Market Focus: Poland

The most important legislation governing gaming in Poland first entered law in November 2009, with passage of the Gambling Act. This act set strict requirements for gambling operators looking to enter the Polish market, imposing hardened regulations on licensed operators and financial penalties for violations.

So why did Poland start down the path towards becoming one of the most restrictive egaming marketplaces in Europe? Central to this is a political scandal involving gambling that engulfed the Polish government known as the “gambling affair”.

Reacting to the emerging scandal the Polish government moved quickly to introduce curbs on not only the slots-based gaming industry (which had been the subject of the scandal) but the wider gambling industry as well.  A draft version of the Gambling Act passed through the Polish parliament in just two days and because of this is perceived to be full of errors and inconsistencies.

Population: 37.97 million

GDP per capita: $13,811.66 USD

Internet penetration: 65%

President: Andrzej Duda

Principal regulatory body: Ministry of Finance

Legislation

The Gambling Act provides for specific types of regulated gaming and betting, how they can be marketed, what can be offered, rules for licensing, taxation and enforcement. All online and land-based operators offering gambling in Poland are subject to these rules, but online operators are also subject to the Polish E-Commerce Act of 2002, which relates to the provision of all services through online means.

Central to the Polish Gambling Act are the definitions of what constitutes a game of chance, or as expressed within the act “games, including those conducted via the internet, for cash or in-kind prizes, the result of which depends in particular on chance”.

The process for determining a game of chance is often left to the Polish courts, which have often taken the view that any element of chance no matter how small is enough to define it as a game of chance.

Current games of chance include card games, sports betting, dice games, bingo and lottery-based games. Games where there is no element of chance are not covered by the gambling law and can be subject to individual assessment by the courts.

There is no specific definition for online gambling included in the legislation, however the act does include certain provisions which only apply to games “conducted via the internet network” but no explanation is provided on what this term means in law.

The Gambling Act was overhauled in 2016 to introduce a monopoly system over the majority of all gambling games both in the online and land-based sectors.

Under the act, online sports betting and promotional lotteries are the only forms of online gambling which can be organised by private companies. Online casino gaming cannot be offered by any operator outside of the state-owned company, Totalizator Sportowy, which retains exclusivity.

The Polish Ministry of Finance has overall responsibility for oversight of all gambling activities in Poland, encompassing the licensing of operators, drafting of new regulations and enforcement against operators deemed to be in breach of regulations.

So, has a monopoly system ultimately harmed the Polish market? This is a hard question to answer for Piotr Dynowski, partner at Bird and Bird, as there are different aspects to it. “It seems the plan they had for expanding the monopoly by providing exclusivity for the incumbent operator to run also slot machine parlours and online casino to generate significant extra revenue failed. The numbers remain flat and the opening of new gaming parlours and online casino encountered severe delays and other flaws.”

Speculating about the future, Dynowski adds: “As the monopoly operated online casino has launched only about a month ago, it still needs to be seen how that will develop further and will be able to attract a significant number of players in Poland. If not, it may incentivise the Polish government to maybe open the market for private operators to profit from the licence fees and taxes.”

Licensing

There are three types of gaming licences in the Polish system, one to run a casino, one to offer betting products and finally a notification licence, which informs the regulator of a commencement of licensable activity.

Required documentation varies between licence type with no specific guidance within the act as to the types of mandatory information which must be provided with each application. Looking at this from a sports betting operators’ perspective, betting firms must provide technical documentation concerning the site being used, but no uniform guidance is provided on the mandatory elements with the regulator instead providing informal guidance.

International operators have an especially difficult road in the Polish market, as each non-native document submitted must be translated into Polish by a translator. This causes delays, as many Polish regulatory staff are unfamiliar with international regulatory documentation, having only been trained in their own regulatory standards. If a regulator determines that an applicant has not provided a full response with their documentation, they are given only seven days to provide this.

Once all documentation has been provided, the regulator will commence a review of the documentation subject to internal deadlines. By law licensing should be completed within six months, however the regulator can extend the process without the need for further explanation. Most licensing processes take between nine to 12 months to complete.

Upon issue, a licensed operator must pay the regulator an amount of collateral dependent on the type of licence being applied for. These fees vary, but can range between PLN40,000 for retail betting to PLN1,200,000 for cash bingo arcade games. In addition to this, successful licensees must pay a one-off licence fee covering the duration of their licence. This fee also varies, ranging between PLN246,000 for retail betting up to PLN1,432,000 for cash bingo games.

Licences are typically issued for six-year periods, however licences for lotteries are only issued for two years, with poker tournament licences only being valid for the period of the tournament. Operators which are deemed to break the Polish Ministry of Finance conditions of licensing can have their licences revoked.

Taxation

Gambling in Poland is taxed at various levels and calculation methods depending on the type of gambling activity. Sports betting is taxed at a rate of 12% of turnover, or 2.5% of turnover in the case of horseracing, while poker tournaments are taxed at 25% of any winnings, following deduction of entry fees. In most cases, licensed sports betting operators transfer the cost of paying the tax to the player.

The steep tax of 12% turnover is putting off operators from entering the Polish betting market as only building a significant client base in a short time could prove profitable.

“Bearing in mind that there are a couple of operators present on the market already for many years and having a pretty strong position, it would require newcomers to be pretty aggressive both in terms of marketing and promotions for new players to be able to attract a good chunk of the market,” Dynowski adds.

Restrictions

As part of their licence approval, operators must adopt standard responsible gaming rules which are subject to ministerial approval. There are, however, no formally published requirements as to what elements of responsible gaming conventions are compulsory and which are not.

The only type of gambling which can be advertised is licensed sports betting, with restrictions like those used in alcohol or tobacco advertising ie. products cannot be advertised misleadingly, or adverts cannot target minors. Advertising of sports betting on TV and radio is limited to between 11pm and 6am, plus all advertisements must carry problem gambling warnings and information on the advertisers betting licence.

Under Polish law, organisers, participants, and advertisers of unlicensed gambling can be held liable for breaching the act, potentially facing administrative fines and potentially imprisonment.

In addition to these main restrictions, the Ministry of Finance can blacklist unlicensed gambling sites, compelling all Polish internet service providers (ISP) and payment services to block the site, in most cases without notifying the domain owner.

Dynowski says ISP blocking is proving hard to effectively implement as the software is “primitive and fairly easy to circumvent” so the main efforts of regulators are in going after payment service providers involved in transferring money to unlicensed operators.

The future

Despite the high restrictions, Dynowski believes the popularity of sports betting in Poland makes it one of the potential markets to watch, with increasing interest in esports and fantasy sports and betting rising despite “steep” tax rates, making Poland quite an attractive market.

“Just in the last two years the number of online betting operators in Poland doubled (from seven to 14) and apparently the revenues of the leading online sports betting operators since the introduction of blacklisting and payment blocking have also doubled,” Dynowski adds.

So, increasing interest, coupled with changes in political appetites could potentially see the Polish market become one of the big Eastern European markets of the future and with 40 million prospective punters, how long will it be before the industry comes calling?