The United States of Poker

The United States of Poker

Monday, 23 December 2013

Why Europe must open its borders to poker players.

Online poker player pools are shrinking and segregation in Europe is killing the game, but the death of online poker may yet be somewhat exaggerated, says our editor, Philip Conneller.

Remember the days when online poker was truly international, before governments started erecting walls and strengthening borders? When you could bluff a Spaniard and tease an American in the chatbox, before being picked off by an unusually astute Frenchman? It was fun, wasn’t it? However, beyond diluting the joy and diversity of the game, segregated jurisdictions are actually strangling online poker to death. As more European markets choose to regulate the game within their borders, poker sites increasingly require licenses from each specific jurisdiction in order to operate there, closing the borders between player pools and effectively corralling the market. This is bad for everyone. Online poker must open its borders before it’s too late.

In 2010 Italy and France decided to regulate and ring-fence online poker as well as other forms of internet gambling. It was thought that the ease of domestic payment transfers would have a positive effect on these new poker economies, and more localised marketing campaigns would attract new players to the game. Then, in the wake of Black Friday, Spain, Belgium and Denmark followed suit, perhaps feeling that the reassurance of stringent government regulation would ease some of the fears that Black Friday and the Full Tilt fiasco had instilled in the minds of the players. And yet, three years later, overall online liquidity levels are at an all-time low. Indeed, Italian regulator AAMS has reported that revenues from online poker cash games dropped 33.5% to €78.5m in the first half of 2013 in that country, with tournament revenue falling 36.9% to €57m.

Even the UK, for so long a bastion (on the whole) of progressive and sensible gambling legislation, is opting to take this route. Currently, sites are permitted to operate in the UK with a licence from any EEA member country, as well as those jurisdictions white-listed by the UK government, but soon they will need a UK licence and therefore be subject to a 15% tax on profits. EU rules don’t allow a company to charge different rates to different EU nations for supplying the same service, which will necessitate ring-fenced, UK specific products, as the sites seek to dictate their own rakes and rewards programmes in order to offset the punitive new tax on their gross profits.

Perhaps the UK should have taken a look at its closest neighbour before introducing such ill-advised legislation. In 2010, attracted by potential tax revenue, France regulated online gambling. Heavily-taxed by the government, operators were forced to increase the rake to an unpalatable 7%. Many of the online pros headed across the channel to the UK, while the recreational players, especially those who could not beat the rake, simply gave up and lost interest. In contrast to a burgeoning sportsbetting market in France, new figures show that licensed poker operators’ turnover fell by 14%, year-on-year, during the first half of 2013.

Something is clearly amiss. Online poker is in decline because it needs a healthy player ecology in order to thrive. Player liquidity is everything. Player liquidity allows poker sites to host a huge variety of ring games and big multi-table tournaments with earth-shattering prize pools, and that in turn attracts even more players. This is why poker networks like iPoker exist; to share player pools between skins and further drive liquidity and the market itself. Pooled cross-border liquidity between EU states also allows less mature markets, such as Denmark for example, to grow alongside established markets like the UK. Attracting new recreational players from across Europe is exactly what poker needs; recreational players are the building blocks of the poker economy. Today, the skill gap between the serious and recreational player has never been greater, which means the recreational players – poker’s bottom line – are being swallowed up at a faster rate. With fewer and fewer new players coming into the game, could it be that poker is cannibalising itself?
Without the liquidity of old, things are looking bleak for the networks and operators. There’s no denying that PokerStars is good for poker and the promotion of poker, but they need some competition. A diversity of operators, all with strong marketing budgets, would support the poker media with their advertising dollars; they would create new TV shows and live tournaments, encourage innovation within the industry and would spend to acquire more players, promoting poker holistically, growing the industry for the good of the industry.

It’s not all doom and gloom, however; there’s an increasing realisation among European legislators that segregation has not worked; that it’s bad for player, operator and regulator alike, and that a move towards pooled liquidity is an economic necessity. In July 2012, representatives from European regulatory bodies met to discuss the need to work towards a common regulated market in Europe.

“Attractiveness of poker,” said French regulator Jean-Francois Vilotte, “is a matter of concern,” indicating that a fine-tuning of the high tax for operators within France may be necessary in order to work towards a brighter future. France and Italy already have a Memorandum of Understanding to facilitate information-sharing between the two countries and have expressed a desire to work towards the sharing of player pools in the near future, and Italy and Spain have suggested they may even be ready to do so later this year. These so-called “compacts” will be far more in keeping with the spirit of the EU, where the free movement of trade principle means that cross-border services and trade are enshrined in law. Indeed, there have been calls from organisations such as the Remote Gambling Association (RGA) and the European Gaming and Betting Association (EGBA) for the European Commission to address matters of protectionist law in countries such as Greece, in that such monopolies fail to comply with EU Law.

If the march towards compacts is an economic necessity, then we may even see the Americans rejoining us one day on the online felt. As regulation is rolled out in the US, state by state, and with federal legislation looking like a distant pipe dream, each state will look to share liquidity, first with one another, and then, perhaps, with Europe. Draft legislation has been submitted to the Nevada Legislature that could eventually see current regulations amended to allow licensed operators to accept online poker wagers from players located in other jurisdictions.

While gambling law is never completely clear in the US, there is no federal legislation that bans the offer of poker between states, or nation states, as long as there are no restrictive state laws in either participating state. New Jersey’s regulations, for example, potentially allow for reciprocal agreements with any other international jurisdiction that allows online gaming, provided those agreements are not inconsistent with federal law.

This all may take a long time to happen, but for online poker to flourish in the future, it must happen, which means we might find ourselves once again three-betting some guy in Idaho before being four-bet to death by some crazy Swede. Oh, those were the days!

Tags: Philip Conneller, regulation, politics