Polish Gambling Market on the Eve of Revolution

K&L Gates LLP

K&L Gates LLP

On July 20, the Polish government adopted a draft amendment to the Polish Gambling Act (“Draft Amendment”). The Draft Amendment was notified to the European Commission and until October 31, 2016, awaits comments and consultations. The government has said that it expects that the amendment will minimize the grey market in gambling; assure better protection of players against negative consequences of gambling, especially via online websites; and ensure higher revenues generated by the legal gambling sector.

In fact, the projected legislation would impose a new, very radical, and tough gaming framework in Poland. It significantly strengthens the position of the gaming state monopolist by equipping it with more competences and additional channels of games distribution. Also, it introduces severe instruments to combat illegal gaming, with the intention of driving players to the legal market mostly operated by the state monopolist.

Online gambling

The Draft Amendment, if enacted, will extend the catalog of gambling games which can be offered online. At present, the Polish Gambling Act legalizes, under certain conditions (Polish companies having a licence) betting on the Internet only. The new legislation will allow all gambling games to be offered online. However, except for the online betting regulated by the Gambling Act Amendment of 2011 and promotional lotteries, all online gambling will fall under the competence of the state monopolist (currently Totalizator Sportowy). The Draft Amendment would require all online operators (including existing licensed online betting operators) to enable the Customs Office to have remote access to the data stored in the operator’s archive system, including adequate tools and software ensuring protection of the data. Also, none of the entities offering online gaming will be allowed to offer or advertise banking and financial services on its website.

New instrument – blocking illegal online gambling operators
The Polish government has decided to engage more intensely in combatting illegal online gaming. A new instrument introduced in the Draft Amendment is a competence of the Minister of Finance to block access to Internet websites using domains formally recognized as associated with organizing gambling without required licences. Such domains addressed to Polish users, in particular those available in Polish or advertised in Poland, will be entered by the Minister of Finance into a special public register of domains used to offer gambling contrary to the Gambling Act (“Register”). Such registration will trigger far-reaching and adverse consequences, namely, an obligation of telecoms operators to remove such domains from data communication systems, inability for users to access such websites, and a ban on payment service providers to offer payment services on the website using domains entered into the Register. The regulation concerning the new Register is very restrictive. Once the domain is listed and blocked, its removal from the list is a time-consuming and discretionary process. The interested game organizer is entitled to a single appeal to the Minister of Finance within two months from the entry of the domain into the Register and, if unsuccessful, needs to bring a court action. It is important to stress that the Draft Amendment does not introduce any periodical reviews of the domains entered into the Register enabling their deletion from the list.

Finally, with the stated aim of preventing money laundering and financing of terrorism, the new regulation restricts online payments methods available to online players to the use of Polish banks, Polish branches of foreign banks, credit institutions, para-banking cooperative savings and credit unions, as well as Polish and EU-licensed and registered payments and electronic money institutions. Clearly, such regulation might be a challenge for the players’ preferred international online money transfer businesses offering virtual payments.

One may expect that the above new control instruments will result in additional procedures and mechanisms enabling its enforcement.

Revolution in the organization of slot machine games
The current legal regime prohibits slot machine gambling outside casinos. The planned amendment will deprive casinos of their monopoly position and allow slot machine games outside of the casinos (in dedicated game rooms and under the control of an audio-visual system). However, such games will be offered outside the casinos only by a state-owned company. Moreover, the Draft Amendment also restricts online slot machine gaming to the sole competence of the state, stipulating, however, that state monopoly regarding slot machine gaming outside the casinos is exercised only in game rooms (i.e., not online). The amendment increases supervision over the production, distribution, possession, and location of slot machines.

The proposed regime will clearly not liberalize this segment of gambling as was proposed by gambling institutions during the Draft Amendment consultation process. The question remains whether it will indeed minimize grey market and shift players into the legal market.

Other changes
The Draft Amendment addresses the demands of poker players by allowing organization of tournaments outside casinos and without a casino license, based on a prior notification to the Customs Office and tournament rules approved by the Minister of Finance. Also, playing poker online will become legal if organized by a state-owned company.

The definition of betting is to be amended to encompass also betting on virtual events.

Further, the new legislation would abolish the obligation for gaming personnel to obtain work certificates (issued by the Minister of Finance following an exam), replacing such certificates with training. Therefore, as a result of this deregulation, access to the game supervisor or operator professions will be much wider.

Finally, a new restriction is imposed on the grant of licences to applicants. They would not be granted a new gaming licence if their previous licence has been canceled within the last six years due to material violation of the licence terms. Operators that faced such problems with the Minister of Finance in the past years, after the amendment becomes a binding law in Poland, will be refused new licenses.

As noted above, the expected liberalization of the slot machine gambling market is not planned by the Polish government. Although, under the projected legislation, it is allowed to play slot machine games outside the casinos, such activity will be controlled by one state owned company. Additionally, the Draft Amendment does not address the issue of a contested online gaming tax, retaining it at the high level of 12% of the sum of bets accepted.

The catalog of entities who risk liability under the penalties set forth in the Gambling Act is to be significantly increased. In addition to the game operators and game players, the sanctions may be imposed on the owners of the premises where unregistered slot machines are kept, as well as payment service providers offering payment services on the websites using domains entered into the Register and finally, telecoms operators who do not fulfil their obligation to block access to the listed domains. Moreover, the proposed legislation penalizes not only organization of illegal gaming but also violation by the licensed gaming operators of the adopted game policy, licences, or game registration terms. The novelty is that the Draft Amendment extends the fines to apply to the individual members of the operator’s boards, in addition to the illegal game operators. Also, the actual amounts of fines have been increased. By way of an example, the increase in case of a fine for offering illegal slot machine games ranges from PLN 12,000 to PLN 100,000.

The amended Gambling Act is to enter into force as of January 1, 2017; however, the pending European Commission consultation process might affect this date.

It is questionable whether the Draft Amendment will in fact eliminate the grey market, however it might well increase the revenues for the State Treasury generated by the gambling market.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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