UNIVERSITY OF GDAŃSK

FACULTY OF ECONOMICS

Kamil Wesołowski

International Economic Relations - International Business

Register No: 204631

LEGALIZATION & TAXATION OF

TEXAS HOLD‘EM ONLINE POKER IN POLAND

Bachelor thesis written

In Institute of International Busniness

Under the supervision of

Prof. UG, dr hab. Radosław Koszewski

Sopot 2014
 Sopot, 23.06.2014

I declare that the paper version of the diploma work entitled:

‗LEGALIZATION & TAXATION OF TEXAS HOLD‘EM ONLINE POKER IN

POLAND‘

is in conformity with the enclosed compact disc in Microsoft Word format

(.DOC) and Adobe Acrobat (.PDF).

……………………………………………………………….

Author‘s signature

……………………………………………………………….

Tutor‘s signature

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 Sopot, 23.06.2014

Kamil Wesołowski

Faculty of Economics

International Economic Relations - International Business

Register No: 204 631

I declare that the submitted diploma‘s thesis entitled:

‗LEGALIZATION & TAXATION OF TEXAS HOLD‘EM ONLINE POKER IN

POLAND‘

prepared under the supervision of Prof. dr hab. Radosław Koszewski in

Institute of International Business does not infringe copyrights, legal and
material interests of other people as defined by Act of February 4 th 1994
dealing with copyright and neighbouring rights (Journa l of Laws No 80, item
904 with further amendments).

……………………………………………………………….

Signature

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Table of contents
Introduction ............................................................................................... 1

1. Texas Hold‘em Online Poker .................................................................. 2

1.1 Definitions and rules ......................................................................... 2

1.2 Online casinos ................................................................................... 5

1.3 Mathematical application in Texas Hold‘em ....................................... 8

2. Legalization of Texas Hold‘em online poker in Poland ........................... 12

2.1 Polish Gambling Act & EU free provision of services ........................ 12

2.2 Limitations against abuses and addiction ........................................... 13

2.3 Countries which legalized and taxed Texas Hold‘em online poker ...... 16

3. Taxation of Texas Hold‘em poker in Poland ........................................... 21

3.1 Polish tax law .................................................................................. 21

3.2 Ways to collect taxes from players .................................................... 25

3.3 Income from taxation in Poland ........................................................ 26

Bibliography ............................................................................................. 29

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Introduction

The purpose of this thesis is to point out the benefits of legalizati on and
taxation of Texas Hold‘em Online Poker in Poland. Texas Hold‘em is poker
variation in which edge can be obtained by mathematical application, skills
and software. Game is relegated to the black area in spite of players desire to
pay taxes to legally spend won money. Currently online poker games are
prohibited in Poland. Prohibited but not being blocked or monitored, which
means players do not have to pay taxes from their winnings. In result
government does not receive any income from players nor from offshore
casinos. In fact, there are tens of thousands of players from Poland, which
stands for huge amount of taxation income.

There is also some inconsistency in government actions, proven skill game

is not legalized whilst on Polish market there are many gam es based on pure
luck. Lotto (and clones) is the example of negative-sum games in which
casino (in this case Government) is the only winner.

In following three chapters I will guide you through Hold‘em case starting
from basic rules of the game and finishing at expected income from taxation
in Poland.

1
1. Texas Hold‘em Online Poker

1.1 Definitions and rules

Instead of increasing current, mostly high enough taxes, opportunities having

positive investment to expected revenues ratio should be exploited by the
governments. These often include omitted by Poland information technology
areas, like Texas Hold‘em Online Poker itself.

Poker industry is well prepared and countries can benefit even more if
cooperating with online casinos in implementing this great machine into
work. It is win-win situation for both of sides. Gambling companies are
operating already on Polish market.

Thin knowledge of game and technical side of it consisted in this section is

not intended to make you a winning player but is required to achieve
understanding needed to successful adaptation of Online Poker in Poland.

There is only one visible reason why online poker is not legalized, and it is
not protection against gambling. If it was so, lotto and other pure gambling
activities would be banned. Most important cause in this case is ground
casinos lobby. Legalizing online poker would hit hard on ground casinos
revenues, because taxes are almost unbearable for professionals already.
People chose to stay safe at home, deposit mone y directly from bank account
or other e-wallet in 15 minutes, and play. Politics do not realize that it is
happening already. Although, it might be the case where a ha ndful of
corrupted people block favorable law for personal gains, while country loses
are huge.

,,The objective of poker is to win money by capturing the pot, which contains
bets made by various players during the hand. A player wagers a bet in hopes
that he has the best hand, or to give the impression that he holds a strong
hand and thus convince his opponents to fold (abandon) their hands. Since
money saved is just as valuable as money won, knowing when to release a

2
hand that appears to be beaten is just as important as knowing when to bet. In
1
most poker games, the top combination of five cards is the best hand.‖

In Hold‘em table there is capacity from two to ten participants. Best players
to maximize profit tend to play poker on tens of tables simultaneously. This
means that commission is charged on each table separately. For Hold‘em,
there is used standard 52 card deck (23456789TJQKA ) in four suits.

,,At the start of a Hold‘em hand, after the two blinds have been posted, all
players are dealt two cards facedown. These are known as the hole or pocket
cards. Players then make a decision to call the blinds (match the big blind),
raise the blinds (increase the bet) or fold (quit playing and throw their cards
away, facedown, to the middle of the table — known as mucking).

