Offline Poker Tournaments vs. Online Poker Tournaments

The future of offline poker torunaments in the wake of the legalisation of remote skillgaming in Italy and subsequent launch of the first online poker tournaments

A few nights ago, while taking an after-dinner stroll with a few friends in a little seaport town not too far from Rome, a car full of young students pulled by us asking if we could by any chance direct them to an apparently unnamed and unmarked “private club” where a big texas hold’em tournament was due to take place that very night. Regrettably none of us was able to assist the poker-lovers bunch yet two or three thoughts immediately crossed my mind: (i) poker is ever more popular even amongst the youngest generations of Italians, (ii) if the whereabouts of the venue where a big poker tournament was to be held were not easily nor openly available and instead seemed surrounded by a good deal of clandestineness, probably the tournament itself was not authorised or perhaps the type of poker game being offered in the private club was not fully legal, in any event (iii) the law enforcement authorities are unable to effectively cope with the poker-mania phenomenon which is causing an increasing number of poker clubs to spring up all over the Peninsula.

The fact of the matter is, that offline poker tournaments indirectly benefited from the big push the legalisation (July 2006) and subsequent two-phase regulation (September 2007-May 2008) of remote skill gaming gave to real money card tournaments leading many to wrongly believe that the rules explicitly applying to online poker tournaments implicitly covered land-based poker tournaments too, better known in Italy as “poker sportivo” or sporting poker with a good dose of terminological hypocrisy. Such a regulatory misunderstanding was spurred by a provision carried by article 1, paragraph 93 of Law 27 December 2006 (also known as the Finance Act 2007 or simply “FA07”) which stated that any card games organised in the form of a tournament and where the pool prize is based solely on the buy-in fee, are to be considered skill games.

The FA07 provision in comment was aimed at ensuring that once the Italian gaming regulator (AAMS) would eventually implement the remote skill gaming rules, online poker tournaments would be automatically classified as a skill-based game and as such they could be legally and legitimately offered to Italian players subject always to specific regulatory restrictions established by AAMS for game purposes being fully complied with. This is what in fact happened thereby paving the way to the launch of the first AAMS-licensed real money online poker tournament in September 2008 by an Italian operator (Gioco Digitale), followed shortly thereafter by a few others including BWin, Lottomatica, Snai, Sisal, Eurobet, etc.

However, the mere inclusion in the remote skill gaming category of any kind of card-based tournament complying with the FA07 requirements was not meant to legalise poker outright nor to apply to offline poker tournaments which therefore continue to be covered by a different legal and regulatory regime. Indeed the legalisation and regulation of remote skill gaming in Italy did not abolish nor otherwise affect the general gambling ban contemplated by articles 718 and following of the Criminal Code which still apply to all games of chance (including poker and other cash games) carried out in terrestrial premises other than the four fully-licensed Italian casinos, namely Venice, Campione, St. Vincent and Sanremo. This explains why at the moment a texas hold’em tournament legally hosted on any AAMS-licensed online gaming platform could instead well possibly take place in terrestrial premises if the local police authorities competent to authorise such an event had in fact included poker in the official list of games covered by the general gambling ban.

Notably the lack of any thorough and uniform guidelines from the central police department at the Ministry of Interiors as to which games should actually be listed nationwide as illegal gambling has over the years led to a disharmonised and at times also conflicting interpretation, application and enforcement at local police level of the Criminal Code gambling restrictions particularly with regard to live poker tournaments.

The quite unclear status for regulatory purposes of live poker tournaments triggered a number of court cases involving their actual legality under the current rules and resulted in November 2008 in a landmark ruling by the Council of State (the Italian supreme administrative court) which appropriately and timely cast some light over the grey area of offline poker tournaments.

