Pulse

Polish Gambling Market: new reality – new opportunities

By Lewis - 29 April 2020

Marek Plota, Attorney-at-Law for RM Legal, a Polish law firm, discusses the Polish Gambling market including the license application process for offshore entities.

The broadest and, by far, the most significant amendment to the Polish Gambling Act from the time it was enacted on November 19, 2009, came into force on April 1, 2017. Since then, all online gambling games, excluding mutual bets and promotional lotteries, have been subject to state monopoly.

Currently, Totalizator Sportowy S.A., a state-owned company, is the only entity in Poland which legally offers online casino and card games. However, the most important change, allowing for the enforcement of the new law, was the establishment of the Register of Domains which lists domains that offer gambling games contrary to the Polish Act. This development has significantly contributed to the growth of the legal gambling market in Poland. Presently, the Register contains 8,995 domains and continues to grow. Since July 1, 2017, both websites of unlicensed operators and the related payment systems have been subject to blocking.

In fact, the introduction of the ministerial blacklist and associated blocking measures have resulted in many foreign companies leaving the Polish market altogether. Those who remained were promptly blacklisted and consequently blocked. Their response was varied with some deciding to go the license application route, while others are challenging the new legislation.

Prior to April 1, 2017 (i.e., the date of the amendment of the Gambling Act), it was estimated that over 90 per cent of the online mutual bets market in Poland was controlled by unlicensed operators who did not pay taxes in Poland. Currently, the market share of legal operators is approximately 60 per cent, with their revenues for 2018 exceeding EUR 1.2 billion, i.e., approximately 55 per cent more than in the previous year. The growth of the legal market is very dynamic, all the more so that the Polish government is highly motivated to increase revenues from the gambling tax.

LICENSE APPLICATION PROCESS

At the beginning of 2018, there were only seven entities licensed by the Minister of Finance to organise and conduct internet mutual bets gaming. Currently, 16 licensed bookmakers operate in Poland and four further applicants are going through the approval process.

Since Betclic obtained its license, increasingly more offshore operators have been queuing up. It is worth emphasising that, apart from the 12 per cent gambling tax they will have to pay, offshore operators will not be subject to income tax in Poland giving them a certain competitive advantage against bookmakers registered in Poland. Even without the long-awaited change of the taxation system, it is expected that new license applications will inevitably be filed with the Minister of Finance and that the total number of issued licenses will further increase.

Contrary to popular belief, it is possible for an offshore entity to obtain a license in Poland, as was proven by Betclic when it obtained the license in September 2018. All applications for granting a license are examined by the Minister of Finance. The relevant proceedings may last up to six months. However, the time limit is subject to extensions, often involving several additional months being added to the application process.

The application itself shall be accompanied by official company documentation (e.g., articles of association and financial statements), and information on the applicant’s business (e.g., website regulations, technical documentation of the website, or the consent of the sports competition organisers).

The license shall be granted for a period of six years, which may be subject to a one-off extension for the following six years. The fee for granting the license is approximately €100,000 for each website used for the organisation of mutual bets. The applicant shall also be required to provide collateral of €115,000 in cash or in the form of a bank guarantee.

REPRESENTATIVE

One of the key conditions for allowing offshore entities to provide gambling services in Poland is the obligation to appoint a representative or, alternatively, conduct their activity in the form of a branch office. Due to serious tax consequences of establishing a branch office, the appointment of a representative seems to be advantageous for foreign entities. The representative may be either a natural or a legal person conducting business activities within the territory of Poland.

The compulsory element of a license application includes documentation proving that the representative meets a number of formal requirements laid down in the Gambling Act. In practice, the role of a representative (after a license is granted) is to represent a foreign entity before the Regulator and authorities competent in the field of gambling games and gambling tax. In addition, the representative keeps relevant documentation in the territory of Poland, including records concerning the activities of the foreign entity.

According to market reports, the Polish online gambling market is estimated at EUR 1.2-1.7 billion a year. This market is currently divided between 18 locally licensed operators and one offshore entity. Considering the size of the market, there is certainly enough room for plenty more market entrants, particularly those providing a comprehensive and well-presented offer.