Germany’s vast betting and gaming sector has had a lot of challenges to contend with since market re-regulation in 2021, and as the country’s largest operator Tipico is an ideal observation spot.

Christian Heins, Director iGaming at the Malta-headquartered company, shared his views on Germany’s regulatory and market development progress ahead of his appearance at the SBC Summit Malta next week, where these issues will be discussed in even further depth.

The presence of a black market in Germany is unsurprising, he says, pointing to international comparisons. What is worrying for Tipico and other German stakeholders though is the extent of this black market, particularly in the online casino segment, something which Heins believes requires a ‘fundamental reassessment’ in how it is dealt with.

SBC News: How much have changes to tax regimes complicated the development of Germany’s gambling market in the years since 2021?

Christian Heins: The concept of applying a turnover-based tax on stakes has not been adopted in most jurisdictions worldwide, primarily because it disproportionately disadvantages players. Germany has taken a unique approach in this regard.

A player exchanges money for entertainment value, similar to purchasing a cinema ticket. For example, a €10 ticket for a 120-minute film may still yield a poor movie experience, but the duration generally matches expectations. However, if the same €10 buys only a five-minute film, even a great film may feel mispriced. This is precisely the effect of the German turnover-based taxation on slot games.

In concrete terms: Assume a player intends to spend a maximum of €100 over the weekend on slots with a 90% Return to Player (RTP). Statistically, the player loses €0.10 per €1 spin. With the additional turnover tax of 5.3%, the actual statistical loss per spin increases to €0.153. This results in approximately 650 spins equating to about €34 in taxes on the €100 deposit.

For operators under Germany’s turnover tax model, this means that GGR is not €100 but only €65.40. This results in an effective tax rate of over 50% on GGR, which is economically unsustainable. Consequently, RTPs have to be reduced to around 87%–88%, decreasing player value and satisfaction.

That’s the reason why the international standard is to tax Gross Gaming Revenue (GGR). If the goal is to generate €34 in taxes on €100, most other markets would apply a tax rate of approximately 34% on GGR. In such systems, a player could achieve around 1,000 spins with the same €100 and RTP, offering substantially more playtime for the same tax burden.

This reflects a much better entertainment value, this is way more attractive for the players.
The consequence is simple and vast: More than 60% of players prefer black market offers that offer better entertainment value but neglect any player protection measures and don’t pay taxes. This tax regime produces no winners and benefits illegal offers.

Looking over the past four years, how effective have conversations between operators, the regulator and government been in informing policy?

I believe we have a very constructive attitude on all sides, which resulted in learning curves for everyone. Still there is room for improvement.

There is solid evidence and the black market issue in Germany is not too surprising if we look at international examples and distinguish between well-functioning regulatory models and those that have failed or proven dysfunctional.

Germany adds another layer of complexity, as gambling regulation is a matter for the federal states. With 16 states representing views ranging from complete rejection of gambling to full liberalisation, all perspectives must be taken into account.

The time for evaluating the State Treaty on Gambling is approaching. It will be difficult to ignore the fact that the regulation is not achieving its primary objectives. Given a channelling rate of, at best, 20% to 30% in the slot gaming sector, a fundamental reassessment is necessary.

Could relations between German operators and the regulator itself stand to improve in any way, in your view?

This is exactly what we observe at the operational level. There are regular exchanges, and both sides are increasingly building trust. I believe we are on the right path, but there is still a significant way to go. That said, I do see a growing sense of mutual understanding and respect.

As one of Germany’s leading betting firms, how has Tipico navigated the regulatory challenges of the past few years to come out on top?

As the clear market leader in Germany, it is our responsibility to act as a role model. From the very beginning, we understood that regulation is here to stay. We did not look for loopholes; instead, we focused on making our products 100% compliant and keeping them that way. Our success has proven us right: we continue to grow profitably across all product verticals.

And I must highlight our brand strategy, which has remained consistent since 2016. Tipico is a true brand, and in times of crisis—when consumers seek stability and security—strong brands serve as beacons that cut through the darkness. Today, more than ever, we prioritise protecting and nurturing our brand.

Is Germany’s status as one of Europe’s leading regulated markets threatened by black market activity?

Particularly in the area of online casino gaming, the share of the black market is overwhelming. We estimate that only one in four euros is spent with a legal, licensed online operator. Although we observe that we have now reached rock bottom, there is still no strong sign of a trend reversal.

What more can Germany do to fight back against the black market and win back on channelisation?

I would differentiate here between what regulators and prosecutors can do, and what operators themselves can do. Let’s start with what would help immediately and could be implemented most quickly.

The current lack of effective enforcement against the black market is a fundamental problem. If the goal is to have a strictly regulated market, then decisive action against black market operators is absolutely necessary.

Furthermore, if legal operators were allowed to be more competitive – through a targeted rollback of certain product and advertising restrictions, and a shift from turnover-based taxation to GGR-based taxation – we’d see meaningful progress.

At the same time, the industry needs to recognise that the black market relies on three core ingredients: games, payments, and advertising. In many cases, it’s the same suppliers and distribution channels in both the legal and illegal markets. This is exactly where we, the industry, can make a real difference: by raising awareness and applying pressure on non-compliant suppliers and structures.

With our Trusted Partner Programme, we certify game providers who commit — via a Code of Conduct — not to supply the black market in Germany. In return, we only advertise and feature these Trusted Partners. We have similar initiatives in the pipeline for payment providers and media partners.

We believe this initiative is a very important first step into the right direction and we received a lot of interest and feedback within the industry. These first months already show us how deep black-market structures are rooted. Bringing such hidden structures to light gives responsible actors the chance to take action against it. It’s just the beginning of a long, strenuous walk – but we are convinced that this effort is worthwhile.

How much does the situation around taxation and regulation differ from vertical to vertical (betting, slots, poker, etc) and how does this affect the market overall?

That question would need to be answered on a very detailed level – but to put a long story short: Yes, there are big differences between verticals and therefore the respective markets are quite different too.

What are your hopes for Germany’s betting and gaming market over the coming years? What would be your ideal scenario?

That’s a straightforward answer: strict enforcement against illegal operators. A quick win would be to make a legal example out of a few major black market providers with remarkable, harsh penalties. In addition, some product and advertising restrictions need to be rolled back, and the current tax model should be replaced with a gross revenue-based system.

This would significantly boost channelling into the legal market, while maintaining player protection. It would also help prevent money laundering and tax evasion. Overall, we expect that the state would see a substantial increase in revenue almost immediately.

What lessons do you think stakeholders with interests in Germany will gain from attending the SBC Summit Malta?

I believe that at the SBC Summit, you’ll meet many people like me: people who believe in the German gaming market and who are actively working to make it a success.

After a rough start – there’s no point sugarcoating that – Germany has the potential to become one of the largest gambling markets in the world. It’s not an easy market, and right now it’s certainly not the most inviting place to launch a new, compliant business. But the opportunity is enormous.

The new government in Germany has already committed in its coalition agreement to cracking down on the black market, and the scientific evaluation of the State Treaty on Gambling is coming up. There’s good reason to hope that the current regulatory shortcomings will be acknowledged and addressed.

Secure your spot at SBC Summit Malta with our discounted ‘Group Pass’. For groups of three or more, you can gain access to three days of networking, exhibition, and conference content for the price of €400 (a discount of €200 off a standard ticket). 

Additionally, you can purchase our ‘Expo+ Pass’ for €150. This pass grants you access to the conference and exhibition only.

Operators and affiliates can apply for complimentary passes.

 

 

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