Poker Sites Exit Portugal Following Regulatory Developments

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Monday, July 6th, 2015 | Written by Lucy Brown

On June 29th, Portugal implemented the first phase of its regulated online gambling expansion plan by introducing a new legalized iGaming framework designed to welcome foreign operators to the country, whilst breaking the state lottery´s monopoly over its gambling market. The plan involves allowing foreign operators to apply for Portuguese licenses in September in return for them paying a fee plus between 15% and 30% of their gross gaming revenues (GGR). However, there are already signs the Portuguese government may have overplayed its hand as ahead of the license application process a number of major operators have announced their withdrawal from the market, with many indicating that the punitive tax rate makes their future return financially unviable. This includes such major players as PKR and William Hill, although the latter has also expressed hope Portugal may rethink its regime, with a company statement saying:

“William Hill will officially stop providing its online gambling services to customers currently residing in Portugal and Estonia. [But are] confident that we will have the opportunity to work together in the future.”

Exodus Ahead Of License Application

Other operators to withdraw from the country include Party Poker, which never gained any traction in the Portuguese iGaming space in the first place, and PKR which also sees a lack of potential and so said it would not return. While the Amaya owned sites of PokerStars and Full Tilt Poker have recently withdrawn and given instruction for affiliates to stop marketing Amaya products in Portugal, the move should be interpreted as Amaya taking steps not to jeopardize its licensing process ahead of its September application. As a PokerStars email to its Portuguese affiliates explains:

“[We] fully expect to apply for a license in Portugal so that we can provide a fun, safe and competitive environment for Portuguese consumers to enjoy online poker.”

In the meantime, operators such as Betfair, 888 and Bet365 have yet to announce their intentions, although it is likely they are currently assessing who will be left in the future regulated iGaming market before deciding their potential market share and whether obtaining a license will be worth their while. Similarly, the country’s principal affiliate site, Portugal PokerPT.com, has stopped all of its poker room promotions until a clearer picture emerges as to which internet site will still be around by the year’s end.

Most Newly Licensed Sites To Quit Within A Year

The biggest worry for international operators is the extortionate tax rates they will have to pay, especially considering Portugal currently has a ring-fenced market of just 10.5 million people. Casino and poker companies, for instance, will find themselves subjected to a tax rate of between 15% and 30% depending on their yearly incomes, while sports betting businesses with less than €30 million in turnover will be taxed at 8%, after which that rate will increase to 16%. Needless to say, such levels are likely to make many operations wholly unprofitable, similar to the situation which currently exists in France, and consequently a recent PricewaterhouseCoopers report concluded that the punitive tax regime will likely see as many as 80% of newly licensed companies quit Portugal within their first year.

Poker Players To Be Affected Too

It’s a pity Portugal seems to have learned nothing from studying the French online poker industry and the devastating effect its high tax regime has had on the country’s online poker industry. In fact, Portugal now seems intent on committing the very same mistakes which landed France in its current predicament, although to date Portugal has shown little appetite for taxing the actual players themselves. What will inevitable occur, however, is that online poker operators will simply pass on their higher costs to consumers by imposing higher levels of rake, whilst also limiting player promotions and benefits.

Furthermore, a number of other measures added to the new licensing rules are likely to further create an uncompetitive poker environment. These include no cash prizes or tournament entries via freerolls, no late tournament registration after three levels of play, as well as all tournament having a minimum of six players around the table, and the banning of HUDs and hand history storing software. Inevitably, such extreme requirements will lead to Portuguese players continuing to play on unlicensed offshore sites, resulting in a similar situation to France or Spain where almost 50% of online poker takes place on grey market sites.