative Court of North Rhine-Westphalia should be applied to this case.
The European Court of Justice has already ruled that the brokering of sports bets should not lead to criminal sanctions. In administrative law, the Federal Administrative Court, the Higher Administrative Court of Münster and the Higher Administrative Court of Kassel have accordingly not considered the lack of a German permit to be an obstacle to the brokering of sports bets. This must apply not only to the brokering of sports bets, but also to the organization of sports bets on the Internet.
The Regional Court did not rule on the question of whether monthly deposits of more than €1,000 and the organisation of live and event bets, which were without exception prohibited, would lead to the invalidity of the betting contract.
The appeal to the Federal Court of Justice was allowed. The plaintiff filed this in due form and within the deadline.
Legal classification
The fundamental legal question regarding repayments from online sports betting could now be finally clarified before the Federal Court of Justice:
Is the demand for reimbursement from the provider justified without permission, or does the mere application for permission preclude it, even though this is based on of the faulty Concession award procedure was not granted?
Like the appeal court, some local and regional courts have denied a claim for repayment on the grounds of the "unity of the legal system". There is a contradiction in assessment if a behavior can be reversed under civil law even though it was tolerated under administrative law and cannot be prosecuted under criminal law.
Uniform opinion of the higher regional courts
Meanwhile, the higher regional courts have reached a unanimous opinion that the uniformity of the legal system does not preclude civil law claims such as those in the present case. For good reasons:
Regulatory action would have been possible at any time
The legal opinion that no administrative action against online sports betting was possible is long out of date. As things stand today, there was no tolerance of the offers in principle. The authority would not have been entitled to tolerate them in the first place. The Federal Administrative Court ruled in 2017 that it is compatible with Union and constitutional law to use the lack of the required permit to counter online sports betting providers in gambling prohibition proceedings. In 2018, it ruled that refraining from repressive measures does not equate to a legalization effect and is not required under Union law. It further ruled:
“A claim to the grant of a licence independent of a concession for the brokerage of sports bets cannot be derived from either the State Treaty on Gambling or from Union law.”
No hindrance to national prosecution
The so-called "Ince" case law of the European Court of Justice cannot be applied to online sports betting. This presupposes that there is a state monopoly and that private providers are denied access to a market open to the state. From this perspective, the ECJ has examined whether international prosecution is possible for terrestrial sports betting (in shops), which is punishable in Germany.
Unlike the situation under review there, when the State Treaty on Gambling of 2012 was in force, there was no state monopoly and no discrimination against private providers. The ECJ rulings should therefore no longer have stood in the way of at least national criminal prosecution. Accordingly, the Federal Court of Justice last year found that the Ince principles for civil law had no legalizing effect. There is no contradiction in the assessment between 1. the hindered international criminal prosecution in the case of a monopoly and 2. civil claims for repayment in the case of a closed market.
Previously, the Higher Administrative Court of Lüneburg had already ruled in relation to the internet ban (which in the end did not violate European law) that there was no right to administrative tolerance of the unlawful activity, regardless of the question of possible criminal sanctions in the event of a violation of the permit requirement.
Jurisprudence on sports betting monopoly no longer applicable
In the previous instance, the regional court had overlooked the fact that the legal situation in 2005 was significantly different from that in 2012. In 2005, sports betting was legally permitted by the state and there was a sports betting monopoly. This was classified as being contrary to European law. Since a state provider was allowed to offer sports betting, private providers could not be treated worse than them.
The legislature reacted to this and abolished the monopoly in 2008. Instead of opening up the market, a total ban was imposed, both for the state and for private providers.
However, the experimental clause, which was introduced in 2012 and requires permission for the general ban, was probably ineffective because the legislative process violated constitutional law (cf. Hessian VGH). The reason for the suspension of the granting of licenses was the violation of the federal and democratic principles. Today, the concession award procedure itself is also largely classified as being contrary to European law due to the lack of transparency of the award criteria. However, this was not the decisive factor in stopping the awarding of concessions at the time.
However, the fact that no permits could be issued did not lead to an opening for all providers - unlike under the conditions before 2008 (sports betting monopoly, discrimination). On the contrary, the remaining ban means that all providers are treated equally, as has been the case since 2008. The 2012 State Treaty on Gambling clearly shows the legislator's will to keep the market basically closed. This had already been demonstrated by abolishing the monopoly.
The courts today therefore predominantly check whether a license has been granted. Betting without an existing license is considered invalid and claims for repayment are upheld.
Conclusion
The proceedings before the Federal Court of Justice could have far-reaching consequences for the online gambling industry. It could also have an impact on the links with professional sport that is currently difficult to predict.
The media are invited to the hearing on March 7, 2024 and image and sound recordings are permitted.
Please direct inquiries to: [email protected]
Would you like to finance a claim or sell your claim? Please use our application form on www.gamesright.com
