888 Holdings Ponders Exit From Germany After Adverse Court Ruling

More signs that the European sports-betting market continues to trod down the road to a large collective of single-country offerings is the news that 888 Holdings Plc is considering exiting the sports-betting market in Germany following an adverse legal decision in the German state of Baden-Württemberg.

888’s announcement of its possible withdrawal from the German market was detailed in the companies year-end financial results, which were just released on Tuesday. The ruling from the German Court echoes earlier German court rulings targeting online gambling firms. Those earlier rulings had been struck down on multiple occasions by the European Court of Justice, until that arm of the EU announced late last year that it would no longer investigate and intervene in cross-border disputes involving online gambling.

888sport logoThe Baden-Württemberg ruling can thus be seen as one of a large wave of such rulings likely to emerge not only from Germany, but across the entire EU. This case was based on the same German Inter-State Gambling Treaty.that previously ran afoul of EU code, but it is likely to typify the future of such online-gambling, cross-border disputes.

In his Chairman’s Statement, 888 CEO Brian Mattingly assessed the Germany situation, writing this:

As previously stated in the Risk Management Strategy section of our Annual Report and Accounts regulatory uncertainty exists in certain territories in which we operate. In Germany, a subsidiary of the Group has been the subject of a ruling on appeal by the Federal Administrative Court which prohibits offering online gaming services in the state of Baden-Württemberg, and includes general findings of law upholding the prohibition on offering online gaming in Germany under the German Inter-State Gambling Treaty.

In recent months, other providers (in the online and land-based sectors) have withdrawn from the German online gaming market, and recently payment institutions facilitating approximately 9% of deposits for the Group in Germany have decided to cease providing certain services with respect to the German online gaming market. Certain other payment institutions have notified the Group that they are considering their position.

The Company is highly disappointed by this far reaching ruling and, together with the Group’s legal counsel, is considering potential courses of action, which may include a petition to the German Federal Constitutional Court and is assessing the status and breadth of its offerings in the German market.

Deeper in the year-end report, under a heading titled “Regulatory Risk”, a few other details emerged. There’s no doubt the company is laying the blame for this one squarely at the feet of the EU. Per 888:

In Germany, the Company was served on 6 March 2018 with a detailed ruling of the German Federal Administrative Court in a case to which a subsidiary of the Group was a party, pertaining to a prohibition order which prohibits offering online gaming services in the state of Baden Württemberg. The ruling was founded on a finding of law contrary to previous EU and German court rulings, upholding the current German ban of remote casino and restricting remote sports betting activity, rendering the offering of online gaming in Germany in general as prohibited under the German Inter-State Gambling Treaty. The Group has been advised that this ruling could result in increased enforcement measures in connection with the provision of its services to German customers. …

The company also announced that it is withholding US$45.3 million on special account against possible fines it might have to pay in the Baden-Württemberg case, which stretches back several years and is in relation to 888’s pre-2016 services in Germany. 888 also announced that it has held back an additional US$5.5 million as part of “a resolution of the UKGC licence review” undertaken after 888 was wrapped up into one of the UKGC’s recent high-profile investigations into cases where online customers had stolen embezzled millions of pounds from other parties. Those criminals then gambled that money away on various sites, including 888. The (USD) $5.5 million is in regard to the fine levied against 888 in one of those cases, and for both and the possible German fine, the company took an “exceptional charge” writeoff that impacted last year’s fiscal numbers.

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