French Online Poker Market Needs an Overhaul

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Tuesday, March 7th, 2017 | Written by Stephen Smith

France legalized and began regulating online gambling back in 2010, and since then the industry has seen some successes and some tribulations. The latest numbers from France’s gambling regulator, the Autorité de régulation des jeux en ligne, or ARJEL, provide a clear illustration of this.

Sports Betting Up 18%

The figures show that sports betting continues to drive the online gambling market in France, with the vertical generating €532 million in gross gaming revenue during the final quarter of 2016. That’s an 18 percent increase over the numbers produced for the same period in 2015, and the second highest posting of revenues since regulation began.

Online Poker Falls Slightly

While sports betting had a great quarter, online poker does not have as much to celebrate, with ARJEL reporting that gross gaming revenues from internet poker declined again. That marks 21 months of steady decline for the sector, although a small silver lining is that the market appears to be declining at a rather slower pace. Gross gaming revenue for online cash games in Q4 of 2016 was only 0.4 percent lower than the numbers for the last quarter of 2015, while tournament fees also declined by 2 percent during the final three months of 2016.

Identifying the Problem

There are a number of reasons which might explain why online poker has struggled in France since its launch. ARJEL officials, for instance, have blamed the game itself for not being as popular as it once was, and while this is true, other markets are not experiencing a continuous steady decline in the same the way that France is doing. Clearly, something else is at play.

High Tax Rate

Industry insiders point to France’s gambling regulations as the problem, as the country has one of the highest rates of taxation, with online operators having to pay 37 percent of gross gaming revenue to the government in order to maintain their licenses. On top of that, France is one of the few countries to tax online cash game pots, with every pot taxed 2 percent, in addition to the rake mandated by European Union laws. This means that French players end up keeping less of their winnings than players in other European countries. Overall, the high rate of taxation for operators makes doing business in France expensive, making smaller operators less likely to invest in site improvements, marketing and gaming expansion, and therefore leading to reduced interest among players.

Low Liquidity

Liquidity is also a major problem for the French online poker market. France has a population of about 66 million, making it one of the more populous countries in the European Union; however, sites have struggled to remain good average daily liquidity rates. ARJEL is hoping to change that in the near future by partnering with European neighbors to form liquidity sharing arrangements, and reportedly, France has been in talks with the United Kingdom, Italy, Portugal and Spain to develop a player-sharing system that would increase online poker liquidity across all five countries.

Representatives of the European regulators have expressed a desire to have a player sharing compact signed in 2017. There are some doubts that this will be possible though, due to the dramatic differences between France’s taxation methods and those of the other countries in the compact.

Tax Reforms

Against this backdrop, last month two French MPs delivered a report to the French Parliament calling for an overhaul of the country’s gambling taxes, including in the online arena. One of the proposals made by MPs Régis Juanico and Jacques Myard is that online operators should be taxed on gross gaming revenues, and not based upon a percentage of their business’s turnover. Even this simple suggestion has the potential to smooth the way for merged player pools with other regulated EU countries to take place.

France will have to act fast if it is to bring its online tax system in line with other regulated jurisdictions in time for an anticipated shared iPoker liquidity agreements by mid-2017. Nevertheless, it will represent a huge step on the way towards making its online poker industry a more competitive and attractive market, as well as stopping the flow of online poker players to unregulated and unlicensed sites.