Federal Court of Justice - Money back? Dispute over unlawful sports betting goes to EU Court of Justice
Since when have Sport Betting been allowed in Germany?
Until mid-2012, only state providers in Germany were permitted to organize Sport Betting, according to German lawyer and gambling expert Lennart Bruggemann. In order to dry up the black market, the German states introduced a new gambling treaty in 2012 that also included private providers. However, no interested private provider had been granted a license for over eight years, Bruggemann stated. The reason was concerns of the administrative courts regarding the regulatory procedure.
Providers therefore remained in a legal limbo for years. The first licenses were only issued in 2020. The currently valid gambling treaty, which officially legalized Sport Betting under certain conditions, came into effect in the following year.
What is the matter in this specific case?
At the Federal Court of Justice (BGH), it concerns the claim of a man against the betting provider Tipico (Az. I ZR 90/23). He had participated in Sport Betting from 2013 to 2018 and lost over 3700 Euro, which he demanded back. In his opinion, the Sport Betting were not permissible and the betting contracts were invalid, as the provider did not have the necessary authorization. Tipico had applied for a license but only received it in 2020. The plaintiff's right to sue was bought by the process financier Gamesright from the original plaintiff. The Landgericht Ulm had previously ruled that Tipico had violated provisions of the Gambling Treaty in its then valid version, but the betting contracts were still valid.
What did the BGH decide?
The Karlsruhe Senate suspended the proceedings. The European Court of Justice (ECJ) is to clarify whether the service provider's European Union freedom to provide services, with a seat in another EU country - in this case, Malta - opposes the reimbursement of losses from illegal Sport Betting. The question arises as to whether Sport Betting contracts are void if the provider had applied for a German license but the procedure for granting it was in breach of EU law.
What does it mean for players?
From the perspective of their lawyers, only waiting: The ECJ ruling in favor of the players will only be delayed, but not prevented, according to German lawyer Claus Goldenstein, whose law firm, according to its own statements, represents over 4500 clients in similar cases. "Affected gamblers should not be alarmed and should quickly recover online betting losses to prevent the expiration of existing legal claims." Gamesright stated: "Although we have not yet received a final decision, we are optimistic that the clarification on the European level will bring the necessary legal security for all parties involved."
What do the providers hope for?
On the contrary, Tipico refers to the fact that the European Court of Justice (ECJ) has already clearly decided in a criminal case that the lack of a German license due to a transparent procurement process cannot be enforced against licensed providers in the EU. "We are very confident that the ECJ will also confirm this in the concrete case," explains Tipico lawyer Ronald Reichert. The German Sports Betting Association also expressed "confidence that the ECJ will decide in favor of the providers and European service freedom."
What is the Federal Court's stance on this case?
The Federal Court leans towards the players. President Judge Thomas Koch emphasizes that the Senate is inclined to consider sports betting contracts without a license as invalid, even if the providers have already applied for a license. In making this assessment, the previous case law of the ECJ was also taken into account.
What would be the implications of a ruling in favor of the players?
A consumer-friendly ruling could trigger a larger wave of lawsuits than there already is. Thousands of proceedings are ongoing in German courts. This is due in part to the fact that several companies offered sports betting in the legally uncertain situation several years ago. In addition, law firms and companies have specialized in such lawsuits - like Gamesright. A ruling in favor of the players could encourage many affected parties to seek damages, says Co-Founder Hannes Beuck. "We assume that we will be able to achieve faster and higher refunds after a positive ruling."
How common are sports betting today?
According to the Gambling Atlas, five percent of the population participated in sports betting in 2021 - a doubling within two years. The gross gambling revenues from sports betting would have amounted to 1.4 billion Euros in 2022. For comparison: At lotteries, it was 4.1 billion Euros and at gaming machines 4.8 billion Euros. The growth in sports betting has been strong since the legalization in 2020, it continues. According to the Joint Gambling Authority of the States (GGL), 30 providers of sports betting now have a license.
- The case at the Federal Court of Justice (BGH) involves a man's claim against betting provider Tipico, as he participated in sports betting from 2013 to 2018 and incurred losses exceeding 3700 Euro.
- The man argues that the sports betting were not permissible and the betting contracts were invalid due to Tipico not having the necessary German license during that period.
- The proceedings at the BGH were suspended, and the European Court of Justice (ECJ) is now tasked with clarifying if Tipico's EU freedom to provide services, based in Malta, opposes the reimbursement of losses from illegal sports betting.
- The ECJ will consider if sports betting contracts are void if a provider applied for a German license but the regulatory procedure was in breach of EU law.
- The German Sports Betting Association hopes that the ECJ will decide in favor of providers and European service freedom, as a previous criminal case has already established that the lack of a German license due to a transparent procurement process cannot be enforced against licensed providers in the EU.
- Should the ECJ rule in favor of the players, it could potentially lead to a larger wave of lawsuits, as many affected parties might seek damages, according to Co-Founder Hannes Beuck of a company specializing in such lawsuits.
