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Posted on: May 9, 2023, 08:38h.
Last updated on: May 9, 2023, 11:47h.
Germany continues to refine its definition of gambling, and has now landed on how it wants to approach Daily Fantasy Sports (DFS). The country’s gaming regulator, the Joint Gaming Authority of the Federal States (GGL, for its German acronym), has determined that some DFS players are breaking the law.
The GGL, which only recently took over as the regulator for almost the entire gaming space, has checked certain forms of DFS contests and classified them as illegal gambling, according to a recent press release. It didn’t specify what helped it draw its conclusions, only stating that the accepted options can be found in the white list on the regulator’s website.
Ronald Benter, CEO of the GGL, asserted that the move “protects consumers from illegal gambling and the risk of gambling addiction.” The decision already led to one DFS provider, Spitch, exiting the country.
A Consumer Protection Issue
In DFS contests, players build their own virtual teams of players from real sports teams. They can choose anyone they like in the sport, but base their decisions on an analysis of the players’ abilities to create a winning team. The goal is to match the results of the DFS contest with the real games, and the person who makes the most correct choices wins.
In determining whether DFS should be illegal, the GGL said that it’s possible to set up a team for individual games or competitions and to participate for a fee. Therefore, the contests require a license because it’s a “game of chance,” not skill.
In this context, the GGL points out that public games of chance may only be “organized or brokered with the permission of the responsible authority.” This is in accordance with the Fourth State Treaty on Gaming, which didn’t take DFS into consideration, despite the contests being around for 70 years.
The regulator defines something as a game of chance based on two criteria. The gaming option falls into this category if it requires a participation fee and a chance to win prizes, and if winning depends, in any aspect, on chance.
This reignites the long-standing debate over what separates gambling from betting. Gambling, such as playing slot machines, can effectively be defined as a game of chance because players have no control over the outcome.
However, betting, into which DFS falls, requires analysis, research, and a certain level of skill. This is why certain poker players routinely win more at the tables and certain sports bettors are sharps. It’s also why sports betting has become legal despite the fact that, according to some courts, it carries all the traits of gambling.
Financial Trouble Ahead
The GGL could have learned from New York, instead of spending resources researching the issue. The New York Court of Appeals ruled a year ago that DFS contests are a game of skill, not chance.
Spitch, which offers an online soccer manager game, shut down in Germany almost as soon as the GGL made the announcement. Others will certainly follow its lead.
Leaving the country will keep the operator in good standing going forward, but it does little to protect it from its past. German courts have set the precedent on suing nonlicensed gambling operators to recuperate losses, which could also apply to DFS operators. It’s likely only a matter of time before the first suit arrives.
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