- US Online Poker
- US Online Casinos
- US Online Sports Betting
Italian gaming new site, Gioconews quoted Coppolani saying:
“We are closer to the realization of international liquidity. We have been working hard in recent months among regulators and on November 17th we have scheduled a technical meeting that will serve to overcome some obstacles.”
Even if regulators can get together a framework for shared liquidity, a simple analysis indicates that it will have little short term impact on the online poker industry.
The impetus for the current talks on shared liquidity has come from the passage of the French Digital Law, which gave ARJEL the authority to negotiate shared liquidity agreements with other EU member states.
Although Coppolani should be congratulated for his successful lobbying efforts in this area, French taxes remain a serious stumbling block both to the implementation of any agreement and to its potential impact on the industry.
The three countries which segregate their player pools from the global dot-com player pool are France, Italy and Spain. Portugal’s new laws don’t segregate the market, but the regulator SRIJ has been directed to create a segregated market for online poker.
The models of segregation are different:
Until the UK introduced its point of consumption tax in 2014, UK players could play on French regulated sites. After the new tax system was introduced, French operators found themselves having to pay both French and UK gambling taxes on UK players. This guaranteed them a loss, so they were forced to stop UK players having access to French sites.
The French taxation system takes 2 percent of every cash game pot, although taxes on tournament fees are consistent with other EU members’ laws.
The next regulators’ meeting in November will seek to fix the technical issues regarding other differences in the laws, but there is nothing in the new French law that will help resolve the taxation problem.
All cash game players at a French regulated site must pay the 2 percent tax. On top of which, the rake is generally higher at French sites, and the regulated operators can’t reduce it to the level of rake in Spain or Italy, without hurting their revenues.
ARJEL’s annual report for 2015/2016 stated that only two poker operators had managed to make a profit in the year. Presumably these were the market leader Winamax and number two, PokerStars.fr.
Partypoker and the online poker skins on the iPoker France network are probably all losing money on their operations.
Giovanni Carboni, the managing partner of gaming consultants Carboni & Partners-Eglah told Assopoker:
“To offer games with the Italian rake would be a disaster for the operators in the French market who are already operating at a loss…. If instead the French rake was adopted, many Italian players would run indignantly to the illegal market. Only the French tax authorities would benefit, feasting on the flesh of everyone, including the Italian State.”
Assopoker is a leading affiliate in the Italian regulated market and it has published its own op-ed opposing any form of shared liquidity.
It quoted “authoritative sources saying that there was no technical solution possible to the problem of different rake levels in cash games.” Furthermore, if shared liquidity with France meant operators implementing the French taxation system then:
“It would be better to turn the page and focus on a feasible and realistic agreement with Britain or Denmark to gain access to the field of the dot com/eu.”
The French regulated market consists of PokerStars, Winamax, skins on the iPoker network and partypoker. Winamax doesn’t operate in Italy, and apart from the three others, none of the Italian regulated operators are licensed in France.
The iPoker skins in the two countries are also different. The benefits of an Italy/France shared liquidity agreement would accrue only to those operating in both markets.
Adding in the Spanish market would make little difference as that is almost completely dominated by PokerStars, with 888, which doesn’t operate in either France or Italy, playing second fiddle.
Only PokerStars would see any meaningful benefit in terms of cash game numbers. iPoker cash game traffic would be much healthier, but the benefit is spread thinly across its various skins, none of which are active in all three markets.
Even for PokerStars, the added traffic from all three markets brings its liquidity up to less than the peak level it achieved in the Italian market back in February 2013.
The size of the combined markets would still be too small to make much difference to tournament guarantees. Players in the pool would not have access to tournaments, or even Spin & Go’s which could regularly offer the life changing prizes available in the dot-com player pool.
Last week, the French Court of Auditors produced a report on the regulation of gambling. The report concluded that
“The regulations governing gambling in France, which accounted for €44 billion of bets in 2015, are not satisfactory, insofar as they are not based on a clear strategy or a coherent organization. The objectives set by the law of 12 May 2010 on the opening to competition and regulation of the gambling industry and online gambling are far from being achieved, particularly in health and public order.”
The report made nine recommendations, one of which is based on the Court’s finding that the taxation system reduces the amount of tax the government collects and encourages players to leave the regulated sector and play at unlicensed sites. The report recommended that the government:
“Carry out under the aegis of the Interministerial Committee on Games, an overall study of the taxation of gambling and its impact both on the stability and viability of the legal offer of gambling and on player behavior.”
While this is good news for the operators in the French market, and for Charles Coppolani, who has been lobbying for changes to the tax system, it is unlikely to lead to change in the short term.
The results of the study will need to be accepted, and then turned into law by a future French government, a process that at best will take several years.
The effort to find a solution to shared liquidity in the European segregated markets has run up against the problem of poor primary legislation.
In July, the UK Gambling Commission (UKGC) and the New Jersey Division of Gaming Enforcement (DGE) said that they were discussing the possibility of some form of shared liquidity.
These talks will also be hampered by the need to stay within the strict laws passed in New Jersey. DGE Director David Rebuck admitted:
“We’d still have to figure out lots of issues: specific regulations, how the tax rate from each jurisdiction would be applied, player ID and geolocation issues, and other things we probably haven’t even considered yet.”
One key problem is that the New Jersey legislation demands that games are played on servers based in New Jersey and accessible to DGE regulators.
In the UK there are no such restrictions, and players can play against other players located anywhere in the world, with games hosted on servers based anywhere.
Players from the UK may possibly be allowed to play in the New Jersey online poker player pool, but New Jersey players are likely to be locked into their own tiny market.
Other states considering gaming regulation should be very careful that their legislative proposals don’t cut off the possibility of international shared liquidity with over zealous controls.
Even California needs to take the lesson on board. Contrary to what many in the state may believe, California has the potential to be only a tiny online poker market if it is segregated from other player pools.
Its population of 37 million is just not large enough to sustain more than a few profitable operators, and is probably too small to offer the large tournament prize pools which make such powerful marketing tools.
The population is 56 percent that of France, and the French operators have difficulty (paywall) putting on quarterly tournaments with a prize pool in excess of a million dollars.
The decline of online poker in segregated markets, including New Jersey and Nevada, has highlighted the industry’s need for deep liquidity pools.
Ultimately, legislators and regulators will probably realize that allowing their populations to access the dot-com player pool is not a consumer protection risk but essential to bringing players into the regulated sector.
Meanwhile they will continue to miss out on gaming taxes from players who prefer to use offshore sites where they can compete for bigger prizes while paying lower rake.