All 16 German state legislatures voted by mid-December to approve the new law which seeks to prevent any form of Web-based gambling or brokering of games over the Internet.

The law also encompasses placing bets from Germany to a gaming company abroad. The new legislation grants states the power to demand Internet service providers to block Web sites that promote betting. Banks may also be ordered to stop money transfers for gambling transactions.

Internet betting companies and lottery brokers like Bwin Interactive Entertainment, Fluxx and Tipp24 have criticized the new regulations and claimed that the ban is contrary to law.

Tipp24 has said it will pursue a lawsuit if necessary, while Bwin already sued four German states in October seeking to continue offering online bets after the rules come into effect. The cases are pending.

Legal loophole?

Bwin operates a betting site under a license issued by the former communist East German government before unification and another portal under a Gibraltar license.

The company has said that both of those licenses prevail over the new online-betting ban and stressed that it would continue to operate its sites.

The European Commission, the EU's executive arm, has called on Germany to reconsider the complete ban on online betting. In April, Germany rejected the demand, claiming that citizens must be protected from the dangers of gambling.

The commission has the power to sue any EU member state to force them to comply with EU law.

Until now, 13 of Germany's 16 states have submitted the ratification documents for the ban to take effect, creating the required majority. The other three states are expected to submit their papers by New Year's Eve.

The new law will also prohibit the advertising of gambling over the Internet and on television; specifically, advertising in print and other media may only "inform" people about betting possibilities, and may no longer "directly invite, incite or prompt" customers to play.