In the form of Hold‘em known as Limit, the bets have to be of a certain

specified amount. In No-Limit, players may bet any amount of their chips on
the table.‖ 2

Blinds amount is determined by the stakes level. For example, while playing
on stakes 1/2$, small blind is 1$ and the big blind 2$. Maximum amount of
money which player can bring to one table vary from 20 to 300 big blinds.

Every hand, dealer button moves clockwise, which changes contributors of

the blinds. Important thing to remember is that player actions are based on
position. First player to act is a person sitting next to the dealer button, and
rest clockwise. Position is very strategic aspect of play.

Each player is dealt two hole cards and all of the participants will share five
community cards. Hole cards are dealt face down and no other player than
they are dealt to can look them up. While community cards are dealt on
middle of the table and are visible to everyone. Community cards are dealt
partially, which is called rounds or streets. Th ere are four rounds. First is
called preflop, only hole cards are dealt. Flop, where three community cards

1
Harroch R. D., Krieger L., Poker for Dummies. New Jersey 2000, p. 12
2
Harlan M., Texas Hold'em for Dummies . New Jersey 2006. p. 12

3
are unrevealed. Third street is called turn, where one card is dealt. Last round
is river where the last card is distributed. From these seven cards (two hole
and five community cards) players complete best five card hand.

In every round there is place for betting. Which means players must act
accordingly to actions made by other players , on earlier positions. On its
turn, player can fold a hand which means that it is no longer possible he wins
the pot. He can also stay in hand: by making bet, calling the other player bet
or re-raising other player bet. There might be situation when player puts all
his chips into the pot which is called all -in. When other players stacks covers
person with all-in, he can win no more than multiplicity of his stack from
every person who stays in the hand. Rest is so called side pot. Every betting
round looks the same.

Hand can be won with or without showdown. If there were two players on the
river for example and one of them made bet, other called – there will be the
showdown. In this situation, only hierarchy of cards counts. If the other
player would fold – winner doesn‘t have to show his cards and it is said that
he won by bluff.

Texas Hold‘em hand is made of exactly five cards. Starting from the weakest:

 High card – if there was no hand completed, highest 5 cards are taken
into account.
 One pair – two cards of the same value
 Two pairs – two pairs of the same value
 Three of a kind – three cards of the same value
 Straight – five cards in a order but no in same color. Ace can be used
also as 1.
 Flush – five cards of a same kind of color
 Full house – one pair and three of a kind
 Four of a kind – four cards of the same value
 Straight flush – five cards in order in the same kind of color
 Royal flush – TJQKA in the same color

In case if winning players have the same hand, there is a split pot .

4
Texas Hold‘em has few variations, the most common are:

 No-limit – there is no limit in any betting round

 Pot-limit – bet cannot be more than actual pot
 Fixed Limit – bets in any betting round are fixed
 Tournament – its scheduled game where more than 10 participants can
take a part. If in the way of elimination, one table of players remains ,
it is called final table. Payment structure and variation is announced
before the tournament.

1.2 Online casinos

,,A cardroom or card room is a gaming establishment that exclusively offers

card games for play by the public. The term poker room is used to describe a
dedicated room in casinos that is dedicated to playing poker and in function
is similar to a card room.

Such rooms typically do not offer slot machines or video poker, or other table
games such as craps as found in casinos. However, a casino will often use the
term "cardroom" or "poker room" (usually the latter) to refer to a separate
room that offers card games where players typically compete against each
other, instead of against "the house." 3

Poker rooms are mostly operated from offshore islands, where jurisdiction
allows for obtaining licenses to offer gambling services. Examples of
offshore islands with soft gambling law are Malta, Gibraltar, Isle of Man.

Poker room can be downloaded as an application and sometime s ran directly

from web browser.

Software allows making deposits and withdrawals. Most common ways to

manage poker balance are credit cards, local bank transfers and online wallets
like Skrill or Neteller. To increase deposit/withdrawal limit players have to

3
http://en.wikipedia.org/wiki/Cardroom [accessed August 10 t h 2014]

5
send scan of any document proving identity and scan of bill registered to the
same address. This is also protection against underage.

Mentioned e-wallets found great use in gambling industry. These institutions

issue special debit cards to make players able to withdraw money from every
ATM, directly from wallet account, even if country law prohibit playing
online poker.

For every hand/tournament pok er room charges fee called also rake.

,,Rake is the scaled commission fee taken by a cardroom operating a poker

game. It is generally 2.5 to 5 percent of the pot in each poker hand, up to a
predetermined maximum amount. There are also other non -percentage ways
for a casino to take the rake. Some cardrooms will not take a percentage rake
in any community card poker game like Texas Hold 'em when a hand does not
have a flop. This is called "no flop, no drop".

Poker is a player-versus-player game, and the house does not wager against
its players (unlike blackjack or roulette), so this fee is the principal
mechanism to generate revenues.‖ 4

Operators of poker rooms are obliged to keep players from cheating,

collusion and money laundering. It is very difficult to track and analyze tens
of thousands players actions. In result, there are very sophisticated methods
involved.

