While British players like Alex “Kanu7” Millar and Chris “Moorman1” Moorman were tearing it up online in 2014, off the virtual felt it was all about the new UK gambling Act and how it would affect players and operators.
The UK Gambling (Licensing and Advertising) Act would introduce a 15 percent point of consumption tax and would require operators wishing to engage with the lucrative UK market to be licensed and regulated within the UK for the first time.
Players were relieved to hear that liquidity pools would still be shared with other countries, but the tax was punitive, and they were anxious to know just how operators would make up the UK shortfall in revenue.
Previously, the UK gambling landscape was comprised of operators that were licensed and regulated in a number of jurisdictions around the world that had been approved or “whitelisted” by the UK government.
Only operators regulated from within these jurisdictions were allowed to legally advertise in the UK market. Jurisdictions included all EU countries and some Crown Dependencies, like the Isle of Man, Alderney and Gibraltar, as well as Antigua and Tasmania.
While these jurisdictions met with the UK government’s strict regulatory standards, many were jurisdictions that were tax havens for online poker and gambling companies, offering hugely competitive tax breaks, which meant that even the UK’s best known gambling brands were regulated outside the UK. These tax breaks would now disappear for all UK-facing operators.
The ostensible reason for the legislative shake-up was that the UK regulators would be better served to protect UK customers, which seems logical but is actually counterintuitive, as the bill’s detractors have argued. In forcing up the prices, the government would essentially be driving customers away from responsible operators and into the unregulated markets, where poker sites pay fewer taxes.
There are many cases that substantiate this point in France, Spain and Italy. All of them chose to ring-fence their player pools and tax operators highly, driving up the rake. Their online poker markets have been plummeting ever since.
While, mercifully, rakes were not raised across the board for online poker in the UK, promotions and VIP programs were curtailed, a consequence UK players can perhaps learn to live with.
Concern remains, however, about the long-term health of online poker in the UK. Simply put, online poker markets with higher tax rates do not tend to thrive, and at a time when poker is already suffering from a dearth of new recreational players, marketing spend will suffer, which in turn is likely to hurt the game.
Should I Stay or Should I go?
Some operators have cut and run, deciding that 15 percent is too rich for their blood, despite the potential of the market. Mansion Poker, along with French market leaders Winamax and PokerStars.fr, bowed out just before the bill came into force, as did a glut of online casinos.
Meanwhile, PokerStars launched its .uk client in early November, and while changes to the VIP program won’t take effect until 2015, the company has gone on record, saying it will be introducing extra charges for tournament rebuys in markets such as the UK that have “significant local taxes.”
It’s too early to tell how the market will be affected by the new regime in the long term; the act only came into effect on December 1, one month later than expected. This is due to the bill having been postponed when it was forced to resist a legal challenge from the Gibraltar Betting and Gaming Association.
But while the players may be able to live with the changes, for now, let’s hope that the operators, and ultimately the market, can too.