The ruling issued by the Council of State is largely based on a well-articulated opinion submitted by the legislative office of the Ministry of Interiors (“MoI”) whose main points can be summarised as follows:

1. The MoI authorities confirm that the law provisions and subsequent regulations whereby remote skill games were introduced in Italy are not aimed at repealing the criminal code provisions in matters of gambling but only at legalising and strictly regulating real money remote skill games carried out pursuant to a state-granted licence. Hence offline poker does not fall under the scope of the remote skill gaming rules
2. Pursuant to the FA07 law provisions, card-based tournaments qualify for skill game classification provided (i) they are offered remotely (not live) and the pool prize is solely based on the buy-in fee. By contrast no mention whatsoever is made therein to offline poker tournaments which accordingly should be considered in principle as a game of chance thereby falling under the general gambling ban laid down in the Criminal Code
3. Section 721 of the Criminal Code is still fully in place and requires that illegal gambling has two features: (i) the service is offered for a profit and (ii) it entails a game of chance
4. Whenever a live poker tournament is conducted for a profit of its organisers or however the pool prize is not just token, the game cannot be considered a play-for-fun event and becomes a play-for-money instead
5. There is no standard criterion to establish whether the amount of the pool prize is such as to give rise to a profit for the organisers hence the actual nature and purpose of a live tournament has to be assessed from case to case having regard to: (i) whether it is to be carried out at local, regional or nationwide level, (ii) a buy-in fee is charged only in the final stage of the tournament as opposed to it being required also in the qualification and/or pre-final rounds (in which case it ought not to exceed €30 anyway). Even in those cases where the entry fee was very modest a live tournament could equally devise a play-for-money event if the aggregate amount of all buy-ins resulted in a not economically irrelevant amount
6. When multiple games are simultaneously played within the same live tournament, a player who entirely used up his fiches plafond must be ruled out of the context hence no re-buys are allowed
7. The promoter of a live tournament cannot be authorised by the police authorities to run more than one event on the same day and in the same venue

The MoI report is an important term of reference and going forward it should hopefully enable the police authorities to adopt also at local level a more consistent, uniform and well-coordinated policy when it comes to granting or denying an authorisation to the promoters of an offline poker tournament. In this regard there is very little doubt that clearer and more straightforward rules on poker will not just help the law enforcement authorities but also benefit the Italian market in terms of tournament promoters on the one hand, and players on the other by steering at long last poker sportivo out of the regulatory limbo it has featured so far.

Given the big success marked by the first online poker tournaments launched in Italy that at the end of 2008 and in only four months have already fetched nearly €240mln in total turnover, a bit more clarity regulation-wise in matters of online poker tournaments versus offline poker ones was not just appropriate but much needed too so as to enable the Italian authorities exploit and drive the poker-mania boom in a fair and balanced way.

Quirino Mancini, partner
Sinisi Ceschini Mancini
Qmancini@scm-partners.it

Interview with Dr. Wulf Hambach, Partner of law firm Hambach & Hambach

Bulletbusiness.com’s Legal Gaming Special

“States are wounding themselves if they stick on to the old fashioned monopoly approach”

Even as some of the key markets across Europe are contemplating the idea of opening their respective online gambling sectors, and some level of co-operation between Member States is inevitable, the region is still a long way from any system of pan-European regulation.

Achieving agreement between governments and regulators on detailed regulations will be an extremely difficult task. At the same time, there are a number of key issues that they should be able to agree on without too much trouble and these relate to consumer protection, crime prevention, and combating problem and underage gambling. Of course, there are existing laws and mechanisms that also already apply in areas related to money laundering, fraud and corruption.

Assessing the situation, Dr. Wulf Hambach, Partner of law firm Hambach & Hambach told Bulletbusiness.com it is indeed in the interest of the European governments to regulate this interesting market.

“Without regulation or even worse with regulations like the German one including an Internet ban, the black market is growing, the players are unprotected and the states go away empty-handed. A common approach aiming at a liberalised online gambling market in consequence of their own interests and the pressure of the European Commission as well as the ECJ decisions is probable but unfortunately it will still take some time, ” said Hambach, who is scheduled to speak during Bulletbusiness’ 3rd Legal Gaming in Europe Summit 2009, to be held in London on 26-27 January.

Elaborating on the issue of players being unprotected and governments completely losing control of their tax revenues in today’s environment, he said, “I am definitely convinced that the states are wounding themselves if they stick on to the old fashioned monopoly approach in times of the digital age. The consequence of an Internet gambling ban and a monopoly that is not allowed to advertise in a normal manner for the products leads to the fact that players stop playing with state operators but go to the Internet where they have the possibility to choose between thousands of internet gambling operators.”

