Financial bets and digital options are becoming more and more popular particularly among risk-loving private investors.
On the one hand, numerous small investors are still deeply disappointed as a result of the stock exchange crash, particularly as at the high point of the stock exchange fever at the end of the 90’s, there was a progressive decline in the previous upward market trend as a result of the discovery of the concealed actual value of the securities. The deficit of information and false risk assessments left shareholding to become a game of chance. According to the Federal Court of Justice (Bundesgerichtshof, BGH-Urteil XI ZR 296/98), even the laws see no major difference in the conception of the terms “game”, “bet” or “future”.
On the other hand, financial bets offer considerable advantage over the investment and trading possibilities available from trading on the stock exchange or the conventional financial derivatives. In particular, the simple construction of these new financial instruments makes the trade – in contrast to the complicated valuation and market price assessment with classical stock options – interesting for investors. In addition, the betting partaker can himself decide on the amount of potential gain as well as the risk.
Financial bets are provided by bookmakers and betting exchanges in Germany. The provision by the Internet bet exchanges is for the time being limited to trade in sports betting. The trade in financial bets has however been booming for about a year.
From a legal perspective, providers as well as agents of these bets are treading on thin ice. One could take the view that partaking in bets on the stock exchange is to be seen as a game of skill which does not require a licence. The state will however – almost certainly from a financial point of view – look on this very differently and use corresponding regulatory measures as has happened in similar cases.
The jurisprudence to date in favour of private providers (such as the Gambelli Decision of the European Court of Justice) mainly concerned the organisation of sports betting in the traditional form, i.e., sports betting by bookmakers. The German judicature has not yet expressly dealt with the legitimacy of the organisation of stock exchanges. The legal situation is therefore as ambiguous as before.
As it is to be expected that most federal states will pull out all the stops in order to retain the state gambling monopoly, financial betting providers and agents should make arrangements to resist legal proceedings by the state.
In doing so, it is not only important to see that the emphasis is on skill rather than chance with regard to betting possibilities on betting exchanges, but also that the providers and agents primarily make efforts to obtain a “licence” in the sense of Art. 284 of the German Criminal Code (StGB). Should the state then interfere, the betting exchange cannot be accused of not at least having made an effort to obtain a licence.
Overall the permissibility of financial bets in Germany is rising and falling, in particular with regard to the exciting developments in European and German gambling law. As, in my opinion, it is only a question of time before the state gambling monopoly is dispossessed, the German betting customer will soon be able to speculate on (betting) exchanges without concern and betting exchanges will be able to strongly influence the German gambling industry.