Poker room checks whether players acted naturally and played hand as they
would if they were to win, not to launder. If strange behavior is detected,
hand histories are examined manually by personnel. If game history is
suspicious, poker accounts with balances become frozen until clarification.

Figure 1 is here to better understand how many Polish players take part in
illegal online Texas Hold‘em games. Combined with information from Table
1 assumptions about number of Polish players can be made.

4
http://en.wikipedia.org/wiki/Rake_(poker) [accessed August 10 t h 2014]

6
 50,00%
45,00%
40,00%
35,00%
30,00%
25,00%
20,00%
15,00%
10,00%
5,00%
0,00%
2008 2009 2010
PokerStars 30,53% 36,05% 40,96%
Full Tilt Poker 14,65% 19,45% 21,73%
PartyPoker 8,72% 7,22% 6,12%
Others 46,10% 37,28% 31,19%

Figure 1. Global online poker market share 2008 -2010, available at:
https://www.academia.edu/724198/The_Market_for_Online_Poker , [accessed August 10th
2014]

Table 1 show the numbers based on Polish players. Every hand was taken
from cash game tables, which mean rake has been collected. All these hands
are stored and available on PTR website. Please note that there are neither
players nor hands from PokerStars taken into account , which is biggest room
of online poker.

Country Hands Players Rooms Years

PartyPoker,
Poland 401.868,801 35.540 2007 – 2012
FullTiltPoker
01.2013 –
Poland 110.120.817 10.115 PartyPoker
11.2013
Table 1. Hands played by Polish players, available at:
http://www.pokertableratings.com/top -countries-alltime [accessed August 10th 2014]

On PartyPoker and few small poker rooms Polish players participated in

around 100,000,000 hands in th e period of 01.2013 - 11.2013. Number of

7
Polish players in poker market calculations based on above data refer to
Chapter 3.3.

1.3 Mathematical application in Texas Hol d‘em

Texas Hold‘em variation is greatly influenced by mathematics, which is one

of the most important reasons, why poker should be legal. More and more
organizations qualify poker as game of skill, because of this mathematical
application. For example, while we buy Lotto coupon, we are losers from the
beginning. Probability of winning can be changed only by buying greater
amount of coupons. Lotto does not vary from roulette and other pure
gambling activities where the only winner is host of the game. In case of
Lotto it is government.

In Poker, players making decisions accordingly to the numbers can obtain

huge edge in the long run. Profitable decisions are called EV+ (expected
value+) decisions. Hold‘em is based on randomness also. Even playing every
hand in possible best way can lead to losses after tens of thousands of hands.
However, probability for that is very close to zero as standard deviation
states.

Figure 2 Samples over 5,000,000 hands with winrate 2,5BB/100, available at:
http://pokerdope.com/poker -variance-calculator/ [accessed August 10th 2014]

8
Figure 2 illustrates possible outcomes of playing 5,000,000 hands, with
winrate of 2.50 big blinds per 100 hands. Every outcome lay in the profit
area.

The most basic but fundamental knowledge is how to count ,,outs‖ to

calculate ,,pot odds‖.

,,Counting your ―outs‖

An out is a card (or sometimes a sequence of cards) that will turn a losing
hand into a winner. People tend to make a big deal out of counting outs, but
it‘s really pretty simple as long as you keep in mind the basics of a deck of
52 cards, namely:

 There are four suits in a deck.

 There are four of each rank in a deck (for example, four 2s).
 There are 13 cards of each suit.

You count one out for every card that will make your hand.‖ 5

For example, if You are drawing to flush of hearts, having AhKh in hole
cards. Flop is 3h8hJs – there are 13 (all of hearts) – 4 (already owned) = 9
hearts left in deck. You are said to have 9 outs to hit flush of hearts.

,,Calculating your pot odds

Pot odds is a term used to describe the ratio of the pot size relative to the bet
you have to make to call. For example, if you have to make a $5 ca ll on a $20
pot, your pot odds are: 20 ’ 5 = 4. This is expressed as a ratio: 4 -to-1. In
other words, if you call for $5 and win, you are paid four times what your call
cost you.

Note that you do not count the calling bet you put in the pot as part of the pot
odds. Again, in the example, you‘re making a $5 call on a $20 pot — 4-to-1
pot odds. You are not making a $5 call on a $25 pot.‖ 6

5
Harlan M., op. cit., p. 142

9
Now if we combine these two simple math calculations, we have draft of the
information which will help us in making most profitable decision. If pot
odds seem unfavorably compared to probability of drawing a hand, we simply
checks/folds till the end of hand.

When calculating probabilities for a card game such as Texas Hold 'em, there
are two basic approaches. The first approach is to determine the number of
outcomes that satisfy the condition being evaluated and divide this by the
total number of possible outcomes. For example, there are six outcomes
(ignoring order) for being dealt a pair of aces in Hold'
em: A♠ A♥ , A♠ A♦ , A♠ A♣ , A♥ A♦ , A♥ A♣ and A♦ A♣ . There are 52 ways to
pick the first card and 51 ways to pick the second card and two ways to order

the two cards yielding possible outcomes when being dealt two

cards (also ignoring order). This gives a probability of being dealt two aces
of .

