Russia May Soon Legalize Online Poker
by Robert Carmona-Borjas
In what may prove to be the multi-billion-dollar online gaming industry’s biggest change in a decade, Russia appears to be ready to finally let its estimated 20 million poker players legally compete on the internet. Russia is considering declaring poker predominantly a “game of skill” and requiring online poker operators to be licensed and regulated under Russian law. Although the timing of these measure remain uncertain, observers believe the move could come within months.
For non-gamblers, this may seem a retrograde step — back to the shadier, no-holds-barred days when poker first moved online. Scandal after scandal involving poker websites led to the first significant attempt at policing the industry, the US Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).
The UIGEA made financial transactions related to online gambling effectively illegal for US citizens, destroying a third of the global online gaming industry in a single stroke. The law also erased $7 billion in market capitalization from the London Stock Exchange, where major gaming operators had listed their shares.
Far from being a step backwards, Russia’s current move builds on what others have learned since UIGEA. Moscow plans to license, regulate, and tax online gambling operators. Russia has seen the future and decided to embrace it, at least as far as online gambling goes.
But why is this good news? Think of how Prohibition, the US’s nationwide ban on alcohol between 1920-1933, turned a large proportion of the American population into criminals, simple for consuming something they wanted. During that period, non-alcohol related crime used popularly-supported but illegal liquor sales as a cover for larger, more socially damaging crimes.
Pavel Sychyov, a member of Russia’s Kremlin-appointed Civic Chamber, says Russia’s current ban on poker has simply driven the activity underground. “We are trying to counteract the illegal online gambling, but we understand that it is very difficult to control the Internet in principle,” he said recently.
Members of Russia’s legal community appear to agree. Evgeny Korchago, chairman of Starinsky, Korchago and Partners law firm, says a state ban on anything (including gambling) usually just transfers the banned activities from the legal field into a shadier and even less regulated sphere.
Poker players agree too. Maxim Katz, an internationally known professional poker player and now a Moscow municipal councilor, says the Russian authorities need to create conditions which allow operators to make a profit and secure tax revenue for the state. Without these measures, online poker is likely to follow its real-world counterpart after it was made illegal.
“In particular, poker went underground after the ban,” he said recently. “The game did decline, but not for long. And the (national) budget stopped receiving taxes.”
If roughly 16% of a nation’s adult population, according to a poll by the All-Russia Public Opinion Research Center (VTSIOM), likes to entertain itself through a currently illegal but essentially harmless activity, it usually means that segment of the population will somehow find ways to engage in that activity anyway.
In this instance, the law encourages use of the internet cloaking system TOR or some similar means of hiding from official scrutiny. There have already been moves in Russia to ban the use of VPNs and TOR. A Russian parliamentary committee has proposed legislation to do this, with support from local pressure groups. But the pressure to enforce a blanket ban on web anonymization will be greatly eased if ordinary poker players can play safely and legally through the regular internet.
Secondly, Russia’s move marks a major step towards international acceptance that poker is a game of skill, and not a game of chance. As former New York Senator Alfonse D’Amato wrote in 2011, “Congress knows that poker is a game of skill. Congress knows that playing games of skill in American homes needn’t be outlawed. And Congress knows that, since poker is a game of skill that is legal in the home, it should be legal to play it online.”
D’Amato’s former colleagues in Congress haven’t gotten around to implementing this view. But legislators in several states, including Nevada, Delaware and New Jersey, have made moves towards legalizing online poker. It’s increasingly dawning on other jurisdictions in the world that it’s better for governments to license, regulate and tax online poker operators and their customers than it is to treat them like criminals.
Gradually, online poker is turning into a legitimate, transparent business.
This is a ongoing process. Legalization in Russia is proving much slower than was originally anticipated six months ago when Igor Shuvalov, the nation’s First Deputy Prime Minister, began the process, apparently with the Kremlin’s blessing. Plenty remains unknown about Russia’s plans.
After a meeting with Russian Finance Ministry officials in August, Marina Bludyan, chairwoman of the public council of the Poker Enthusiasts League, said international operators will be required to maintain data servers in Russia and prohibited from exporting the data to servers outside the country. “Thus, they will be accountable to Russia’s Federal Tax Service, and other sites which have not been registered will be considered illegal,” she said.
That will take time — and, presumably, some difficult negotiations. There is some expectation that players will need to supply full financial and personal tax details in order to be allowed to play. That too will be controversial. There is clearly debate taking place inside the Russian government on how legalization should be implemented.
Russian poker fans are still confident that change is on its way.
“In my opinion, conceptually the decision to legalize online poker has been already made by the Russian government.” says Alexander Zakondyrin, a Moscow politician and lawyer. “As early as June 2014, Shuvalov instructed the Ministry of Economic Development and the Ministry of Justice to prepare a report on such a project’s prospects.”
Zakondyrin points out that online poker has been legalized in the UK, France, Spain, Canada, Argentina, several US states and parts of Germany. Despite current legal restrictions, Russians are heavily represented on foreign poker sites, with Russians accounting for 8.4% of players on the biggest site, PokerStars.com, he says.
“Russians play poker, but their money goes abroad,” Zakondyrin said by email. “In the crisis situation, low oil prices and sanctions against Russia, which excludes the use of foreign debt markets, Russia’s budget needs additional income.”
One of the big attractions of online poker legalization inside of Russia is the possibility of allocating at least some of the resulting new tax revenue to amateur sports development, especially for children. These kinds of benefits from online poker may, in the end, even convince American legislators to change their view, paving the way for a more liberal approach to online gambling in the US.
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reposted by Chandler Bator