France Is One Step Closer To Shared Online Poker Liquidity
Online Poker Report

French Senate Votes For Limited International Shared Liquidity In Online Poker

ARJEL Digital Bill amendments pass France
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The French Senate has voted to pass three amendments to the Digital Bill sponsored by the gambling regulator ARJEL.

One of the amendments gives ARJEL the power to enter into agreements with other European jurisdictions to establish shared liquidity for online poker.

The other two amendments deal with data availability and mediation in gambling disputes.

The vote is a triumph for ARJEL President Charles Coppolani, who has quietly lobbied for the measure since shortly after taking office. His predecessor is popularly believed to have resigned because he couldn’t get political support for either shared liquidity or changes in the French system of gambling taxes.

The key amendment on shared liquidity states (in translation) that:

The online gaming regulatory authority may allow an operator holding a license under Article 21 to offer players with a verified account on a site subject to accreditation to participate in circle games as defined in the first paragraph with the players holding an account on a site subject to approval by a member State of the European Union or State party to the agreement on the European Economic Area.

Important restrictions on liquidity

Note the important limitations. Shared liquidity applies to “circle games,” which under the regulations means only those forms of poker which have been specifically authorized by ARJEL—currently Hold’em and Omaha.

Secondly, the shared liquidity is only with players holding an account on a site regulated in another EU or EEA jurisdiction. This could severely limit the potential of the shared liquidity provisions.

European players at PokerStars sign up to a PokerStars.eu account, or a national account such as PokerStars.co.uk, or PokerStars.bg.

Unless they are in France, Spain or Italy, they then get to play in a player pool which includes players from the rest of the world who have signed up through PokerStars.com, which is licensed in the Isle of Man, outside the EU and EEA.

The text of the amendment suggests that any shared liquidity arrangements entered into by ARJEL will have to be with a player pool which does not include rest of the world players who have not registered accounts with a European regulated operator.

Theoretically, ARJEL could sign a bilateral agreement with the UK Gambling Commission, for example, and then set up a shared liquidity agreement. Some means would then need to be created to prevent French players from playing with players with accounts at dot-com sites, even though they are in the same liquidity pool as the UK-registered players.

Tax differences create technical problems

The second obstacle which is likely to arise is that of negotiating a shared liquidity agreement that takes account of the unusual tax system employed in France. For tournaments, there should be no problem, but in cash games, gambling taxes are deducted on each street, including pre-flop.

Italy, Spain and Portugal use the internationally standard tax methodology of calculating a percentage of gross gaming revenue. Resolving the tax differences with the French system will not be easy.

The simplest method may be to refund players the tax deducted during a hand, if they are not liable to pay.

Tax changes are not on the horizon

There is no prospect of getting a tax change through the current French parliament, although it is high on Coppolani’s agenda as a longer term objective.

The French taxes make it the most heavily taxed gambling jurisdiction in Europe, and of the 11 online poker operators with a license, only three have ever made a profit in the market.

Winamax and PokerStars.fr are the two market leaders, and can be assumed to be profitable, but even they have added sports betting to their range of products in order to make the market more commercially viable.

Partypoker is the market number three, ahead of iPoker, and many of its licensed skins must only be hanging on in the market because of their sports betting income. For these smaller operators, the prospects of improving their cash game traffic by sharing liquidity will be a strong incentive to remain in the market despite their current online poker losses.

France, Italy, Spain and Portugal could create a viable segregated EU market

In practice, ARJEL is most likely to begin by setting up agreements with the other segregated markets, Italy and Spain, although Portugal will shortly join this club when it issues its first licenses this year. ARJEL already has in place a bilateral agreement with Portugal.

If these agreements could be negotiated relatively quickly, it might even attract Germany to segregate its market when it comes up with whatever changes are necessary to the German State Treaty on Gambling to bring it into compliance with EU law.

In this admittedly speculative vision of the future, a segregated market inside the EU consisting of four of the largest online poker markets in the world would create a highly viable single market addressing a population of almost 250 million people.

Other EU states may then do their bit towards the “ever closer union” objective of the Maastricht Treaty, and decide that they too want to take part. In the long term, the EU online poker market could close itself off from the rest of the world.

Successful shared liquidity could incentivise the U.S.

In the U.S., shared liquidity between states with regulated online poker markets is seen as an essential counter to the natural fragmentation that state regulation creates.

Unfortunately, the first example of an interstate compact on shared liquidity has not been a resounding success. The deal between Delaware and Nevada has not led to the expected increase in play, revenues or taxes.

There are good reasons why, in hindsight, we can see that this is the case. Both markets, even combined, are relatively tiny, so the incremental difference gained by joining them together is insufficient to create the tipping point – the critical mass which means that recreational players can get a seat at the game and stakes of their choice without waiting.

The revenue impact on French operators is uncertain

PokerStars can be expected to be a big beneficiary of whatever shared liquidity arises from the new law. It is the dominant market leader in Spain and Italy, and is probably going to take the same position in Portugal. In France it is the number two, but market leader Winamax has no license outside France.

In an enlarged segregated market, PokerStars would be the undisputed number one, and would get the benefits which would accrue from the marketing advantage that gives.

Bigger tournament guarantees would be only one of the improvements that its players would see. Amaya revenues could look forward to a boost both from the synergistic growth offered by shared liquidity, and also by the inevitable market cull as smaller operators are squeezed out of the mainstream market.

2017 is more likely than 2016 for the first agreements to be signed

The French Senate vote is just the first in the legislative process. The text of the Digital Bill must now be brought into line with the text voted on by the lower house, the Chamber of Deputies, and further votes are necessary before it can become law.

The Digital Bill, plus the gambling amendments, should be passed before the end of 2016, and in the interim, ARJEL will be doing the preparatory work it needs in order to get the first shared liquidity agreements signed as soon as it can.

Negotiations with Portugal may be the easiest to complete, but both the Spanish and Italian regulators have expressed their support for increased liquidity. Early 2017 is likely to be the soonest that an agreement with any of the likely partners can be completed.

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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.