Piotr Dynowski is a partner at Bird & Bird Warsaw office and Head of IP/TMT practice. He advises on all aspects of gaming law, in particular online gambling, social gaming and e-sports. His expertise covers licensing regimes, regulatory issues as well as advertising and provision of B2B services for gambling industry such as payment services etc.
As an expert on Polish gambling law, Piotr frequently comments on case law developments for Gambling Compliance and speaks as events such as World Gambling Briefing and Annual European Gambling Congress and Expo.
In 2010, as the Polish expert he participated in the research conducted by Cambridge Health Alliance together with Harvard Medical School and Harvard Law School, investigating associations between European gambling regulations and the actual gambling behavior of players.
In 2011, he represented the two largest European online gambling industry organisations in complaint proceedings against Poland to the European Commission for violation of the EU law by Polish gambling regulations, which resulted in the European Commission launching proceedings concerning violation of the EU law by Poland at the end of 2013 which terminated only in January 2016 after a number changes to the Polish gambling regulations were introduced. He is a legal expert to the Polish Chamber of Commerce.
EEGReport Magazine: Poland’s Gambling Law is currently going through some rapid changes. What are the key changes and amendments that have been added or changed over the past few months?
Piotr: Yes, there are several major changes that will come into force in the near feature, resulting from the amendment to the Polish Gambling Law that was adopted by the Polish Parliament on 15 December 2016 and signed into law by the President on 28 December 2016. Most of provisions of the new law will enter into force on 1 April 2017, with exception of provisions introducing website and payment blocking measures against the unlicensed operators and sanctions for in-compliance with these measures that will enter into force on 1 July 2017.
The new law introduces new forms of legal online gambling such as online casino-style gambling. Until now, the only online form of gambling legally available in Poland was online betting. Also slot machine gaming will be greatly expanded as slot machine games will be now allowed not only in casinos (as it is today), but also in newly-established slot machine parlors.
Unfortunately, both these changes will not affect private operators and will not open the market to them, as both these new forms of gambling will be subject to exclusive state monopoly.
Several other, lesser changes will also come into force. Unfortunately, many of them seem to be intended to tighten the restrictions concerning gambling, which are already very strict in Poland. However, some of them, while not ground-breaking, will open the market to some extent.
For example, the new law will allow advertising of betting, including on TV, although only after 10:00 PM, or during transmission of events sponsored by betting operators, such as football matches. The provisions on advertising of betting still contain several restrictions, but it’s good they were introduced. Currently all forms of public advertising of any forms of gambling is prohibited and there was even a case where someone was convicted for publishing a “selfie” on Facebook which featured a roulette wheel in the background.
Once the new law enters into force, it will be also possible to organize minor sport poker tournaments outside casinos where they have to be organised now. Currently poker tournaments held outside casinos (if the participants play for money or prizes of any value, no matter how minor) are sometimes raided by uniformed services and the participants convicted. The new law will allow for minor poker tournaments to be held outside casinos, although they will still have to be notified to authorities. Although many consider poker to be a game of skill more than a game of chance, Polish law does not recognize this.
Thus, to some extent the new law is a step in the right direction, even though it’s a small one.
From July 2017, the gambling sector in Poland will face a revolutionary change. The Minister of Finance will be granted authority to restrict access to unlicensed gambling websites in Poland. Not only access to such websites will have to be blocked by Internet Service Providers, but also payment services providers will be required to stop providing payments to such blacklisted websites. The rationale behind this regulation is that whereas it is difficult to directly enforce Polish regulations against the unlicensed, often offshore, operators, the efforts should be focused on cutting them off from money which may be harmful for their business and force to comply or withdraw.
It is hard to say what will be the actual impact of the new laws. It is possible, however, that in a year from now we may be facing a completely different gambling market in Poland.
EEGReport Magazine: Is there a country that has been model for Poland in these tough times of searching for the right framework in the online gambling industry?
EEGReport Magazine: What are the key sectors in the Polish gambling market based on niches? Sports betting, casino, poker?