The second approach is to use conditional probabilities, or in more complex

situations, a decision tree. There are 4 ways to be dealt an ace out of 52

choices for the first card resulting in a probability of . There are 3

ways of getting dealt an ace out of 51 choices on the second card after being
dealt an ace on the first card for a probability of . This value is the

conditional probability that second card dealt is an ace given the condition
that the first card dealt is an ace. The joint probability of being dealt two aces
is the product of the two probabilities: .

Last mathematic approach which I will explain is called implied odds. It

states that we should go step ahead with counting pot odds and probable
winnings. That means if we want to draw a hand (we must assume that it will
be the winning hand) while pot odds are clearly showing it is unprofitable to

6
Ibid., p. 144

10
stay in hand, we should assume how much can we win from other players
when our hand will be completed.

There are many more of mathematic approaches which compiled with

psychological reads can make player long run winner. Advanced players
calculate these which I have described in seconds, on many tables
simultaneously. Even person which sticks only to the numbers can easily beat
low stakes, where worse players tend to gamble.

11
2. Legalization of Texas Hold‘em online poker in Poland

2.1 Polish Gambling Act & EU free provision of services

Online Poker is specifically outlined in art. 29a, 19 November 2009 act about
gambling game, which states:

1. It is prohibited to arrange gambling games over the Internet.

2. It is prohibited to take part in gambling games arranged over the
Internet. 7

First point means that gambling companies are not allowed to arrange online
poker games accepting Polish players. Fact is that Polish players are not
banned on even single one poker room, from existing hundreds of them.

Polish law is easy omitted by gambling operators; they carefully select

content of website hosted on .pl domain s that it does say only about
organizing games for no value virtual money. M ost of times after entering
download section looking for application it redirect us to abroad hosted
servers, where Polish law has no authority. Same with advertisement,
PokerStars commercials are aired in Poland because of not mentioning real
cash game tables and using .pl site address.

Second point is addressed to players. It is prohibited to play, but no steps to

prevent Polish people from playing have been taken. Poker room applications
could be easily blocked by Polish internet operators. Direct deposits from
Polish bank accounts could be rejected also. If this prohibition is for safety of
citizens as government states, these two would work way better than words
and unclear legal situation. Poland is member of European Union , which

7
Ustawa z dnia 19 listopada 2009 r. o grach hazardowych , Journal of Laws of 2009, No.
201, item 1540.

12
threatens us with punishments because this law is not consistent with EC
Treaty. It is worth writing that to this moment; there were no individuals
accused of playing online poker in Poland.

,,There is not, for the moment, specific legislation on gambling at EU level.

However, the free provision of services in the internal market, enshrined in
Article 49 of the EC Treaty, applies to gambling. Regrettably, many Member
States restrict the free provisio n of gambling services from elsewhere in the
EU while they permit the active promotion of gambling by operations that are
frequently state owned or state sponsored. ‖ 8

Gambling law was apparently implemented quietly, as in the normal case

should have been notified by the Commission, which rules on the conformity
of our law with the EU law. Polish government claims that such treatment
was not necessary. There is no notification, and the law still works.

Greece in 2002 passed a very similar law that also miss ed the European
Commission in the implementation. The Court of Justice held that such action
is unworthy of a member of the European Union and imposed a € 31 799 for
each day of delay in the change of the law.

2.2 Limitations against abuses and addiction

In each consultation, country, which is considered to regulate online gaming

zone, put great emphasis on the problem of money laundering. Opponents of
legalization of online poker use this argument in every speech and every
meeting. Until recently, politi cians have put this argument as a key, and thus
ended the discussion with the supporters of legalization. Recent researches
show that it is not true.

8
http://www.rga.eu.com/pages/en/gamb ling-in-the-eu.html [accessed August 10th 2014]

13
,,Members of the European Parliament (MEP) attended a workshop in
Brussels last month at which Professor Friedrich Georg Schneider, an
economist at the Johannes Kepler University of Linz, Austria, presented
evidence that all gambling – land-based and online – accounted for a mere
0.5% of total money laundering activity. Schneider singled out online poker
as a particularly ineffective method of laundering money, in no small part due
to the high transaction costs.

Schneider quoted a study of the German gambling market by consultancy

Goldmedia that concluded that even if the entire online poker market was
utilized solely for money laundering purposes, the total amount processed
would represent just 3.2% of the estimated total sum generated by all
criminal activity in Germany. Schneider said his research had led him to
conclude that online poker was ―by no means re levant for money laundering.‖

At the same meeting, Sven Stiel, Director Northern Europe for PokerStars ‘
parent company Rational Group, stated that the relatively small sums
involved in online poker transactions ―have no relevance with regard to
money laundering.‖ Stiel also noted that since online gambling is a non -cash
business, most of the money that flows into the site has already been handled
(and presumably vetted) by the banking system. When MEP Jürgen
Creutzmann tried to throw Stiel by asking him about anonymous payment
methods, Stiel noted that prepaid cards can only be loaded with minimal
sums, usually a maximum of €100 to €150, and the use of these cards requires
players to log in via their individual accounts, making them easily
identifiable.‖ 9

Poker rooms have very sophisticated systems reviewing every hand, whether
if it was played logically and without players collusion. Beside from that fact,

9
Stradbrooke S., Experts: Online Poker “by no means relevant for money laundering” ,
available at: http://calvinayre.com/2013/04/06/business/experts -online-poker-by-no-means-
relevant-for-money-laundering/ [accessed August 10th 2014]

14
TÜV Trust IT (TÜV Austria Group) made research recently, which states that
money laundering in poker is unsuitable and too expensive.

