Poland – NIK on supervision over the gambling market

Following the amendment to the Gambling Act of 2016, theMinister of Finance and the National Treasury Administration authorities supervision effectiveness over the gambling market in Poland has increased. The changes also had an impact on reducing the grey area in the environment of gambling games, including those organized via the Internet, as well as increasing budget revenues from gaming tax.

According to forecasts, these revenues were to be even higher if it wasn’t for the delay in starting slot machine games outside the casinos. NIK emphasizes that despite these changes, Poland is still struggling with illegal gambling. Over 25 thousand penalties were imposed in three years amounting to nearly PLN 750 million for entities organizing gambling without concessions and permits, and nearly 63,000 illegal slot machines were secured. Moreover, according to the Ministry of Finance, the value of the illegal online bookmaking market is still higher than the legal one.

The amendment to the Gambling Act entered into force on April 1st, 2017. New tools have appeared to limit access to illegal games. The amendment introduced the state monopoly on slot machine games outside casinos, as well as on arranging online gambling, with the exception of betting and promotional lotteries. The state monopoly was entrusted from April 1st, 2017 to the company Totalizator Sportowy sp. z o.o. owned by the Treasury.

From April 1st, 2017, an official registry of Internet domains that offer gambling illegally has been introduced. Entries in the Register are subject to the names of internet domains used to organize gambling games without a license, without a permit or without filing the notification required by the Act, which are addressed to recipients on Polish territory. A specialized organizational unit of the Opole Customs and Tax Office, which deals with fighting crime in the IT environment, identifies illegal internet domains and gathers evidence. The register of banned domains is public, available and maintained by the Ministry of Finance (at: hazard.mf.gov.pl). As of December 7th, 2018, the minister competent for public finance disclosed almost 5,000 illegal internet domains used to organize gambling (as of 26.08.2019 there were already 7 140 illegal domains in the Registry).

From July 1st, 2017, telecommunications companies are required to block domains entered in the Register and to redirect connections to such domains free of charge to a website maintained by the Minister of Finance, which contains a warning about the impending criminal liability of a participant in illegal games and a list of entities legally offering games. On the other hand, payment service providers are to prevent payments on websites entered in this Register. Website blocking and payment blocking are common tools used by EU Member States to combat the grey area in the online gambling sector.

Although NIK positively assesses the introduction of the Registry, the phenomenon of the so-called “Clone domains”, which are domains whose content and operating principles are the same as other, already identified domains, with a similar name to services already entered in the Register, differing only in name (sometimes even one character). “Clone domains” are available to Polish players until they are registered, which reduces their effectiveness in blocking illegal gambling and inhibits the reduction of the gray area. In the sample examined, 47 domains were entered in the Register after 9 to 57 business days from the receipt of the case by the Ministry of Finance. NIK pointed out the need to search for legal and organizational possibilities ensuring shortening the time of inclusion of these domains in the Registry, while maintaining high standards of identification and security of evidence. The correctness of making an entry in the Register is subject to control by an administrative court (the legislature provided for the possibility of objecting to an entry of a domain name in the Registry).

The head of the Opole Customs and Tax Office monitored whether telecommunications operators block domains entered in the Register, and whether payment service providers comply with the ban on providing such services on sites using domain names entered in the Register. As at October 15th, 2018, the head of this Office submitted in 34 cases to the Ministry of Finance files regarding non-performance by telecommunications undertakings of the obligation to block Internet domains entered in the Register and files 7 cases regarding non-performance by the payment service provider of the task of blocking payments on websites entered in the Register. The Minister of Finance initiated 20 proceedings against telecommunications companies and payment service providers, and 4 proceedings against payment service providers. The files of other cases were sent to the Customs and Tax Office in Opole in order to supplement them. Out of 6 proceedings examined by the Supreme Audit Office, none was completed.

During the audit, NIK revealed the lack of sufficient powers of customs and tax offices to control whether and how telecommunications companies and payment service providers fulfill the obligations set out in the Act on gambling. It turns out that by designing the amendment to the Gambling Act in 2016, which imposed obligations on telecommunications undertakings and payment service providers, it did not foresee the introduction of provisions authorizing the then Customs Service to control compliance of these entities with the obligations set out in the Gambling Act. The lack of these rights had an impact on the effectiveness of the instruments introduced. The necessary changes came into force only on January 2nd, 2019.

The reduction of the gray area of ​​gambling was one of the amendment to the Gambling Act objectives. According to analyzes of the Ministry of Finance (Department of Sector, Local and Game Taxes), in 2018 the estimated value of the market (legal and illegal) of online betting (bookmakers) amounted to nearly PLN 7.9 billion and increased by 4 compared to 2015, PLN 5 billion.

In recent years, the growth dynamics of the legal online bookmaking market value has been higher than the illegal market of these bets. The value of the legal online betting market increased from just over PLN 543 million in 2015 to PLN 3,878 million in 2018 (seven times), while the value of the illegal market increased from PLN 2,822 million in 2015 to over 4,007 PLN million in 2018 (by 42%). During this period, the share of legal online betting in the entire market also increased (an increase from 16% in 2015 to 39.5% in 2017 and to 49% in 2018). Although the greay area share in the online bookmaking market has clearly decreased in Poland (due to the higher growth rate of the legal market), the value of the illegal online bookmaking market still exceeds the value of the legal market.

In 2017, gaming tax revenues amounted to PLN 1.64 billion (16.6% higher than in 2016) and were lower by 4% from the forecast adopted in the budget act for this year. In turn, revenues for the entire 2018 amounted to PLN 1.9 billion (16% higher than in 2017) and were lower by 0.6% from the forecast included in the budget act for this year.

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