New Australian Laws Hand The Online Poker Market Over To Less Scrupulous Operators
Online Poker Report

888 Poker Bails Out Of The Australian Online Poker Market – Will PokerStars Follow Suit?

888 Leaving Australia, PokerStars May Be Next
As of January 16, 888 is no longer offering online poker in Australia. The decision was made in anticipation of the passing of an amendment to the laws governing Australian gambling.

Australian players on 888 were given short notice. On Friday January 13, players received an email which baldly stated the decision.

“Following a business reevaluation, we’d like to inform you that 888poker’s services are not being offered to players residing in Australia and therefore your account will be closed as of 16/01/2017.

You’ll continue to be able to withdraw all funds from your bankroll using our web cashier.

If you’ve already registered to any of our tournaments starting from 16/01/2017 onwards, please unregister as you won’t be able to participate.

Regards,
888poker team”

During the Amaya Q3 earnings call, CFO Daniel Sebag alerted investors to the fact that the company was also considering a market withdrawal.

“In Australia, we currently offer poker and are reviewing the applicability of proposed legislation to player versus player games of skill. At this time, it would appear likely that if the legislation passes, we would block players from Australia.”

888’s decision adds to the likelihood that Amaya will withdraw PokerStars.

It’s likely that other operators, including GVC, will also be pondering the decision.

The legal amendments are an attempt to deter unlicensed operators

There is no licensing system that allows online poker in Australia, although limited sports betting is licensed.

Offshore operators such as Bet365 and William Hill are licensed for sports betting, and notably, William Hill bought GVC’s SportingBet Australian operations in 2012.

The law changes will affect three pieces of legislation; the Australian Interactive Gambling Act of 2001, the Interactive Gambling Regulations 2001, and the Australian Communications and Media Authority Act 2005.

The text of the legislation is available here.

The purpose of the legal changes is to make it easier and more effective to stop unlicensed operators from offering online poker and other gambling.

As far as the legislation itself, it’s a response to the recommendations made in the 2015 Review of Illegal Offshore Wagering.

Key elements of the new laws are:

  • The introduction of civil penalties for offending operators.
  • The provision of authority to the immigration department to disrupt the travel of directors of gambling companies.
  • The provision of authority to the Australian Communications and Media Authority to disclose information on offending operators to other national regulatory bodies.

Human Service Minister Alan Tudge explained:

“We expect online wagering providers to meet community expectations. The tougher laws will seriously disrupt illegal offshore providers from acting unscrupulously or targeting vulnerable Australians.

The government is committed to taking tougher action against illegal offshore wagering providers and this bill does exactly that.”

The issues that will impact on PokerStars’ decision

It might appear that Amaya will automatically withdraw from the market in compliance with the new Australian law, but the decision is not so clear cut.

Several factors will bear upon the decision, not least of which is a balancing of the risk and revenues the market provides.

Australia provides 2.5 percent of Amaya Revenues

PokerStars only offers online poker to its Australian customers. But Amaya’s business strategy is based on opening new markets, and offering the additional business verticals of sports betting and casino games.

Danie Sebag told investors that Australia only accounted for 2.5 percent of Amaya’s revenues, implying that the company would not take a big financial hit if it exits the market.

However, the decision will not be taken based on last year’s revenues, but on the potential revenues that Amaya could receive.

If it exits the market, it will lose the poker revenues, but the path would be clear for it to apply for a sports betting license for its BetStars brand.

In the long run, this may be the more profitable business vertical. And should Australia add a licensing option for online poker in the future, the PokerStars brand would not be tainted by any bad actor provisions.

Conversely, if it stays in the market, it can expect to pick up additional revenues from operators like 888 which exit.

Staying in the market could damage its license suitability in the US and elsewhere

The bad actor issue will probably be the biggest issue that will worry Amaya CEO Rafi Ashkenazi.

PokerStars is licensed in more jurisdictions than any other online poker operator, and this strategic positioning as a compliant and trusted company undoubtedly helped it to secure a license in New Jersey.

Should it continue to operate in Australia, the New Jersey license could be at risk, as the New Jersey Division of Gaming Enforcement (DGE) has set out its policy on operators defying national laws.

The DGE recognises that the law applying to internet gambling is not clear in many jurisdictions, and permits its licensed operators to continue their activities in gray markets.

Operations in black markets are considered to be confirmation that a licensee is not suitable for a license.

The distinction between gray and black is partly criterion based, and partly a matter of judgment for the DGE. But the new Australian laws look like they will clearly put the market into the black category.

888, GVC, which owns partypoker, and Amaya will not lightly put their New Jersey licenses at risk.

In particular, their presence in the New Jersey market gives them a solid base from which they can acquire licenses in other US jurisdictions that may permit online poker.

It’s easy to imagine the impact on California legislators of PokerStars losing its New Jersey licenses because of continued operations in Australia. Amaya would be seriously disadvantaged under any future Californian legislation.

Legal justifications may work elsewhere

The UK Gambling Commission (UKGC) also tackles the license suitability issue by looking at global operations.

If a license applicant receives more than 3 percent of revenues from a particular jurisdiction, it is required to provide a written explanation of the legal basis for its operations in that jurisdiction.

On the face of it, the new Australian laws would put any operator that ignored them in breach of the UKGC rules. However, the legal situation is a lot more obscure than it seems.

The new Australian laws don’t make it illegal for citizens to play online poker. They’re written to apply to companies based outside Australia’s legal jurisdiction.

The legality, let alone enforceability, of passing laws on companies based in other countries is questionable.

The World Trade Organisation rules have not yet managed to catch up with internet commerce, and international law is equally vague.

  • If a company based in Costa Rica accepts Australian players in its online poker room, completely legally under local law, it can hardly be accused of acting illegally.
  • In jurisdictions like New Jersey, the law says the game takes place on the game server. Under DGE regulations servers must be located in a licensed casino in the state.
  • In the UK, the law doesn’t care where the server is based. It just cares that any game which a UK player joins online must be licensed by the UKGC, and revenues taxed accordingly.

While the arguments may sound specious, they offer a loophole for operators to claim that online poker rooms that allow Australians to join the game are operating legally if the national laws allow.

Marketing such services in Australia is another issue, and fairly dealt with under national marketing rules. But game play is not under the control of the Australian government.

Taking all factors into account, assume a PokerStars exit

No matter how hard they look for an alternative, and how much they argue the legality, Amaya’s board and CEO Rafi Ashkenazi are not likely to find a sound basis for staying in the Australian market for online poker.

The revenue issue is marginal, the reputation risk is substantial. With very little downside risk and plenty of risk if Amaya tries too greedily to hang on to the Australian revenues, investors and poker players should assume the exit is imminent.

The revenues are there, but not for a company which needs a global reputation for compliance as a basis for its growth strategy.

Australia is handing over the online poker market to unlicensed operators

Assuming that PokerStars and partypoker also leave the Australian market, then the gap is most likely to be filled by operators prepared to ignore national laws and licensing requirements.

As the big names exit, affiliates will happily offer Australian players attractive deals to sign up with alternative sites.

The new laws will likely give online poker rooms such as Americas Cardroom and Bodog access to a market which 888, PokerStars and partypoker are too law-abiding to address.

The total impact on consumer protection is more likely to be a net negative than a positive.

The Australian solution to online poker is not one that should be followed.

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Joss Wood
- A former editor of Poker Industry Pro, Joss Wood is a graduate in English from the University of Birmingham. Joss also holds a master’s degree in Organisational Development from the University of Manchester. His career path has taken him from the British Army, through business and finance to seven years as a successful professional poker player.