Payment Services in Online Gambling – Where Are the Limits for What Is Permissible?

Gambling regulation in Germany is fundamentally a matter for the federal states. The rules governing the permissibility or impermissibility of gambling are therefore regulated separately in each of the federal states in their respective gambling laws. However, in the area of online gambling, the federal states of Germany have decided to introduce uniform regulations that apply to the entire German territory. The creation of uniform rules for online gambling makes sense, especially since access to it does not usually stop at state borders. To achieve this goal, the sixteen German federal states concluded the State Treaty on Gambling (GlüStV) in 2021. In addition to some general provisions concerning stationary offerings, it also contains provisions for common regulations in the area of internet-based gambling and strict compliance obligations for organizers and intermediaries of online gambling. In addition to the requirement to obtain prior permission to organize virtual slot machine games, online casino games, or sports betting, for example, Section 4 (1) sentence 2 GlüStV provides for a so-called prohibition of contribution, which prohibits the provision of payment services to providers of illegal gambling. However, Section 4 (1) sentence 3 GlüStV extends this comprehensible principle to the extent that contribution to payment transactions for other services of a provider is also prohibited if the provider mixes fundamentally permissible services with the offering of unauthorized gambling.

Payment Institutions Must Fully Understand Their Customers’ Business Models

Compliance with the prohibition of contribution under Section 4 (1) sentence 3 GlüStV can be quite challenging for payment institutions. In order not to violate the prohibition of contribution, the payment institution must have a comprehensive understanding of the customer’s business model and be able to classify it under gambling law. If the services offered by a payment institution’s customer include gamification elements or simply random chances of winning, the payment institution must determine with legal certainty whether the customer’s business model contains elements of illegal gambling. In such cases, if a mixture of fundamentally permissible services and illegal gambling means that payments relating to these services cannot be clearly separated from payments relating to illegal gambling, and illegal payment flows are therefore not clearly identifiable, the prohibition of contribution under Section 4 (1) sentence 3 GlüStV applies. As a consequence, the payment service provider may not execute such payments or provide payment services in relation to such transactions. Payment institutions must therefore thoroughly review the business models of their commercial customers to determine whether they contain any elements of illegal gambling.

When is Gambling Considered Illegal?

The general requirement to obtain a license for organizing or brokering public games of chance is set out in Section 4 (1) sentence 1 GlüStV. Unauthorized gambling within the meaning of the prohibition of contribution is therefore any organization or brokering of public games of chance without the necessary license within the meaning of Section 4 (1) sentence 1 GlüStV. Section 3 (1) GlüStV defines what exactly the State Treaty means by gambling. According to this, gambling is when a fee is charged for the opportunity to win in a game and the decision on the winnings depends entirely or predominantly on chance. The concept of chance can be difficult to interpret, particularly in the case of sports betting, horse betting, and online poker, but the State Treaty clarifies in this regard that dependence on chance is to be assumed in any case if the uncertain occurrence or outcome of future events is decisive. A game of chance is considered public if a large, non-closed group of people has the opportunity to participate, but also if it involves games of chance that are habitually organized in clubs or other closed societies. The question of whether a license is required can be difficult in individual cases, especially in cases where the customer of the payment service provider does not actually intend to organize a public game of chance, but rather it is a random by-product, for example, as part of marketing measures, that is part of the customer’s range of services.

Attorney Dr. Lutz Auffenberg, LL.M. (London)

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