“The negative consequence is of course that, if the player and customer is not able to find out immediately after using an online gaming product whether this product or gaming operator is credible or not and if the gaming operators do have an effective responsible gaming programme or not, the player is left alone in the cyberspace. Therefore, not only tax money is staying out of the monopoly jurisdiction but also the gamblers and players are endangered by the uncontrolled offer in the Internet.”

Hambach also spoke about current status and issues related to Germany. Excerpts:

On major developments in Germany: The major issue of 2008 in Germany was definitely the enactment of the Interstate Gambling Treaty on the 1st of January 2008 and the reaction of courts, the new gambling authorities and operators in the light of this UIGEA style. As before the enactment of the Interstate Gambling Treaty we still have the situation of legal chaos in the way that courts decide in some cases that the Interstate Gambling Treaty is in accordance with German Constitutional Law and with European Law and others, who declare the Interstate Gambling Treaty not being valid in accordance with EU Law and national laws.

This lack of clarity definitely leads to the fact that most of the EU gaming operators decided to stay on the promising German gambling market and fight the cases through in case they are attacked by the German gambling authorities. The question of the opening up of German gambling market definitely depends on the development of European law level and the future decisions of the European Court of Justice.

On how can operators benefit in the time to come: First of all we received a very strong, supporting statement of the European Commission. This brief by the Commission to the ECJ relates to proceedings conducted by the Gibraltarian online gambling provider Carmen Media (represented by the law firm Hambach & Hambach) before the Administrative Court of the German Federal State of Schleswig-Holstein. At the beginning of 2008, the Administrative Court decided to suspend the proceedings and to refer the decisive questions regarding European law to the ECJ for a preliminary ruling. So, we hope that the ECJ will follow our and the Commission’s legal statement when replying to the Administrative Court. In this case the ECJ will come to the conclusion that the German State Treaty on Gambling violates higher-ranking Community law due to the incoherence of the German gambling regulations. Should the ECJ follow this opinion, German courts would have to cease application of the regulations which violate European law.

Secondly, the political discussions do not cease on European and national level. The French Government announced it would open its gaming markets as a result of pressure from the European Commission. The Italian Government realised that a legalised Internet gambling offer is necessary for the protection of the Italian citizens and to control and tax this market. Additionally all European institutions are discussing how to regulate online gambling. An independent expert opinion was published by the European Parliament’s Internal Market and Consumer Protection Committee – IMCO and comes to the conclusion that “some form of Code of Conduct is the best way forward, since it would allow Member States to leave their differences on one side and concentrate on issues seen as important across the whole EU.”

On whether operators should be individually licenced in each jurisdiction: In my point of view, a regulation on European level is preferable as the requirements for online gambling offers regarding consumer or minor protection should be the same.

Furthermore the e-Commerce Directive installed the principle of origin for online offers not without cause. Also for the European gambling market operators who are licensed in one state should be allowed to provide their services in all Member States. If a license per member state – or even worse – 16 licences e.g. in Germany for all German Federal States – are required, smaller operators simply cannot bear the costs of this marathon and fair competition is prevented. Nevertheless, their online offer will be available in all Member States and so they will be obliged to ensure that players from states where the operators do not hold a license are blocked. Again the smaller operators will have to pay for geo-localisation tools without being certain that they can guarantee that all foreign players are blocked. Legal conflicts are inevitable.

Role of Bullet Business and Gaminglaw.eu partnership going forward: The partnership between Bullet Business and a portal with special information of the gaming laws around Europe is a big profit for the gaming industry as on the one hand legal information is provided and on the other hand industry information from a gaming industry service Bullet Business. I see that the partnership will develop into a long term relationship with more and more improvements where industry news and legal news will shape the future of gambling regulations as they define the needs and the weaknesses of gambling law systems.

Ritesh Gupta

Bulletbusiness.com

3rd Legal Gaming in Europe Summit 2009

Bulletbusiness’ 3rd Legal Gaming in Europe Summit 2009 is scheduled to take place in London on 26-27 January.

For more information visit: http://www.bulletbusiness.com/legaleurope09/agenda.shtml

or

Contact:

Ben Satchwell at +442073757163 or email ben@bulletbusiness.com

Interview with ULYS’s partner Thibault Verbiest

‘There will be a day when the competition will be more fluid in France’

Bulletbusiness.com’s Legal Gaming Special

It is recommended that within the European Union every Member State should be enabled to decide about the liberalisation of the gambling market taking national characteristics into account.

