Online gambling has seen its role for the growth of the overall gambling industry increase significantly over the past decade or so. The Internet has allowed players (almost) unlimited access to different betting and gaming options and the convenience of not having to go to a specific venue to wager. And the smartphone revolution has further facilitated the proliferation of online gambling.
That widespread increase has created a need for regulation, a need that has already been recognized by a number of European jurisdictions. However, some of those jurisdictions have failed in creating an online gambling regulatory environment that is equally friendly to both players and operators. News from the past several weeks have shown that Poland may be one such country.
Last month, sports betting operator Pinnacle announced that it would leave the Polish market due to upcoming regulatory changes. The company led an exodus that was soon joined by EnergyBet and most recently by gambling giants bet365 and William Hill. All three informed players and customers that their services will not be available in the local market due to the implementation of a new gambling regulatory framework on April 1, 2017, or less than a week from now.
What Has Urged the Operators’ Exodus?
It was last spring when news broke that Polish lawmakers were considering the introduction of new regulations that would change the country’s gambling environment. The regulations were to encompass the provision of online betting and gaming services, among other things.
A bill was eventually voted in favor of in the Polish Parliament in December, and is now to come into effect next Saturday. While the new gambling law will expand the specter of legal online gambling options, as promised, it will keep most of those under the purview of a state monopoly. Thus, online casino, poker, and bingo games will be added to the list of legal iGaming services, with sports betting already being on the list. However, international operators that apply for a license will only be able to provide sports betting.
The Polish government will try to combat unlicensed online gambling activity by blocking violators’ IPs. Under the new gambling regulations, such violators will have their IPs and payment services blocked by July 1, 2017. Such measures have been implemented by other countries, but have proven highly ineffective, so chance for their success in Poland is very slim.
Although the very limited gambling options allowed has not appealed to operators, the heavy sports betting tax included in the new regulatory framework has probably become the main driver for their withdrawal. Licensed bookmakers will have to pay a 12% tax on turnover, a tax rate too high to be linked to the Polish government’s intention to somewhat liberalize the local market.
Turnover has been the least preferred option for tax base by most of Europe’s regulated jurisdictions. Operators providing their services in different regulated markets are usually taxed on a percentage of their gross gambling revenue, which makes the tax rate much more reasonable.
Proposals emerged sometime last year that asked for the implementation of a 20% tax on turnover, a ridiculous suggestion that would have vexed operators even more and would have made the local market highly unattractive. Although it should be said that with the 12% tax rate on turnover, one should not expect a wave of happy operators applying for Polish licenses.
Operation Blackjack
Poland’s iGaming regulation efforts began in 2009. The widespread popularity online gambling enjoyed among Poles necessitated the implementation of certain measures. A probe into the state of the country’s gambling industry at the time, called Operation Blackjack, found out that high profile politicians had tried to influence decisions related to the way iGaming would have been regulated and taxed. What is more, it seems they had also attempted to encourage the creation of a regulatory environment that would have been particularly friendly to certain gambling companies.
Anyway, a new gambling law was proposed that year, one that required interested iGaming operators to be physically present in the country, in order to be granted a license. And it was back then when the 12% tax on turnover was first introduced. The new law was contested by many operators and the matter was brought to the European Commission’s attention. As it could have been expected, the Commission sided with the gambling companies, claiming that the proposed regulations violated the European Union’s free trade policies.
The physical presence requirement was scrapped from a new legislative proposal in 2011. Four years later, the European Commission declared the new law consistent with its own regulations. Although that new law was a bit more liberal than its predecessor, the new regulatory environment did not attract a lot of operators. Thus, the greater part of iGaming activity was conducted on unlicensed gambling websites. Losing money to the black market and exposing customers to unregulated operations, the Polish government threatened to arrest everyone who gambled on unauthorized websites. That was, too, contested by operators who argued that bettors were the least to blame for the country’s regulatory havoc.
As mentioned above, iGaming regulation efforts were renewed in 2016, with a promise that more gambling options would be available to customers and the environment would be somewhat more liberal and friendly to international operators; a promise that lawmakers may have failed to fulfill.
Conclusion
Opening the market to iGaming options beyond sports betting has been an important step toward the Polish market’s liberalization. However, putting those new options under a monopoly’s purview together with the introduction of a ridiculous tax rate has created an environment that few foreign operators would find friendly enough to venture into. And given the fact that the Polish iGaming market is a relatively small one, it is very likely that the new regulatory regime would, too, push players down to the unregulated underground, instead of pulling them to the regulated surface.