Problem, faced by every game and activity, is that it can be subject of

addiction. If poker would be regulated, government would have access to
player gambling history. It is easier to take care of citizens when legalizing
but with supervision, than when delegalized without supervision. Important
information like number and frequency of deposits/withdrawals, total amount
of deposits/withdrawals, hours spent on playing and many others could be
used for good.

There are ways to limit number of addicts, make them gambling harder.

Poker software already has functions which restrict players to certain total
deposit amount, single deposit amount s, maximum stakes on which gambler
can play and more.

These combined with live analysis of losses might be the basis of excluding
player from participation in poker games. Ban can maintain for period of time
or lifetime if person show serious gambling addiction signs.

Next problem is resolved already. These are underage playing Texas

Hold‘em. Rooms have great security departments which verify age of users in
many ways. Most often they froze account with funds and require scan of
documents like passport or ID, bank account statement, scan of any bill with
registered address. What is more, there are telephone verifications also.
Verifications happen randomly. Sooner or later it occurs to every user. Unless
underage are not using verified account of legal aged, casinos take care of
things.

If underage or legal age account will be c losed for a reason, it is hard to get
back into the game. One user can open only one account. Every new on

15
similar personal data or IP address will be banned immediately. The same
with account sharing. There are advanced systems involved, which monitor if
there is possibility that account is shared. That means used by more than one
user.

2.3 Countries which legalized and taxed Texas Hold‘em online poker

Denmark

,,January 1st 2012, the Danish Government assigned Spillemyndigheden

(Danish Gambling Authority) to regulate online casino, poker and sports
betting. The Danish Government gave up its monopoly after 9 years of
pressure from EU and foreign betting companies.

A Danish law used at the Supreme Court in Denmark in 1926 stated that it
was illegal to make a living from gambling (such as poker). The
implementation of the Danish license system moved online poker from a grey
area to a regulated legal business for players and operators.

It cost 250.000 DKK (€33,500) to apply for a c asino/poker license or a sports

book license. You can apply for both at the same time and pay 350.000 DKK.
The license enables you to legally promote your brands in Denmark.

You are allowed to have offices and employees in Denmark. You can have
Danish content on your websites and player winnings are exempt from taxes.

The prize of running a casino & poker room is 20% of the gross income
meaning that you cannot deduct marketing expenses, bonuses, rake back,
affiliate commission etc. For a poker room it is 20% of the total rake and for
casinos it is the total amount wagered minus winnings.

16
It is legal for Danes to play on a non -Danish licensed poker rooms. If you
play on a poker room licensed and regulated in EU the winnings are still
considered tax free according to the Danish and the European Union‘s tax
laws.‖ 10

Germany, Schlezwig-Holstein

The solution used in the Schlezwig-Holstein shows it is possible to combine

protection of players and the control over the licenses. All with the attractive
offer for companies, workers and the state.

Schleswig-Holstein is the only German federal state which chose an

innovative solution for regulating gaming companies. Besides, it also has a
valid law approved by EU, which allows for gambling and online poker.
Companies that offer gambling online must pay up to 20% of gross profit,
which is a relatively low tax. It is estimated that revenues will amount to 200
million euros.

Draft of Schleswig-Holstein law:

Lack of market foreclosure;

20% tax on gross profit;

Licensed operators from the area of the European Union may obtain a license

Operators who would have applied for a license in Schleswig -Holstein are not
required to have their headquarters in the federal state, in another country of
the EU or in the Member State o f EEA. To get a license, it is sufficient that
the branch office is located in one of these locations, and the headquarters
may be located anywhere in the world. This certainly makes the German
market more attractive to all non-EU companies;

10
Smith E., Danish gambling license, available at:
http://www.pokerhistory.eu/history/major -changes/danish-gambling-license [accessed
August 10th 2014]

17
To calculate tax paid in Schleswig-Holstein, there must be taken into account
payments from players all over Germany, not just those living in Schleswig -
Holstein.

France

The situation in France has changed in 2010 . The government decided to

legalize poker. From that moment Texas Hold'em is legal in France, and the
players pay 34% tax on gross income, through higher rake. Each poker room
that wants to enter the market has to apply for a special license granted by the
ARJEL commission. Since the legalization, a lot of poke r rooms already
received licenses, so the French players have many to choose from. One
problem is that the French players can play tournaments and cash games only
with each other - for example on PartyPoker.fr or PokerStars.fr. Initially,
French sceptically looked at this changes - PokerStars has to introduce higher
rake because of licensing fees and costs. This led to the strikes. Players from
other countries regretted that the French will no longer play on the global
servers. Changes applied in France mad e that poker market began to develop
rapidly there. Licenses are obtained by more and more companies and online
poker boom also contributed to live poker. World Series of Poker Europe
moved to France and was played at Cannes.

Italy

Initially there were announcements that the government will protect citizens
against gambling and poker will be banned. However, in the end, it was
decided to legalize through government licenses. PokerStars has licensed
quickly.