This is in fact the current position in EU law, but with the crucial caveat that there is only a narrow band of legitimate reasons for restricting market access, according to the Remote Gambling Association.

According to the Association, unfortunately, the key to opening up markets is as much about taxation as regulation.  The main sticking point is that most EU Member States will not recognise the fundamental right of EU-based gambling operators to provide their services across borders. If this right is not enforced properly by the European Commission then Member States will gradually introduce systems that call for operators to be individually licensed in each jurisdiction.  This is completely unnecessary if the primary interest is consumer protection because comparable standards really should be in place across the EU, but compulsory local licencing will of course enable jurisdictions to levy taxes.

From France’s perspective, international law firm ULYS’s partner Thibault Verbiest says this will probably be the case in France, according to the ongoing discussion within the French government, the draft bill requires that all operators should obtain a licence in France, without respect to the fact they may already have one in another Member State.

“It would be surprising if the European Commission did not react against systems that are blatantly violating the freedom to provide cross-border services. However, operators will probably need to take legal action against legislations which one way or another limit cross-border services without having a coherent regime in parallel (e.g. which really protects consumers) or which discriminates operators without real justification,” said Verbiest, who is scheduled to speak during Bulletbusiness’ 3rd Legal Gaming in Europe Summit 2009, to be held in London on 26-27 January.

In France, the market opening talks are still ongoing.

Äccording to Verbiest, a draft bill creating a new regime should be examined within the next three months by the French MPs.

“The government announced at the end of 2008, that by the beginning of 2010 the new licencing project was going to be in place thanks to the new French gambling authority,” said Verbiest.

Verbiest also said that the government acknowledges that it is completely losing control of their tax revenues and consumers for their part continue to look for online gambling sites in other markets.

“This is not a new situation in France, since online gambling exist, French people have been trying it, sometimes at their own expenses since there was no system to help them distinguish trusted operators from fraudulent ones. For more than a year, the French government has acknowledged this situation and is trying to find remedies through a new piece of legislation. Since the topic has stopped being a taboo in France, it seems that consumers are more aware of which websites are safe (i.e. duly licensed in the E.U. or other safe jurisdictions), but it is obvious that only a real and realistic awareness campaign from the State will reach out to all players,” said Verbiest.

From operator’s perspective, Verbiest said since private operators did not have any legal access to French market until now and that the French government is willing to let some of them in, it can be said that there is a progress.

“However, there will be a long time before all operators can compete evenly, since the opening in France will only concern sports betting and casino games (poker, maybe backgammon) operators; all online games which are assimilated to lotteries and slots machines will remain prohibited. Thanks to European law and big legal battles, there will be a day when the competition will be more fluid in France, but this is not for tomorrow despite the tremendous progress which has been made.”

On grounds for a common approach to regulating the European Union, Verbiest said gambling regulations have been challenged in light of EU law in almost all EU Member States, and the same questions are raised every time. This alone is the sign that there is a need to discus common issues.

“There are already common regulations concerning money laundering but Member States seem to be ready for at least a common recommendation,”  Verbiest said.

Role of Bullet Business-Gaminglaw.eu partnership going forward

Gaming law specialists, who have joined hands with Bullet Business, feel the main and most important job mission of pan-European groupment is to provide the gaming industry not just with accurate and up-to-date legal advice but also to share key information, disseminate comments and suggestions, stimulate debates, quickly spread news and if at all possible, effectively reach out to the regulatory movers and shakers in the interest of the stakeholders.

For his part, Verbiest said this partnership (between Bullet Business and portal Gaminglaw.eu from gaming law specialists) is a unique opportunity to develop and enrich the only European portal dedicated to gaming and gambling laws.

3rd Legal Gaming in Europe Summit 2009

Bulletbusiness’ 3rd Legal Gaming in Europe Summit 2009 is scheduled to take place in London on 26-27 January.

For more information click here: http://www.bulletbusiness.com/legaleurope09/agenda.shtml

or

Contact:

Ben Satchwell at +442073757163 or email ben@bulletbusiness.com

Interview with Quirino Mancini, Partner, SCM Partners

Call for operators to go for ‘realistic and swift action’ in Italy

eCOGRA extends its services