Germany’s Legal iGaming Market Fighting Against Unlicensed Operators

Article by : Erik Gibbs Jun 20, 2024

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The illegal gaming machine market in Germany is expanding at a rate that is expected to surpass the number of legal machines by 2026. This trend was highlighted in a study conducted by DICE Consult, which was commissioned by the trade association VDAI.

The study analyzed market trends that have been evolving since the implementation of inter-state treaties on gambling in 2012.

In 2022, Germany had 137,383 legal gaming machines, a significant reduction from the peak number of 211,887 in 2016. This decrease contrasts with other market studies that estimated the total number of gaming machines in Germany for the same year to be approximately 180,000 units.

DICE Consult’s report highlighted that alongside the 137,383 legal machines, there were between 58,336 and 116,672 illegal machines, mostly found in ‘coffee shops’ in larger cities.

Projections from the study suggest that by 2026, the total market will comprise around 250,000 machines, with illegal machines accounting for 45-62% of this total. This indicates that the black market could potentially overtake the legal market as early as the following year.

The inter-state agreement, which has managed the operation of gaming machines in arcades and pubs since 2012, has led to numerous regulatory changes by the 16 federal states. These adjustments have inadvertently made the legal market less appealing, contributing to the surge in illegal operations.

The continuous imposition of restrictions on the legal gaming industry, driven by concerns for player protection, has inadvertently fueled the growth of the illegal market.

The Working Group Against Gambling Addiction stresses that the legal gambling market needs to be sufficiently attractive to compete with illegal alternatives, which often flout legal limits and player protection measures to draw gamblers.

Georg Stecker, CEO of DAW (the umbrella organization of the German gaming machine industry), emphasizes the necessity of stronger enforcement and the creation of a more appealing legal market to combat the illegal market effectively.

This sentiment is echoed in a recent article by Der Spiegel, which depicted the legitimate industry in a somewhat sympathetic light while exploring the rapid expansion of the illegal gambling market.

Der Spiegel’s coverage reveals that the black market is bolstered by decommissioned older machines, which are reprogrammed with banned software by companies based in Eastern Europe.

These illegal operations are conducted in “thousands of amusement arcades disguised as cafes and bistros,” generating a tax-free turnover estimated to be between €3 billion and €6 billion (US$3.22 and $6.44 billion) annually.