At first, Italian players were unsatisfied bec ause they were allowed to play
tournaments with a maximum buy-in up to 100€. Cash games were prohibited.
After few months players were able to play tournaments up to 250€ and cash
games buy-in also up to 250€. Entry fee for cash game and tournaments
should not exceed 1,000€ in one session. Italian market, like the French,
developed a fairly rapid.

18
Table 2 include regulatory status of online poker in chosen countries. Poland
should not even be considered as in process of regulation.

R EGULATORY T AX IMPOSED ON T AX IMPOSED ON

C OUNTRY
S TATUS OPERATORS PLAYERS

11% on gross
B ELGIUM Regulated 25-50%
income

H UNGARY In progress 15% on turnover None

15% on net
C ZECH R EPUBLIC In progress None
income
20% on gross
D ENMARK Regulated None
income

E STONIA Regulated 5% on net income None

Poker winnings
outside EEA are
F INLAND Regulated None taxed and players
have to pay
normal income tax
34% tax on gross
F RANCE Regulated None
income
30% tax on gross
G REECE Regulated 10%
income
Regulated in
20% tax on gross
D EUTSCHLAND Schleswig- Not introduced yet
income
Holstein

G IBRALTAR Regulated Low and variable None

20% tax on gross

H UNGARY In process None
income
3% tax on
Low, already
tournaments
I TALY Regulated included in entry
20% tax on net
fee
income from cash

19
 cames

M ALTA Regulated Low and variable There is

H OLLAND In process Unknown None

No licensed
N ORWAY Regulated Around 30%
operators
25% from every
R OMANIA Regulated Not decided yet over 600 RON
won
From every won
S PANISH Regulated 20/25%
pot
None from EU
Local operators
sites, 30% tax on
S WEDEN Regulated pay 36% of
gross income
income tax
outside EU sites
15% tax on gross
G REAT B RITAIN Regulated None
income

Table 2 Regulations on Texas Hold‘em Online Poker over the world , available at:
http://resources.pokerstrategy.com/2014/03/06/Poker_Regulation_by_PokerStrategy.pdf
[accessed August 10th 2014]

Most successful regulations are these which do not put huge tax on players,
as for professionals they are critical about the EV of games. Some countries
restrict casinos to allow only their countrymen, which greatly lower turnover
of players, which in turn discourages professionals to play.

20
3. Taxation of Texas Hold‘em poker in Poland

3.1 Polish tax law

Poker is a game of chance in accordance with the law on gambling. Rules of

organizing games of chance is defined in the Act of 29 July 1992 On games
and mutual wagering (unified text: Journal of Laws of 2004, No. 4 pos. 27)
according to which "Gambling games are cash or in kind games, which, in
particular, depends on the luck, and the playing conditions are defined by the
regulations. "In accordance with the above regulations, such games are,
among others, black jack, poker, baccarat. ‖ (Article 2. 1 point 5) 11

In accordance with art. 2 paragraph. 1 item 6 of the above Act. The minister
responsible for public finances settle the decision , whether a game or a bet
with the characteristics listed in paragraph 1-5 are a game of chance, mutual
bet or slot machine, within the meaning of the Act.

It should be noted that the above regulation does not specify whether all
variations of poker is a game of chance. Against this background a dispute
arose as to the assessment of sport poker Ministry of Finance in the
interpretation concluded that the card game - poker sports (Texas Hold'em) is
a game of chance within the meaning of Art. 2 paragraphs. 1 point 5 o f the
above gambling law situation commented on the Supreme Administrative
Court in Warsaw, which held that, in order to take a position, whether the
above variation of poker is a game of chance and therefore whether or not the
regulations do not apply. All the above Act must appoint an expert to give an
opinion in this regard. The poker game should not be eligible for gaming
because it prevails element of skill and not random.

Notwithstanding the foregoing, the above mentioned regulations apply, unless

there is an explicit decision of the Minister of Finance issued pursuant t o Art.

11
Ustawa z dnia 29 lipca 1992 r. o grach i zakładach wzajemnych , Journal of Laws of
2004, No. 4, item 27, as amended.

21
paragraph. 6 cited above, law belongs to all varieties of poker and Gambling
Act. regulations apply. 12

The consequence of such a proposal is that playing poker is freely only i n

casinos, which meet all the above requirements of the Act. In accordance with
the requirements of the activity of cylindrical games, card games, dice games,
slot machines and slot machine games with low prizes, cash bingo and betting
may be conducted onl y in the form of a joint stock company or a limited
liability company, having established in Poland. The shares may acquire or
include legal persons or companies without legal personality, whose offices
are located on the territory of a Member State of the European Union or the
European Economic Area, as well as the natural person who is a citizen of the
EU or the EEA.

Legal consequences - financial organization and participation in the game of

poker without maintaining the rules under the Gambling Act

In accordance with Art. 107 § 1 of the Fiscal Penal Code: "Whoever, in

violation of the Act or the conditions of authorization arranges or conducts a
game of chance, game on the slot machine, slot machine game on low prizes
or mutual bet, will be punishable by a fine up to 720 daily rates or
imprisonment up to 3 years, or both penalties together. By contrast, Article.
107 § 1 of the Fiscal Penal Code provides that: The same penalty shall be,
who on Polish territory participates in the foreign game of chance o r foreign
mutual establishment."

