Germany: Federal Administrative Court sharpening the definition of a game of chance. Entrance fee not relevant for the qualification?

by DLA Piper

In a ruling of 16 October 2013, the Federal Administrative Court confirmed a judgment of the Higher Administrative Court Mannheim that an online football Fantasy League game requiring a one time entrance fee does not qualify as a game of chance in the meaning of German gambling regulations (BVerwG 8 C 21.12). The plaintiff was the operator of the game challenging a cease and desist order by the authorities in Baden-Wurttemberg. The game allowed players to create their own football teams consisting of 18 real life Bundesliga athletes. Depending on the Bundesliga’s players performance, the created football teams were ranked under certain pre-defined criteria. The players were required to pay a one-time fee of EUR 7,99 to create their teams and the most successful players were awarded different prizes in kind and in money. The player with the most successful team in a season was able to claim the first prize of EUR 100,000.

Under the German Interstate Treaty on Gambling (Glücksspielstaatsvertrag) a game of chance is defined as a game which requires a wager to obtain an opportunity to win and the decision on having won depends primarily or solely on chance. The court did not address the issue whether or not the success in the fantasy league games was actually based on skill but mainly argued that the one-time entrance fee is made for the purpose to enter the contest and not to receive an opportunity of winning as would be required under the definition of a game of chance. The actual opportunity to win a prize depends on the line-up chosen by the player (for which the player did not have to pay any additional fees). The court also stated that this interpretation is in line with the purposes of the Interstate Treaty on Gambling. According to the court, the restrictive nature of the Interstate Treaty on Gambling requires a very careful consideration whether the prohibition of a specific game is indeed required to justify the aims of the Interstate Treaty on Gambling (ie mainly combating gambling addiction and preventing fraudulent activities). It noted that in light of the mechanisms of the game in question, a prohibition under gambling laws would not be justified.

The decision of the Federal Administrative Court is noteworthy under two aspects. First, the decision provides some important arguments regarding the relationship between wager and an opportunity to win. It seems that the court takes the view that an indirect relation between the wager and the opportunity to win is not sufficient to qualify it as a games of chance regardless whether or not the actual game is skill- or chance based. Second, the court decision again confirmed the trend of the last couple of years that the authorities and administrative courts of the first instance interpret German gambling laws extensively and are in many case overruled by the higher instance courts reminding them that the restrictions provided by the Interstate Treaty on Gambling must be regarded critically.

Please note that so far only a press release of the court has been published. We may update this article after the full reasoning of the court is released.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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