Authorities across Europe are increasingly blocking payments in online casinos in order to force unwanted providers out of the market. How does such a payment block work? Is a payment block also planned in Germany? We provide answers to the most important questions.
A selection of the best providers without blocking payments
What is a payment block in the online casino?
A payment block in the online casino is technically implemented by payment service providers. This can be a credit card company, e-wallet operator, payment initiation service, etc.
Payment services break down recipients of payments by industry. The industries broken down also include gambling operators. Payment services may choose not to allow deposits to gambling operators through their platforms.
If a payment service has set up a payment block for online casinos, users of the service can no longer make deposits in the online casino. Conversely, the casino cannot send any withdrawals to the player either. Often the ban only applies to users of a specific country and not to all users of the payment service.
The reason why payment services set up payment blocks in online casinos is often of a legal nature. Payment service providers have already been sentenced to reimburse losses suffered by players in online casinos.
The background: gambling on the Internet was not finally regulated in Germany for a long time. Many providers operate in a gray market. There are providers based in other EU countries who refer to the freedom of establishment of companies in the EU.
However, whether this also applies to online casinos is controversial – at least not all German authorities see it that way. For a long time there was no uniform regulation among the German federal states either. Schleswig-Holstein, for example, issued licenses to online casinos that were banned in other federal states.
Legal risks for payment service providers
The unclear legal regulation poses a risk for payment service providers. Under certain circumstances, the payment service providers can be obliged to pay damages to injured players.
If a player deposits money with a payment service at an insufficiently licensed online casino and loses, they could sue the payment service. Payment service providers may be subject to a ban on participating in illegal gambling.
The District Court of Neuss (Az.: 86 C 155/20) and the Regional Court of Ulm (Az.: 4 O 202/18) have already taken the view that payment service providers violate a ban on cooperation if players use the platform for unauthorized online deposit casinos.
However, a final decision by the Federal Court of Justice (BGH) on the issue is still pending. Deposits in the online casino are therefore still possible in principle until the supreme case law has created clarity here.
It is by no means certain that case law will decide a claim for damages against payment service providers for repayment of the wagers made. In February 2020, the Munich Higher Regional Court had already ruled that such a claim against payment initiation services did not exist, as they only acted as messengers for the payer. ( 8 U 5467/19 )
What is the purpose of blocking payments in online casinos?
The gambling market on the Internet is ultimately international, borderless and can therefore only be regulated to a limited extent at national level. This is a thorn in the side of many regulators. Authorities want to prevent their residents from accessing websites in other countries without their consent and appearing there as consumers/consumers.
However, technically it is almost impossible to prevent visiting foreign websites – and even if technical measures are taken, these can be circumvented relatively easily. However, all foreign online casinos rely on deposits.
Somehow, players have to transfer money to the game account – and need payment service providers such as credit card companies, banks, wallet operators, etc. The payments have been identified by the regulatory authorities as a bottleneck that needs to be closed. In this way, supervisory authorities want to take action against non-nationally regulated gambling and would like to dry up this undesirable market.
Gray market and licensed market are in competition
One reason for blocking payments in online casinos is the tax authorities’ concerns about their tax revenue. After all, providers based abroad are often not subject to tax in Germany – the income from gambling therefore flows to other countries.
Online casinos from abroad can often make players a better offer than German competitors. The reason for this is the strict German regulation. For example, this provides for a very tight monthly deposit limit of EUR 1000 – across all German online casinos.
In Germany, players are not allowed to bet more than EUR 1 per round on slots, have to take a five-minute break every 60 minutes, endure a delay in the game process due to the 5-second rule and also do without a whole range of games.
For example, jackpots are prohibited in Germany – as are machines that display classic banker games such as roulette, blackjack or baccarat. These games are also not available as classic online casino games – at least until now.
The reason: While a central authority is responsible for virtual slot machines and poker, the licensing of banker games remains the responsibility of the federal states. These have often not yet granted any concessions – so that the games cannot be offered either. In addition, offers from the federal states may only be accepted by players who also have their place of residence in the federal state in question. This alone is likely to cause considerable confusion on the German online gambling market in the future.
Last but not least, there is a rather peculiar taxation in Germany. A tax of 5.3% applies to stakes in slots and online poker. Many games with attractive payout ratios have therefore been removed from the range – but are still available abroad. The reason: It is not stakes that are taxed abroad, but gross gaming revenue.
Payment blocks can hardly be bypassed with a VPN
In the past, authorities have already tried to make the offers of foreign providers inaccessible through geo-blocking. With geo-blocking, users with IP addresses from a specific country cannot access Internet offers. An internet user with a German IP address cannot visit a foreign casino blocked in this way – at least as a rule.
The Internet user could use a virtual private network (VPN), choose a remote server abroad and pay a visit to the online casino via this. In contrast, the authorities have little to do. The payment block works here anyway. After all, players have to deposit money at a casino in order to be able to place wagers.
The payment block cannot be circumvented with a VPN either, since it relates to a user account that is assigned to Germany. Opening a user account with a foreign payment service, on the other hand, is only possible with major hurdles without also being able to prove permanent residence in this country.
Looking abroad: Where are there already payment blocks in online casinos?
In many countries there are already payment blocks in online casinos. The results of the measures are inconsistent and also legally controversial.
