PayPal identified as payments provider targeted by German authorities
EGR understands the payments giant was the unnamed provider issued with a cease and desist letter by German authorities last month
PayPal was the international payments provider told to stop facilitating online casino transactions in Germany last month, EGR has learned.
The German state of Lower Saxony issues a cease and desist letter to a then-unnamed international payments provider in June, warning that the move should send to a message to all payment providers to stop facilitating online casino transactions.
EGR understands that provider PayPal was chosen in part because of its physical presence in Germany, including an operations site in Berlin and a technology campus in Dreilinden.
“It’s difficult to send a cease and desist order to organisations that operate cross-border without a physical presence in Germany,” one source with knowledge of the situation told EGR.
“If you have people on the ground and people responsible, then you are more likely to comply. As a regulator it’s much more powerful than sending a cease and desist letter to the Isle of Man.”
A total of 17 other payments providers have also since received communications from Lower Saxony – the relevant authority for payment for illegal gambling in Germany.
The Ministry requested information from the providers as to their support of ‘illegal’ gaming in Germany and asked how they planned to stop this,.
The letters also threatened further enforcement if no action was taken, which could include escalation to a cease and desist letter.
Some of these companies are understood to have responded to the Ministry and trying to comply with the directive while others are waiting for PayPal’s response to the letter, which could come as soon as this week.
The provider could choose to comply with the cease and desist order – a major win for Lower Saxony – or choose to mount a legal challenge against the country’s online casino ban.
However, the legal base for the online casino ban was strengthened this week buy a Schleswig-Holstein court ruling that held Germany’s ban on online casino gaming was compatible with European Union law.
The ban only applies to online casino transactions – not sports betting – but a payments processor only receives a request from an operator with a 7995 code, which designates it as a gambling transaction.
“Its impossible to know whether the deposit will be used for betting or casino after that,” the source said.
EGR understands PayPal has been telling operators it is looking at ways round this particular issue.
The situation is clouded by the fact that when a provider receives a request for a deposit from an operator it doesn’t know whether that deposit will be used for casino or sports betting, which is permissible.
PayPal did not respond to an EGR request for comment.
The European Betting and Gaming Association described Lower Saxony’s cease-and-desist order as a “dangerous precedent” and not a legitimate solution for the problems of Germany’s gambling framework.