Therefore constitutes an offense both arranging poker game in violation of

the law, as well as of and participation in the game. Subject to that
participation in the game outside Polish borders is no longer penalized. Tax
offense defined in Art. 107 § 2 can be committed in both forms of intent, and
it is also an offense formal. 13

In relation to online poker being played on servers registered outside Polish

borders, to the wording of the above provision must be assumed that, in

12
Kurzępa B., Kotowski W., Tyt. I dz. II roz. 9 art. 107, in: Kodeks karny skarbowy.
Komentarz, Kurzępa B., Kotowski W. (eds), Warsaw 2007.
13
Ibid.

22
accordance with the position of the Polish authorities in such cases, if the
player is in Poland, can be exposed to the above penal consequences.

Notwithstanding the above in the act of ga mbling Art. 82 there are provided
the financial penalties for a violation of applicable rules. For arranging
gambling without a license or permit - the amount of the fine will be 100% of
the revenue derived from arranged game; without the filing or registration,
without the required machine or device for the game; for arranging slot
machines outside of the casino game will be a fine of 12 000 zł from each
machine. Financial penalty will be incurred by the participant of gambling
game, which is without a license or permit, and its height is 100% of the
value of winning. As noted by L. Wilk "[...] in the light of the observations
of comparison of the provisions of art. 89 of the Law on Gambling and art.
107 and 109 k.k.s. there should be no doubt that there is practical possibility
of be punished twice or same natural person for the same act - once under kks
and the second time with a fine art. 89 Gambling Act. In practice, the
possibility of the confluence of these sanctions is more realistic in the case of
participating in illegal games than for their organization, as t he "arranging"
fine is usually imposed to collective entity and not a natural person. " 14

Arranging the game of poker is subject to tax . The tax base tax in the case of
poker games (where the casino is the organizer and the players play each
other) is a poker tournament held annually in the form of poker games -
winning amount less the amount of the entry fee for the tournament; (Article
73 paragraph 8 on gambling).

According to Article 71 paragraph. 1 of the law on gambling: "Taxable

gaming tax is a natural person, legal person or an organizational unit without
legal personality, which operates gambling on the basis of a license or permit
granted, entities organizing games covered by the state monopoly and
participants in the tournament poker games.

14
Wilk L., Financial penalties in the law on gambling , in: Prokuratura i Prawo 2011, No.
1, p 156

23
In addition, Art. 71 paragraph. 2 and 3WW. Act states that "The object of
taxation of games is:

1) The organization of games of chance, with the exception of promotional

lotteries and poker tournament being played in a poker game;

2) Participation in poker tournaments held annually in the form of the game

of poker.

3) The tax obligation on gaming tax arises on the date of beginning of their
business. In poker tournaments held annually in the form of poker games tax
obligation arises at the moment of accession to the tournament.

By contrast, Article. 73 cited above of the Act provides that "the tax basis of
games is:

1) in lottery money, lottery and telebingo -the total revenues from the sale of
tickets or other evidence of participation in the game;

2) audiotex lottery - audiotex lottery organizer revenue derived from the

lottery; games. The tax rate for the poker game being played in a tournament
game of poker - 25%; (Article 74 paragraph 4) for other varieties of poker -
50%;

Proceeds derived from poker (in the case of participation in the game by a
resident of Polish in the game outside Polish borders) in this person can be
taxed, unless the relevant international agreement provides otherwise

The result of the above regulation is that playing poker permitted only in
casinos is not profitable, nor for the organizers of these games or players. In
such a situation, Polish players participate in games online and outside the
RP. There are initiatives that this state should change. There were found
Parliamentary Group on Effective Regulatory Poker Game 15

15 Ferfecki W., Sejmowa rozgrywka o legalny poker, Rzeczpospolita 16.08.2013, available

at: http://www.rp.pl/artykul/1039353.html [accessed August 10th 2014]

24
There were also doubts about the compatibility of Polish regulations with
Article 56 of the Treaty on the Functioning of the European Union "Until the
entry into force of the Act, in Warsaw were held a regular poker tournaments
of international rank, including the European Poker Tour, in which were
involved up to four hundred participants, including players from the forefront
of world stars of poker. As a result of the introduction of the current
measures (including tax on winnings in the amount of 25%), Poland ceased to
organize any of international tournaments, while most of the existing players,
who play legally, according to the former provisions, participate in games
organized without permission. Tournaments held in casinos are a consequence
of purely local with a minimum buy-in (50 - 150 PLN), and the number of
tournament participants is symbolic, not to exceed 30 people at one time.
Changes in the legal regulations concerning the above matter seems to be
necessary and, therefore, all the desired

3.2 Ways to collect taxes from players

There are few ways how to successfully collect taxes from online gamblin g.
The most convenient method would done at the level of poker room. That
means every deposit and withdrawal is visible for government, and for
example once a year sum of winnings or loses would be counted, while
winnings would be subject of tax, deducted from balance automatically . It is
very convenient as country has very small to implement, and players do not
have to take any additional steps to pa y their gambling related taxes.

Another way is to restrict countrymen to use only familiar and most

cooperative payment gates. For example if Neteller would show as most
dedicated one, making processes simple to government and players – Polish
players would be restricted to use only this way to deposit and withdrawal
money.

