Lottoland’s Legal Status in Germany Sparks Controversy

Lottoland, a gambling company, welcomes visitors to its website with the slogan “Welcome to the land of happiness,” accompanied by a picture of a relaxed senior citizen floating in a turquoise sea. Founded in Gibraltar in 2013, Lottoland has been pushing to enter the German gambling market for years, previously operating in a legal gray area.

However, since March 19th, Lottoland Deutschland has been included on the “White List” of approved providers maintained by the Joint Gambling Authority of the Federal States (GGL). This is despite the fact that the authority had previously requested internet providers to block Lottoland’s websites in October 2022.

This inclusion on the White List allows Lottoland to legally conduct business in Germany, at least for the time being. The legalization of Lottoland in Germany by the GGL in March has particularly surprised WestLotto, the largest state lottery company in Münster.

A WestLotto spokesperson stated that the operations of Lottoland Ltd. from abroad are still not permitted or approvable in Germany. They have urged the gambling authority, located in Halle/Sachsen-Anhalt, to prevent this illegal gambling offer from continuing. WestLotto and other providers are critical of Lottoland Holdings Ltd.’s practice of copying local products for the past 15 years without paying taxes or duties in Germany. Lottoland has reportedly offered large jackpots and outsourced the risk of a major win to insurance companies during periods of low interest rates. This is likely because the company does not offer the traditional German lottery game but rather a bet on those events.

A Putzfrau’s 90 Million Euro Win

Lottoland gained national attention in 2018 when a cleaning lady in Berlin won 90 million euros. However, she had to sign secret contracts in Gibraltar before receiving any of the money, and the details were not disclosed.

Thomas Dünchheim, a gambling expert and lawyer from Düsseldorf, is familiar with this case. Dünchheim, who holds a doctorate and is an honorary professor at the European Business School in Wiesbaden, coined the term “black lottery bet” for unauthorized offers from abroad. “Such products are inadmissible,” says Dünchheim, a partner at the global law firm Hogan Lovells. He argues that in addition to the public law dimension of gambling, there is also a civil law dimension. Winners from dubious providers may not be able to claim their winnings, and unsuccessful players may be able to reclaim their stakes if the gaming contracts were invalid.

“There could even be mass lawsuits from affected players,” Dünchheim warns.

He also points to potential criminal law implications (due to unauthorized gambling), unfair competition issues, and tax law considerations, such as whether providers based in Malta or Gibraltar must pay VAT in Germany.

Dünchheim refers to a recent ruling by the Federal Court of Justice (BGH) on sports betting. According to the ruling, many people who lost money on sports betting online in previous years may be able to claim refunds. The BGH has already indicated its support for the players in a case scheduled for May, stating that the provider likely violated regulations of the State Treaty on Gambling in its 2012 version.

State providers like Westlotto, which must allocate a portion of their profits to charitable causes, have remained relatively quiet in their protests to the GGL. However, lottery brokers, such as Faber Lotto-Service from Bochum, are likely to file lawsuits against the market entry of Lottoland and other players. Dünchheim believes this is probable. He does not attribute bad intentions to the new gambling authority for approving Lottoland Deutschland but suggests that “the GGL probably did not dig deep enough before putting Lottoland on its White List.”

New Authority to Monitor Controversial Provider

Dünchheim believes the gambling authority’s approval is clearly contestable. He compares the GGL’s central role to that of the larger Federal Network Agency, which oversees telecommunications, network charges, and gas and electricity prices. “The GGL needs to investigate matters more thoroughly and see who the string-pullers and puppeteers are at Lottoland and others,” Dünchheim stated.

The Lottoland Group, based in Gibraltar, rejects the accusations. Laura Pearson, a spokesperson for Lottoland, stated that the issue involves significant vested interests of the federal states, particularly “annual revenues in the billions, as well as politically appointed positions in the 16 state lottery companies and high-profile government actions as a major sponsor of sports or culture.” This has led to “abusive, wasteful, and sometimes corrupt behavior,” which is well-known to insiders in Germany.

Lottoland Deutschland GmbH received a permit from the Joint Gambling Authority of the Federal States (GGL) “after an intensive and lengthy review process.” It is not surprising that this displeases established providers.

Pearson argues that the fact that the federal states regulate gambling as both the legislative and executive branches while also acting as major gambling providers, especially in lotteries, is the real scandal and “has been a disgrace for years.” She claims that German regulation has been repeatedly criticized by the European Commission and condemned by the European Court of Justice, as European law applies across the board to gambling.

According to Pearson, it is clear to all industry insiders “that the lottery monopoly is obviously contrary to EU law, except that there has been no lawsuit before the European Court of Justice.” This is because the rather state-friendly German administrative courts have not referred any gambling questions to the ECJ for over 17 years.

The State Treaty on Gambling of 2021 has made the incoherence of regulation even more dramatic. “Because, under political pressure – and for the sake of additional tax revenues – even all dangerous games for private individuals have now been opened up, even virtual slot machines and online poker,” says the spokesperson. Only the lucrative “lottery monopoly” of the federal states has strangely been retained, “although lotteries are demonstrably by far the least harmful form of gambling and do not create any addiction risks (in less than 0.3 percent of cases).”

Against this background, the Lottoland Group is currently suing in all 16 federal states for the granting of corresponding secondary lottery permits, after the applications for this were simply ignored by the states, according to Lottoland. In the meantime, even a lawsuit by Malta regarding the current secondary lottery ban in Germany is pending before the ECJ and is expected to be heard this year.

In response to a request, the GGL stated that during the examination of the application, “no legally sound evidence” was found that Lottoland Deutschland GmbH and Lottoland-Holdings Ltd. were economically connected in an unlawful manner. However, a GGL spokesperson stated that any connection would be “constantly” examined as part of the supervision.

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