Pan-European Liquidity Talks: Too Little, Too Late

Talks between European regulators to discuss the issue of cross-border liquidity are too little, too late for players in existing ring-fenced countries.

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EuropeTalks between European regulators to discuss the issue of cross-border liquidity are too little, too late for players in existing ring-fenced countries.

Since 2011, online poker players in Spain, Italy and France have been cut off from shared player pools due to their respective governments identifying online gambling as an activity from which they can extract tax revenues. More recently, Portugal has joined the list of countries denying its players access to shared player pools and, at present, nobody is providing state-licensed online poker in Portugal at all.

The consequences of ring-fencing online poker have largely back-fired for everybody. Many profitable players relocated to jurisdictions in which they could continue playing in a shared player pool, while others chose to play at offshore, unregulated sites where they could keep 100% of their winnings. Because of the decline in trade, online poker sites have been forced out of business and governments have failed to collect the volume of taxes that was anticipated.

Let´s Start Talking after Five Years of Decline

For more than five years, players groups have been pressurising their regulators to scrap ring-fenced markets. However, until the recent passage of France´s “Digital Republic” Bill, the regulators´ hands were tied and they had to look on as the online poker industry declined. Now, according to the Italian media, French regulators will be meeting with regulators from Spain, Italy, Portugal, Germany, Austria and the UK next month to discuss the issue of pan-European liquidity.

According to an article in Scommessa magazine, the six regulators meet every six months to share information and, having last met in September, the next meeting was scheduled to be early next year in Portugal. However, the magazine claims that an additional meeting has been organised for next month in order to identify which ring-fenced jurisdictions might consider re-joining a common player pool and discuss what obstacles stand in their way.

Biggest Obstacles Concern Tax Rates and Rake Percentages

With players abandoning their home countries to play online poker elsewhere – and up to 50% of online poker players in France and Spain playing at offshore sites – it is misleading to say that online poker is declining faster in ring-fenced countries than throughout the rest of the world. There is simply no way of measuring it. However, after five years of rapidly declining tax revenues in France, Spain and Italy, one would hope that their respective regulators would identify the benefits of shared liquidity.

A big issue preventing total shared liquidity with the rest of the world exists while the governments of Frain, Spain and Italy tax online poker. France in particular has a convoluted tax system that taxes every hand, while Spain and Italy tax operators´ Gross Gaming Revenues at different rates – resulting in operators in all three jurisdictions charging higher players different levels of rake. Nobody yet knows what players will be asked to pay in order to play on regulated Portuguese sites.

While operators are charging higher levels of rake in ring-fenced countries, it would be impractical for those jurisdictions to attempt teaming back up with the rest of the world. However, if there could be some standardisation of the way in which tax is charged in Italy, Spain, France and Portugal, it could be possible to create a “mini-European” player pool to increase liquidity among players still playing at licensed sites in the four countries.

Shared Liquidity is Too Little, Too Late, to Rebuild Ring-Fenced Markets

Although the motives of the regulators for holding shared liquidity talks are commendable, shared liquidity – in whatever form – will do little to rebuild online poker markets in ring-fenced jurisdictions. A player pool “possibly-a-bit-larger-than-it-was-before” is unlikely to be enough of an incentive for overseas players to return home, or for offshore players to return to domestic sites and declare their winnings to the taxman.

The only foreseeable outcome of a four-way “mini-European” player pool is that PokerStars will become an even larger dominant force if Winamax fails to gain players from outside of France. Party Poker, 888 Poker and the regional iPoker Network sites are only surviving in the ring-fenced states because of their other online gambling verticals, so they will likely oppose any efforts to share player liquidity.

Even if all the regulations imposed since 2011 were rolled back, online poker in the ring-fenced countries will never be the same. The next generation of online poker players – that could have potentially contributed to a thriving online poker market in the 2011-2016 years – instead found eSports and other online pastimes to distract them from online poker. Those who stuck with the game, and then became disenchanted with the high rake, the limited opportunities, and their personal tax liability, are unlikely to return.

Like we said, “Too Little, Too Late”.