Despite its mounting unpopularity and even a legal challenge that it contravenes European Union law, the new UK Gambling Act will come into force on October 2014, it was announced recently. Operators who are currently offering games of chance to UK citizens and wish to continue to engage with the regulated UK market must now apply for a new license by September 16th at the UK Gambling Commission website.
But what does it mean to UK poker players, and why the unpopularity? Well, the Gambling (Licensing and Advertising) Act 2014 will introduce regulation and taxation at the “point of consumption,” rather than the country of origin, which means that, to offer online gambling to UK players, a company will have to hold a UK Gambling Commission remote gambling license and pay the UK remote gaming tax of 15 percent on gross profits, a levy much higher than many other jurisdictions.
Currently, legal online gambling industry in the UK is comprised of operators that are regulated, licensed and taxed in jurisdictions around the world that have been approved, or “white-listed”, by the UK government under the 2005 Gambling Act. However, in order to pursue the lucrative UK market, these operators will have to move their operations from their well-regulated and tax-lite jurisdictions to the UK, a well-regulated jurisdiction with a punitive tax regime.
Problem is, online poker tends not to flourish in markets with high gambling taxation – you only have to look at the new “dot.country” jurisdictions, like France or Italy, where online poker revenues are plummeting. Punitive tax regimes can force online poker companies to charge a higher rake, for example, or reduce the guarantees on tournaments, which in turn dissuades customers from playing, driving them towards the unregulated “black” market.
Unlike, the dot.country markets, the UK won’t be corralling its player pools – and that means that operators won’t be able to up their rakes or cut their guarantees, because players playing on the same tables must all be playing for the same stakes, naturally. But they will have to plug that 15 percent hole somehow, which means that the promotions and bonuses available to UK players will suffer.
Furthermore, it will eat into marketing budgets, which will make it harder to attract new players to the game; terrible news at a time when poker has plateaued in the UK. Smaller operators, meanwhile, will be unable to engage with the UK market, due to the high taxes and additional costs, increasing the monopolization of the market by PokerStars.
The stated aim of the bill is to give the consumers greater regulatory protection and to raise revenue, but the unintended consequences will hurt the online gambling industry and that in turn will hurt poker. Just how hard it hurts, we are about to discover.