Piotr: When looking at the Polish gambling market, we need to keep in mind that the truth is that currently a major part of it is in fact controlled by illegal or grey-market operators. Because the Polish law is very restrictive, a large part of gambling and betting takes place through foreign websites which are unlicensed in Poland. This is prohibited by law, but according to some studies foreign (so-called “offshore”) online betting operators hold around 70% of the Polish market. Foreign companies can provide all kinds of games (while the only form of online gambling that private companies may legally offer in Poland is online betting) and are not bound by Polish steep gambling tax rates. Legal operators who made an effort to obtain a license are of course frustrated with this.
The situation with slot machine parlors is particularly interesting. While they continue to operate in several places outside the casinos, they are regularly closed down by the authorities who consider them illegal. The situation however is not entirely clear, because some operators argue that the law that banned slot machines outside casinos is unenforceable as the government failed to notify these regulations to the European Commission. With the new law coming into force soon, this dispute may further escalate.
Some forms of gambling, although legal, are not really present on the market, such as bingo saloons, for example. This is most likely a consequence of strict laws making such operations unprofitable.
If we only consider legal enterprises, gambling in Poland mainly consists of sports betting (land-based and online) and casino games (land-based only). Popular games such as slot machines and poker may only be played in casinos.
Another major area in Poland is lotteries – the three main types of these are the national lottery (Lotto) which is losing its popularity year in year, similar number games – reserved for state monopoly, lotteries conducted by phone or SMS (handled by private operators), and various types of promotional lotteries organised by private companies as means of promoting their products.
EEGReport Magazine: Who are the key operators at the moment and how is the taxing going to change?
Piotr: Only big enterprises are able to pay the fees for licenses in Poland and satisfy the requirements to hold casino or betting licences. Currently, only few companies, such as Casinos Poland, ZPR, Finkorp, operate casinos throughout Poland (which are limited in number by law).
Similarly, only eight companies hold betting licences and seven of them may also operate online. The most prominent betting operators are Fortuna, STS, Totolotek and Milenium.
EEGReport Magazine: How is the taxing going to change?
Piotr: No significant changes will be introduced with regard to taxation of gambling. Unfortunately, the gambling tax rates and bases on which they are calculated, which are no less important, tend to be one of the highest in Europe and this will continue. This makes licensed gambling less appealing for Polish customers – offshore entities who pay lower tax can simply offer better deals.
There is some hope, however. During the recent legislative process there was a proposal made to change the tax base and rate for betting from the current 12% of turnover to 20% of the so-called Gross Gaming Revenue, which would make Polish operators more competitive against offshore companies. Although it was finally dropped, there are rumors that the idea may resurface in the near future.
EEGReport Magazine: It has been recently brought to our attention that the government has tried to block certain aspects of “free-speech” like restraining the media. The new law was intended to block unlicensed gambling websites. What would be the outcome of that measure and how is this going to impact online gambling?
Piotr: Website blocking is a novelty in the Polish legal system. While it’s a controversial idea by itself, it is not fully clear how the system is intended to operate in practice. There are numerous problems with it and there can be doubts as to its fairness and transparency. It seems the lawmakers simply overlooked some important issues while drafting the bill.
The basic idea is that the Minister of Finance will maintain a register of unlicensed gambling websites which – in his opinion – address their services to players in Poland. When a website will be entered into such register, Internet Service Providers will be required to block access to them and reroute Internet users who try to access them to a governmental website. Moreover, payment services providers will have to cease providing their services to such blacklisted websites. If they don’t, they may face heavy fines or even lose their license for providing financial services in Poland.
The idea is quite simple, let’s cut off the stream of customers and money from illegal online gambling, but the proposed regulation has numerous shortcomings. For example an operator of a blacklisted website may file an objection against having his website blacklisted. However, the law does not provide any way of letting such operator know that his website is blacklisted in the first place. It is up to the operator to regularly check the register to see whether his website is there.
The new blocking mechanism will definitely have an impact on the market in Poland. Much will depend on how it will work in practice, however.
EEGReport Magazine: Do you think that anything will have changed regarding the way remote operators look towards the Poland online gambling market?
