Order of 27 February 2025 - 1 BvR 2253/25, 1 BvR 115/24
In an order published today, the Third Chamber of the First Senate of the Federal Constitutional Court did not admit for decision two constitutional complaints lodged by online sports betting operators.
The constitutional complaints, which challenge the levying of a 5% tax on sports bets on the basis of § 17(2) of the Betting and Lottery Act (Rennwett- und Lotteriegesetz – RennwLottG) in the version applicable from 1 July 2012 until 30 June 2021 for reporting periods in 2012, are inadmissible.
Facts of the case:
The complainants – corporations under Maltese law headquartered in Malta – organised online sports betting during the relevant reporting periods. While the complainant in proceedings 1 BvR 2253/23 (complainant I) was directly involved in the bets it organised, the complainant in proceedings 1 BvR 115/24 (complainant II) operated a so-called betting exchange. On this exchange, gamblers would set the odds themselves, and if a gambler on each side was willing to take the bet at the respective odds, then a bet would be made. Complainant II earned a commission on winnings from bets. In November 2012, it withdrew from the German market on the assumption that it could no longer profitably operate the betting exchange due to taxation.
With their constitutional complaints, the complainants challenge decisions of the Federal Fiscal Court (Bundesfinanzhof); they also indirectly challenge § 17(2) of the Betting and Lottery Act. They assert, inter alia, that the Federation lacks the requisite legislative competence. They also claim that the Federal Fiscal Court was required to request a preliminary ruling from the Court of Justice of the European Union on the grounds that the complainants were subject to double taxation that was in breach of the freedom to provide services, given that they also had to pay a gambling duty in Malta. Complainant II also claims a violation of its occupational freedom under Art. 12(1) of the Basic Law (Grundgesetz – GG), contending that the tax liabilities determined on the basis of the bets made greatly exceeded its commissions; it was also unable to pass on the tax to its customers due to their specific gambling behaviour.
Key considerations of the Chamber:
The constitutional complaints are inadmissible.
The complainants failed to sufficiently demonstrate that the Federation lacks the legislative competence under Art. 105(2) second sentence, second alternative in conjunction with Art. 72(2) of the Basic Law. Insofar as the complainants put forward the possibility of coordination among the Länder by way of a state treaty for this matter, which, in their view, would preclude federal legislation in this area, they did not address the possibility that a Land could subsequently reject such a consensus. Complainant I also failed to address the possibility of tax competition, distinguishing between domestic and foreign betting operators, and its consequences for the aim pursued by the tax on sports betting – curbing gambling addiction.
The complainants also failed to sufficiently demonstrate that the Federal Fiscal Court arbitrarily breached its obligation to request a preliminary ruling from the Court of Justice of the European Union, thereby violating the right to one’s lawful judge. In particular, they did not sufficiently discuss the 2020 decision of the Court of Justice of the European Union that the parallel levying of gambling taxes in both Malta and Italy did not violate the freedom to provide services.
Complainant II also failed to sufficiently demonstrate a violation of occupational freedom under Art. 12(1) of the Basic Law. Even assuming the operation of a betting exchange should be considered as a separate occupation, rather than a specific manifestation of the occupation of betting provider, and that complainant II could not have continued to profitably operate a betting exchange, the complainant’s submissions do not show any failure to observe the strict proportionality requirements that would then apply. The mere statement that the profitable operation of a betting exchange was no longer possible is not sufficient. Complainant II did not conclusively demonstrate that the curbing of gambling addiction – the aim pursued by the challenged provision – cannot be considered a legitimate purpose. Insofar as the complainant claimed that a different tax assessment basis – in particular, the taxation of the gross earnings of the betting exchange – would constitute a less restrictive means, it did not sufficiently discuss whether this would be equally effective in curbing gambling addiction in view of the significantly lower tax burden this would entail. While an indirect tax reduces the economic incentive for certain participants to organise sports betting on the market on a large scale, this does not serve to impair the activities of the betting intermediary, but instead to achieve a mitigating effect on gambling addiction pursued with the tax.