PokerStars: Battle for Important ‘Grey’ Markets

PokerStars' withdrawal from numerous grey markets some weeks ago is now old news. In our article on the topic, we mentioned that the financial impact of this step by the company shouldn’t be that big. Most of the countries listed most likely do not produce a great number of players, and although the list is long, some of the countries were excluded just as a precaution.

However, there are certain countries that belong to the ‘grey’ area that are of much greater importance for PokerStars’ financial standing. The two markets that come to mind immediately are Canada and Australia. Both of these have rather unclear laws when it comes to online poker, and now that PokerStars have decided to introduce casino games and sports betting on a global level, the situation could become even more complicated.

Canada

Laws pertaining to online gambling in Canada are quite complicated. For the most part, online operators offering their services to Canadian residents and operating from the outside are fine. However, owning and operating an online gambling business from within state borders is not legal. Ironically, many of the servers for the offshore companies are located within Canada's borders on the Kahnawake native reserve.

The trouble for PokerStars is the fact that new owner Amaya Group is a public company registered in Canada. Although initial statements following the purchase reassured the Canadian customers that there would be no significant impact or big changes, a deeper look into legal issues suggests otherwise.

Amaya is a publicly traded company and their utmost priority is keeping their investors happy. Not only that, but there is also the fact that their legal responsibilities toward those investors is a very serious matter. One thing noticable at the bottom of the latest PokerStars press releases is a sort of disclaimer for future expectations mentioned within the release itself. This is a novelty that made its first appearance after the purchase and is directly linked to the legal responsibilities toward the investors that came into play with the transaction.

All this considered, there is little to suggest that the Canadian government will be taking any decisive legal action against Amaya. A good argument for this is that the Kahnawake Gaming Commission has been issuing gambling licenses for years and the government has done next to nothing to stop it. This Mohawk reserve maintains that they are a sovereign nation and, as such, they do not believe they have to abide by state laws. Although the government could easily put a stop to this, they haven't shown any real desire to do so.

In this light, there is little to indicate that PokerStars will be forced to leave the Canadian market. Combined with the earlier statements about their intention to continue offering services in the country and the size of the customer base there, it is hard to imagine the company will fold without putting up a fight. But there is a caveat in the plan now that wasn’t there when the initial statement came out.

This caveat has a name: UK Gambling License. One of the stipulations for acquiring and maintaining the right to offer online gambling is explaining a company’s presence in any and all grey markets. It was particularly the UK license that hastened PokerStars' withdrawal from the smaller grey markets, but the legislation does not exactly make a distinction between important and less important grey markets. In fact, legislators are more interested in the markets that bring 3% or more of total revenue.

When it comes to Canada, Amaya and PokerStars are in a very peculiar position. On the one hand, Canada makes up a big percentage of online players, especially since numerous U.S. players found their home away from home there after Black Friday hit.

On the other hand, if pressed hard by UK regulators, they may be forced to make a very difficult choice. The United Kingdom is, no doubt, another huge market – one that the company would hate to leave. If push comes to shove, what will the decision be? PokerStars had no problem moving out of numerous small markets, but Canada is a whole different kettle of fish. This is one decision that Amaya would love to avoid, if at all possible.

Australia

Online gambling in Australia is regulated by the Interactive Gambling Act (IGA) of 2001. The IGA regulates and handles gaming differently than the Canadian laws. Operating and offering online gaming from Australia is perfectly legal, as long as the services are not offered to local citizens. The regulation does not prescribe any type of punishment for the players – only the operators can be held accountable.

Advertising online gambling is also prohibited according to the IGA. This ban extends to all forms of media, from electronic to print.

These stipulations leave little doubt that Australia is, at the very minimum, a grey market, and leaning well toward the black area. The only reason that the activity of online gambling sites in the country continue without any real restrictions lies in the fact that the government does next to nothing to actually impose the fines stated within the IGA.

Reluctance to impose fines, combined with the fact that the government is not proactively doing anything to stop outgoing transactions toward the online sites, indicates that Aussies might not be as against online gambling as stipulated in the regulations.

However, laws are laws and this is again a situation that could create serious problems with the UK license – even more so than the company’s presence in Canada. Amaya could also (although this is purely speculation) be facing some heat from their investors about Australian online operations. Although they’ve been operating and marketing there without any obstacles so far, nearly everything that is happening is basically against the law.

One could argue the only reason that Black Friday has not happened in Australia yet is the fact that the Australian government does not have such a big reach and could not halt the operations of the biggest online providers overnight as the U.S. authorities did.

There are also strong forces working toward regulation in Australia, so that balance could also be the reason why the current operators are left alone. As for PokerStars, they have quite a big presence offline in Australia, so it is, again, a market they would not like to sacrifice.

Australia clearly leans more toward the black market area. This could mean that Amaya investors could be pushing hard for withdrawal, especially if they are not familiar with all of the intricacies of the online gambling presence there. Although this may seem like a stretch, the investors do not always go digging that deep into the facts and may be very reluctant to continue investing in a company operating in such a ‘risky environment.’

As for the UK license, the part referencing ‘explaining presence in these markets’ could play a pivotal role, as it is open for interpretation to a certain degree. If the regulators really went after them, this seems like a very clear-cut case from a legal stand point. While in Canada there is more wiggle room with Kahnawake and similar, Australian laws clearly stipulate that offering online gambling is not allowed.

In both these instances there are many fine points to consider, and even though it is a long one, this piece doesn’t cover all of these. It was my intention to create a general summary of the situation, especially considering the UK license and the fact that once they introduce the casino games and sportsbook, PokerStars will be no different than any other online casino (e.g. skill game arguments and similar can no longer be used even with its very limited value).

If you are interested in this topic further, there are plenty of reading materials on the web, including full texts of the laws and regulations, and different articles covering different angles of these issues.

Australian Interactive Gambling Act (latest revision)

UK Gambling Commission