Last proposal is to use existing or found new Polish Przelewy24-type of

company. That is service which allow for immediate payments from most of

25
Polish banks. It would be from scratch customized to make gambling
payments easier, tax included.

There is one more, but not so convenient method. Players could fill tax
returns yearly, but that would make more work for both sides. Expenses
would also be higher.

3.3 Income from taxation in Poland

Actually it is very hard to determine how much Poland would benefit from
Texas Hold‘em taxation. Author of this thesis have contacted around 10 poker
rooms with questions regarding number of Polish accounts, active players and
never received the answer.

I have also contacted Polish Ministry of Finances; they never conducted

survey nor research about possible incomes from taxation and how many
Polish players take part in illegal online gambling. Gray zones of that size
should be exploited immediately.

Happily, there are outside services, which collect nearly all of hands played
on few biggest poker rooms. Collected hands include: nationalities of players
taking part in hand, size of the pot, rake taken. Every hand is available to
view through their service, so it is convenient and reliable. For my
calculations I used biggest online poker database PokerTableRatings.com.

Looking at the Figure 1, in year 2010 PartyPoker had 6.12% of global market
share. The rest of the global market share stand for 93.88% after deducting
PartyPoker. 01.2013 - 11.2013 there were 10.115 Polish players, which
played on PartyPoker cash game tables.

1)

6,12% 10,115
[PartyPoker 2010 [Polish players on
-
market share] PartyPoker in 2013]

100%
- ?
[total market share]

26
 6,12% 10,115
[PartyPoker 2010 - [Polish players on
market share] PartyPoker in 2013]

100% - 165,278
[total market share] [Polish players in 2013]

In 2013 there were around 165,278 players from Poland, which still can be
underestimated as it stand only for around 0.668% of Polish adults in
productive age, data from 2011 16. On the other side, number of players can be
right but Polish player might play larger hand number than average player
worldwide.

,,We find that the worldwide 6 million players paid 3.61 billion US$ rake to
the operators in 2010.‖ 17

2)

3,610,000,000$
6,000,000 [total rake paid to the
-
[total players] operators in 2010]

165,278
- ?
[Polish players]

3,610,000,000$
6,000,000 [total rake paid to the
-
[total players] operators in 2010]

99,442,262$
165,278
- [Polish players rake paid
[Polish players]
to the operators in 2010]

From the calculations, Polish players could have generated over

99,442,262USD in rake only from playing poker.

16
http://pl.wikipedia.org/wiki/Ludność_Polski#Doro.C5.9Bli [accessed August 10th 2014]
17
I. Fiedler, The Market for Online Poker, Available at:
https://www.academia.edu/724198/The_Market_for_Online_Poker [accessed August 10th
2014]

27
These do not include Polish players: playing outside of Poland; using other
country VPN, having country hidden in PokerStars software, having country
changed in PokerStars software etc.

It is a shame that calculations of expected winnings of Polish pla yers, which

could be taxed, cannot be made. Although these approximate revenues show
seriousness of the situation.

28
Bibliography

Books and literature

Ferfecki W., Sejmowa rozgrywka o legalny poker, Rzeczpospolita 16.08.2013,

available at: http://www.rp.pl/artykul/1039353.htm l [accessed August 10th
2014]

Fiedler I., The Market for Online Poker, Available at:

https://www.academia.edu/724198/The_Market_for_Online_Poker [accessed
August 10th 2014]

Harlan M., Texas Hold'em for Dummies. New Jersey 2006. p. 12

Harroch R. D., Krieger L., Poker for Dummies. New Jersey 2000, p. 12

Kurzępa B., Kotowski W., Tyt. I dz. II roz. 9 art. 107, in: Kodeks karny
skarbowy. Komentarz, Kurzępa B., Kotowski W. (eds), Warsaw 2007.

Smith E., Danish gambling license, available at:

http://www.pokerhistory.eu/history/major -changes/danish-gambling-license
[accessed August 10th 2014]

Stradbrooke S., Experts: Online Poker “by no means relevant for money
laundering”, available at: http://calvinayre.com/2013/04/06/business/exp erts-
online-poker-by-no-means-relevant-for-money-laundering/ [accessed August
10th 2014]

Ustawa z dnia 19 listopada 2009 r. o grach hazardowych , Journal of Laws of

2009, No. 201, item 1540.

Ustawa z dnia 29 lipca 1992 r. o grach i zakładach wzajemnych , Journal of

Laws of 2004, No. 4, item 27, as amended.

Wilk L., Financial penalties in the law on gambling , in: Prokuratura i Prawo
2011, No. 1, p 156

29
Internet

http://en.wikipedia.org/wiki/Cardroom [accessed August 10 th 2014]

http://en.wikipedia.org/wiki/Rake_(poker) [accessed August 10 th 2014]

http://pl.wikipedia.org/wiki/Ludność_Polski#Doro.C5.9Bli [accessed August

10th 2014]

http://www.rga.eu.com/pages/en/gambling-in-the-eu.html [accessed August

10th 2014]

List of figures

Figure 1. Global online poker market share 2008-2010 ................................ 7

Figure 2 Samples over 5,000,000 hands with winrate 2,5BB/100 .................. 8

List of tables

Table 1. Hands played by Polish players ..................................................... 7

Table 2 Regulations on Texas Hold‘em Online Poker over the world ........... 20

30
31