The legality of the German State Treaty on Gambling, signed by 15 of the 16 Bundesländer, or states, has been thrown into serious doubt by the European Commission.

The states had agreed on a series of measures on gambling, many of them designed to drastically reduce the street market in arcades and bars, over a period of five years. The one outstanding state yet to sign is Schleswig-Holstein, which had already gone its own way, issuing among other things, a stream of licences to operate sports betting.

Now, however, a change of government in Schleswig-Holstein has seen the state wish to join the other 15 Länder and sign up for the treaty.

In Brussels, however, last week, the European Commission issued a detailed opinion on the amending legislation proposed in Schleswig-Holstein, which would see it come into line with the other Länder.

The EC opinion casts serious doubts on the proposed switch from “a transparent licensing model to one that is restrictive and opaque” and also raised doubts about the overall compliance and consistency of the Treaty with EC law. It has ruled that Schleswig-Holstein must not adopt the draft legislation before January 2013.

The EC statement, made on Friday, was welcomed by Sigrid Ligné, secretary general of the European Gaming and Betting Association, who said: “Schleswig-Holstein’s proposed move from a sustainable and EC compliant licensing system to an inconsistent and unjustifiably restrictive regime would be significant step backwards, one that - as confirmed today - the European Commission cannot approve.”

German operators, under siege from states keen to protect their monopolies in the lottery and casinos, were delighted to have the EC’s concerns at the treaty confirmed. Sigrid Ligné added: “The European Commission’s detailed opinion against Schleswig-Holstein sends a clear message that member states are no longer going to be allowed to impose gaming regulations that fail to meet the tests set by the European Court of Justice.

“The German states cannot continue to ignore the warnings coming from Brussels and the growing criticism evidenced by the multiplication of complaints and litigation, even before the new legislation is introduced. This creates an extreme level of legal uncertainty which is damaging for all parties and German consumers in particular.

“At this stage, only the EC can restore legal security by acting on the many complaints it has received, not only against Germany, but also against Greece, Belgium and several other member states.”