Relationship between PokerStars and the Netherlands is complicated, expensive

PokerStars Slapped With €400,000 Fine For Targeting Dutch Customers

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The Stars Group is the latest online poker operator to receive a fine from Dutch regulator Kansspelautoriteit (KSA) for targeting players in the Netherlands. The €400,000 penalty for PokerStars is comparable to others the KSA handed out to competing operators this year, ranging from €300,000 to €470,000.

While not exactly slaps on the wrist, the fines are not as large or as numerous as those being levied by other European authorities like the UK Gaming Commission or Sweden’s Spelinspektionen.

They do, however, signal that the KSA is increasingly serious about its demands as it works to create a regulated online poker market. The agency hopes to begin accepting license applications next July, with a target go-live date of January 1, 2021.

In the meantime, things are in a bizarre state. The KSA has issued fines and pushed operators to keep away from the market, but it hasn’t insisted they suspend service entirely.

A choice between going and staying

Major operators, including PokerStars, have generally been willing to leave a newly regulated market while going through the licensing process. That’s what happened in the Czech Republic, for instance.

For this sort of deal to work, however, the reward — namely legal operation in future — has to be worth the short-term cost of leaving the market.

Regulated online gaming in the Netherlands has been an ongoing project for quite some time, though. Had the KSA demanded companies stop serving Dutch customers for several years in order to have any chance of receiving a license, it’s unlikely many would have complied.

Making an ultimatum it could not honor might have damaged the KSA’s ability to coerce compliance going forward. And even if companies had complied, it would have left Dutch poker players without a safe option for several years.

The KSA seems to realize that excluding reputable operators only serves to drive players to less-suitable sites, which is wholly counterproductive.

Regulators have priorities, compliance has costs

Instead, the KSA has established what it calls “prioritization criteria” for enforcement.

This is essentially a set of rules that determines which operators it will overlook and which it will slap with fines — and in what order it will pursue those companies. Some of the infractions it monitors include using Dutch payment processors, Dutch-language options, and imagery associated with the country or its flag in marketing materials.

The bar for being “compliant enough” has gradually raised over time.

That’s created strange incentives, as compliance comes at a cost. Operators would prefer to get away with as much as they legally can, while making sure there’s someone else that the KSA will go after first.

PokerStars’ Q2 revenue dipped 27% year-on-year in what it calls “disrupted” markets like the Netherlands, despite increasing 4% in the rest of the world. Although much of that decline comes from Russia, the magnitude of those losses shows why companies aren’t rushing to be more compliant in any similar jurisdiction.

PokerStars crosses several lines

In PokerStars’ case, multiple factors drew the KSA’s ire.

First, it continued accepting payments via the Dutch payment processor iDEAL after the KSA ordered this to stop. Although PokerStars eventually complied, it did not do so quickly enough for the KSA’s liking.

Second, PokerStars until recently had a Team Netherlands among its roster of sponsored pros.

While it claims that specifying their nationality doesn’t constitute targeting the Dutch market, the page and branding featured the Dutch flag. And the KSA explicitly included this on its list of things not to do.

PokerStars likewise defended the inclusion of a Dutch option on its contact form and job offers for Dutch-language customer service personnel by saying that these were for Dutch-speaking players in other countries. The KSA likely saw this as a step too far, however, and it would have been easy enough for PokerStars to avoid.

The KSA also counted it as a strike against PokerStars that it included references to Dutch responsible gaming resources on its website. That would seem like the sort of thing that a regulator should approve of, but the KSA considered it additional evidence that PokerStars was deliberately serving Dutch customers.

There are a few other infractions cited, including PokerStars’ failure to list the Netherlands as an excluded territory.

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More than money at stake

In dollar terms, the fine is basically a rounding error for a company like The Stars Group with annual revenue measured in billions of dollars. There are, however, indirect consequences which make the fine a bit more of a problem for the company.

Once license applications open, for starters, companies that the KSA has found in violation will be subject to a “cooling off” period of two years starting from the date of the last infraction.

In PokerStars’ case, the KSA investigated the period from July 14 to August 29, 2018. If license applications open on time in July 2020, then, PokerStars could be at a disadvantage of up to two months compared to competitors not found in violation so recently.

Furthermore, TSG has worked to keep its compliance record as clean as possible to facilitate its approval in other markets as they open.

Critically, this includes US states that have or soon will legalize sports betting. And less than a year into expansion, US sports betting revenue already dwarfs the Dutch poker market. Companies like TSG need to be careful that their game of regulatory chicken with the KSA doesn’t up jeopardizing their image as upstanding corporate citizens elsewhere.

There is, at least, some consolation in the fact that PokerStars is not alone in that regard. GVC and Unibet have both been fined this year too.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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