Piotr: Of course, the government’s view is that the new system will allow eliminating of illegal offshore competition and at the same time encourage the foreign operators to establish “official”, licensed businesses in Poland. Will the blocking system actually achieve such aims? Only time will tell.
What may affect the effectiveness of blacklisting measures is the blocking mechanism used. The government opted for a so-called “DNS blocking” technique. In practice, this means that from a technical perspective it will be quite easy to circumvent the blockade to gain access to the blacklisted websites (although it has to be noted that participation in unlicensed gambling is a fiscal crime in Poland and participants of illegal gambling may also face heavy sanctions).
On the other hand, the new payment blocking system may turn out far more effective, depending on how vigorously the authorities will enforce it.
EEGReport Magazine: If you could immediately change any law on gambling, as you would wish, what would that be, and why would you choose to change that?
Piotr: From a business perspective, it would be beneficial to allow the private sector to provide online gambling services to a wider extent – of course, in a secure, regulated manner. “Civilized” rules on online gambling would increase tax revenue while ensuring protection of players and would be more effective in combating the grey market than any other measures. Strict prohibition is rarely effective – we should learn this from the outcome of the Prohibition period in the United States. Very restrictive regulations usually lead only to growth of clandestine operations and only less legal certainty and security.
The Polish government doesn’t seem to understand this, even though there are studies available that in fact restrictive regulations are not necessarily helpful with tackling such issues as addition from gambling and other related threats. The Polish government presents gambling as a serious danger to the society, so it puts restrictions on the private sector. At the same time however, it plans to open thousands of state-owned slot machine parlors and run state-owned online casino and sees no contradiction in this.
EEGReport Magazine: In your expert opinion, what are the main challenges operators can face when entering the Polish market?
Piotr: Gambling regulations in Poland are very strict, probably one of the most restrictive worldwide. They ban a number of activities which are legal elsewhere, including other EU member states. Thus, the operators who wish to enter the Polish market should thoroughly and carefully review the legal landscape if they want to be compliant and avoid risk.
Unfortunately, there is also a barrier of entry to the Polish market in the form of high licence fees, complicated regulations and high taxes which makes it attractive only to large entities. Setting up a gambling business requires considerable resources.
There also is no specialized authority in Poland supervising the gambling sector, like the Gambling Commission in the UK. It is the Customs who are currently responsible for supervision of the gambling market. There are no official guidelines on interpreting the law available and the government’s stance also does not seem very friendly towards the gambling business.
On the other hand, Poland is a large market (approx. 40 million inhabitants) with considerable potential to grow. The latest changes to the law – although controversial to an extent – may expand the market at least for online betting.
EEGReport Magazine: What advice would you give to potential new entrants considering Poland (operators, affiliates, suppliers etc.)?
Piotr: Due to the upcoming changes to the law, caution is definitely advised for new entrants. It is definitely advisable to be up-to-date with the new laws especially in the near future, when they will begin being enforced in practice. “Interesting times” are definitely coming for the gambling business in Poland.
However, the new law does also create a lot of new opportunities, in particular for the suppliers of software solutions for gambling industry. Even though online gambling will be controlled by a state owned company, that company will still need third-party suppliers – such as software developers – to launch its services. There will soon be thousands of new slot machines on the market – the state company will definitely look for someone to produce, equip and service them.
There are more examples of such new opportunities. The new law introduces betting on so-called “virtual events”, a new form of betting already popular in many other countries like Italy or UK. This of course means that betting operators will need new software soon. It will now be legal to advertise betting – this makes it much easier to enter the market for new betting operators, but it will also generate income for advertising agencies.
EEGReport Magazine: Looking further afield, where are the major emerging opportunities in Eastern Europe for operators at this moment?
Piotr: I don’t think there is a single trend in Eastern Europe as concerns the approach to regulation of gambling. It seems that different countries are trying to regulate the gambling business in their own ways, choosing different models. Some countries seem to understand the benefits of controlled liberalization of gambling and try to monetize on this, whereas others, Poland included, still try to remain as prohibitive as possible. Time will tell which approach is better and more effective.