LeoVegas CEO: Germany has become a “wild west” gambling market
Gustaf Hagman calls on German authorities to take action from 1 July as consumers flock to operators ignoring the transitional regulations
Online casino restrictions in Germany are creating a “huge” black market in the soon-to-be regulated country, according to LeoVegas CEO Gustaf Hagman.
Speaking exclusively to EGR, Hagman admitted he was unsure about the operator’s financial prospects in Europe’s largest economy due to the presence of other operators choosing not to conform with the transitional regulations.
“I think we just have to wait for July and the new licensing system and then we will have a level playing field,” Hagman said.
“Right now, it’s the wild west in Germany, and it has become a huge black market,” he added.
In October 2020, German authorities introduced a set of new rules for prospective online operators, including €1,000-a-month deposit limits and a €1 cap on slot spins.
Table games must also be switched off, although it will be up to the individual German states if they decide to eventually allow online casino games like blackjack and roulette. Operators hoping to provide a regulated online casino offering in country must conform to these rules in order to qualify for a licence when the market goes live on 1 July 2021.
Hagman previously affirmed his commitment to the market by suggesting the short-term pain would be worth the long-term gain, insisting Germany could become a top-three market for the business, an assertion which seems to have changed amid the current environment.
LeoVegas, which has conformed to Germany’s transitional regulations since they went live in October, has experienced a significant downturn in revenue from the market, shrinking by 45% annually in Q1 2021.
The Malta-headquartered operator estimates that up to 80% of Germany’s online casino market has shifted over to non-confirming operators, leading to a “skewed” competitive situation where regulated firms are leaking customers to the offshore environment.
“We know for a fact there are a lot of smaller operators that are not adhering to these restrictions, not implementing everything that you need to implement in Germany, ahead of the new legislation,” Hagman told EGR.
“So, naturally, the players are going for those brands since it’s a greater player experience with those brands today.
“Hopefully, we’ll be able to win them back, but it depends on the authorities in Germany and whether they go after not only those firms who aren’t conforming now, but those who aren’t after July.
“We’ve tried to illustrate this to them, and I know other larger operators than us like Tipico and bwin are suffering a lot as well, but I don’t know what to do.
“I guess we just have to wait for the 1 July and just hope the German authorities are taking this seriously,” he added.
Despite his downbeat assessment of the German market, Hagman hopes the dominance of non-conforming online casino operators will be short-lived due to changes in legislation.
“We are grateful that the German gaming legislation will come under the tax authorities in Germany, so the tax authorities will hunt down the operators who don’t pay tax within Germany,” Hagman said.
“It will be tougher for black-market operators after 1 July, and there is also talk of things like payments blocking, which is a really good sign,” he added.
The European Gaming and Betting Association (EGBA) recently claimed that the mooted 5.3% turnover tax on German online poker and slots could reduce channelisation to the regulated market to as little as 51%.