There is a de facto gaming monopoly in Finland. The Finnish government therefore wants to restrict gambling outside of Finland – and this also includes foreign online casinos that are active on the national market via the Internet.
Payment blocks were therefore decided in December 2021. Banks, credit card companies and other regulated payment services are not allowed to allow players to make deposits or withdrawals at online casinos that are not licensed under Finnish law. The regulation will come into force on January 1, 2023.
The European Gaming and Betting Association (EGBA) criticized the measures and called for a reform of the national gaming sector instead. The payment blocks were intended to prevent Finnish consumers from visiting non-Finnish websites. This would restrict consumer choice and freedom.
As early as 2010, the Norwegian Ministry of Education issued a regulation that required banks to block deposits at online casinos under certain conditions. The obligation to block applies when the recipient or sender of a payment is a gambling company that is illegal under Norwegian law.
In August 2019, the Oslo District Court ruled that this arrangement was legal. The Malta-based payment company Entercash had sued together with the European Gambling & Betting Association (EGBA) with reference to EEA law, which does not allow such payment blocks.
The judges obviously saw it differently. In Norway, unlike in the extensively liberalized gambling markets of Sweden and Denmark, there is still a state quasi monopoly on gambling.
In January 2020, the Norwegian government tightened the payment blocks again – which is also evidence that the payment blocks initially set up did not work as desired.
The government gave figures to justify the tightening in January 2020. According to this, providers not licensed domestically had achieved sales in the range of EUR 590 million in 2019 – with 250,000 Norwegian players.
The government cited circumvention practices by foreign providers as the reason. These apparently used intermediary companies for the payments. The new regulations therefore require banks, credit card companies and other payment service providers to check certain payments.
Players in the UK are no longer allowed to deposit with credit cards at online casinos from 2020. The ban was issued by the supervisory authorities and justified with problematic gambling behavior among 800,000 Britons.
Other payment service providers also offer payment blocks in online casinos for the British market. The service provider Klarna, for example, has blocked the pay-now-buy-later function for deposits with gambling providers.
Instant transfers with Klarna are not affected. Only payment variants with a credit function should no longer be able to be used at online casinos. It should not be possible for players to go into debt to participate in the game – not even in the form of a payment with a simple payment term.
In addition, a voluntary system has been developed with which players can exclude themselves from making deposits at online casinos. This block can be set up on request. The executing bank must then reject the transfer. An activation code is required to set up the lock – which 400,000 British customers have already used. Klarna works with numerous banks for this purpose.
In the past, the British Barclays Bank has already offered a cooling-off period for payment blocks set up on accounts and cards. Those who opted in automatically set up a 72-hour reflection period. The lifting of a payment ban in the online casino only became effective after this reflection period had expired.
The Swedish government plans to tighten the gambling law. In particular, gambling that is not regulated in Sweden should be more strictly prohibited. The law is scheduled to come into force on January 1, 2023.
Payment services should be obliged to block gambling providers without a Swedish license. The Swedish government, on the other hand, considers technical barriers such as IP blocking to be unsuitable. On the one hand, these measures are easy to circumvent and, on the other hand, they conflict with the constitution.
There are 91 licensed gambling companies in Sweden, both national and international – 66 of them with internet gambling licenses. This market has grown significantly in recent years. The reason for this is the liberalization a few years ago.
Payment blocking in online casinos in Germany: What is the status?
In Germany, the new State Treaty on Gaming came into force on July 1st, 2021. This names the Joint Gaming Authority of the States (GGL) as responsible for combating illegal gambling. The authority is currently under construction and intends to be fully operational from 2021. Action is to be taken against illegal gambling offers and advertising for them as early as mid-2022. However, a detailed catalog of measures has not yet been presented. However, it is very likely that the authority based in Halle an der Saale could also resort to blocking payments in the online casino.
Such considerations are not new in Germany. The state government of Lower Saxony had already issued a decree on blocking orders for payment service providers. This was directed against an unnamed company and took place in June 2019. The measure was followed by criticism from the European Gaming and Betting Association (EGBA) and the Lower Saxony FDP, among others.
Bypass payment block in online casino: is it possible?
A payment block in the online casino is often quite easy to circumvent. On the one hand, all payment service providers are rarely blocked for deposits. By switching to another e-wallet, players usually have the option of making a deposit. On the other hand, there are payment methods that are not subject to official control or only to a very limited extent.
Deposit with Bitcoin
The best example of this is the cryptocurrency Bitcoin. Deposits with Bitcoin are basically possible in two ways in online casinos : On the one hand via crypto payment service providers, on the other hand directly via the blockchain. Payments in the latter variant cannot be prevented by geo-blocking or other measures. Payments via crypto payment service providers can be prohibited by the authorities if the payment service provider is regulated. However, this is not the case with all payment service providers.
Payment blocks in online casinos are a means used by authorities by ordering payment service providers to cut off unwanted online casinos from payment transactions.
If such a block is set up, deposits by bank transfer, credit card, e-wallet, payment initiation services, etc. at online casinos are no longer possible without further ado. Not every payment block applies automatically to all payment service providers – in Great Britain, for example, payment options with a credit function have so far been affected.
In Germany, payment blocks in online casinos have already been applied by the state government of Lower Saxony. In the future, such blocks could be used by the new joint gaming authority of the countries (GGL) . Players are left with various fallback options such as unbanned payment services and cryptocurrencies.