Poland And Czech Republic Readying To Issue Online Poker Licenses

New Laws In Poland And The Czech Republic Bring Almost 50 Million EU Citizens Into Regulated Online Poker Markets

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Neighbouring countries Poland and the Czech Republic will be opening their markets to regulated online poker in the near future. Both countries currently have gambling laws which make online poker illegal.

The new laws will add a total population of nearly 50 million people to the nationally regulated online poker markets in the European Union.

Of the 28 member states of the EU, only a handful now lack a legal framework for online poker regulation, although one of these is Germany, the largest EU economy.

Czech legislation offers licenses but high gambling taxes

In 2014, Czech Finance Minister Andrej Babiš initiated the proposals to reform the Czech gambling laws (paywall). One of his main motivations was to raise taxes on gambling to compensate for the social harm it causes.

Babiš told Business Week:

“The indirect costs for the state stemming from such gambling are several times higher than the revenue it collects. That should be made even.”

Early proposals for tax rates as high as 40 percent have since been shelved, but the final bill which President Miloš Zeman signed into law on June 10 still contains relatively high gambling taxes.

On top of the standard corporation taxes of 19 percent, operators will pay 35 percent of gross gaming revenue for casino games using a random number generator, and 23 percent for sports betting and lotteries.

The law also includes strict loss limits and bet size limits which will reduce the attractiveness of the licensed products compared to those offered by unlicensed operators.

No online poker bet can exceed CZK1,000 (~$41.45) and no winnings on one game or tournament can exceed CZK50,000 (~$2,072).

The market is not segregated, but Czech players will need to be denied access to tournaments or higher stake cash games. Even though foreign operators can now be licensed to play online poker, there will be no Sunday Million available to the market.

Regulated sites may struggle to attract players

The taxes and betting restrictions are likely to severely reduce the number of players who switch from their current online poker providers to operators licensed under the new regime.

The new law includes strict ISP blocking measures as well as financial transaction blocking to try to combat unlicensed operators. Fifteen days after the appearance of a site on the new blacklist, ISPs and payment processors will be required to institute blocks.

The ISP provisions have aroused the anger of Czech’s committed to internet freedom. Shortly after the Senate voted in favour of the law at the end of May, internet hackers began a DDoS attack on the Senate.

“‘We threw Senat.cz because you passed a law to prevent free access to the Internet,’ explained a statement by the hackers.”

The new law will come into force on January 1, 2017, by which time the first online poker licenses should have been issued. Given the high tax rates, only the biggest providers can be expected to apply.

The 2011 Polish law proved to be ineffective

In June 2014, the Polish Ministry of Finance announced the government’s intention to amend its gambling laws, to bring them into line with EU treaties and make it easier for offshore operators to apply for an online gambling license.

The 2011 law was highly restrictive. It did not allow operators based outside Poland to apply for licenses, and allowed only horse race betting and sports betting. A large proportion of online gambling remained outside of the regulatory framework, and online poker operators flagrantly ignored the law, continuing to serve the market.

In this they were supported by the argument that the Polish law was illegal under EU treaties, and indeed, Poland was included in the list of countries against which the EU Commission began infringement action. The Czech Republic also appeared on the list.

As late as last month, the government had not confirmed whether online poker would be permitted under the new legislation, but by mid-May, Deputy Prime Minister Jarosław Gowin, told reporters that online poker would be included.

At a press conference he explained:

“We want Poland in a sphere of normality and common sense. We want to move away from solutions that make 95% of betting a gray area.”

The final text remains subject to amendment

Poland intends to submit its proposed law for EU approval in time for it to take effect on January 1, 2017. But before the text is finalised there remain many outstanding issues which must be settled.

The main issue from an operator’s perspective is the rate of gambling tax and how it will be calculated. Currently the law specifies a tax of 12 percent of turnover, but there are rumors that this will be replaced by a 20 percent tax on gross gaming revenue.

Online poker and slots will be permitted, but there will be a requirement for each licensed operator to have a responsible gaming policy. Unlicensed operators will be subject to financial transaction and ISP blocking measures. The detail of these measures has not yet been spelled out.

The proposals remove the need for an operator to have a “permanent establishment” in Poland, and remove professional examinations for gaming company employees. Compulsory training will replace the bureaucratic system which currently prevails.

Poland may be the more lucrative market

The Czech Republic is the smaller of the two countries, both geographically and in terms of population. However, its 10.5 million citizens have a high income at over $18,000 per capita, and the country has the lowest unemployment rate in the EU.

For comparison, the Portuguese market – which is in the process of opening under its new laws – has a population of 10.4 million with income at just over $19,600 per capita.

Poland’s population of 38.5 million is roughly the same as that of California, but it has a much lower level of income. Nominal GDP per capita is only $13,390.

The Czech Republic may be of more immediate interest to operators although in the longer run, Poland should provide the larger market.

Taken overall, the proposed Polish regime looks more attractive than the Czech version. Its higher population may also be able to support a larger number of licensed operators, even though personal incomes are low.

Image credit: SvetlanaSF / Shutterstock.com

- A former founder of Poker Industry Pro and Head of Content at PokerNews publisher iBus Media, 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.
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