Tax and Legal Issues

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Tax and legal issues

Tax and Legal Issues

For US citizens it is not completely clear whether or not playing online poker is legal. In practice, authorities are very lenient towards private individuals and no one has been charged for playing poker online.

On the other hand, there are no licenses for online poker rooms to be operating legally out of the US. The US authorities have also been very active in blocking out advertising opportunities for online poker rooms, despite any clear legislation backing up these policies. The US government has been sued for its allegedly unlawful practices of threatening companies taking online gaming advertising as they are not breaking the law.

The opponents to online gambling argue that it lead individuals to compulsive gambling and debt problems. Also the anonymity of online gambling makes it possible for under aged persons to gamble, for example, by using their parents' credit card. At a casino, there is greater control and it is much harder for under aged people to gamble. However, the argument falls quite flat as there are many offline venues offering gambling/wagering without much control and gambling problems have not proved more likely in an online environment.

Importantly, poker is clearly a game of skill, which sets it apart from most types of wagering and gambling. In traditional casino games, such as roulette and black jack, it is virtually impossible for the player to gain an edge to be a consistent winner. Poker, as a skill game, or sport, may well affect legislation concerning online poker. Nonetheless, the climate in Washington D.C. seems to be moving against online gambling. In October 2002, the US House of Representatives approved the Unlawful Internet Gambling Funding Prohibition Act (HR 556), which outlaws credit card usage, electronically transferred funds or other instruments used to pay for online gambling. During the last couple of years most major credit card companies, and also PayPal, have decided to block online gambling transactions. Instead, many people use the Canadian-based company NETeller. Transfer from NETeller to the poker rooms are instant and free of charge. Transfers from the poker rooms to NETeller are also free of charge, but it might take up to 72 hrs before the money is in the NETeller account.

For most European citizens it is legal to play poker online. If the poker room is operating with a European gambling license, any profit is completely tax-free for the European player. If the poker room is operated with a non-European gambling license it is not clear whether or not profits are tax-free.

A remote danger of playing online is the risk of the poker room going bankrupt and not paying out the players' holdings. A way to reduce the risks involved is simply to cash out often and then deposit again if needed. This is also incentive to play at the more established poker rooms whenever you are playing for any kind of serious money. The likelihood that one of the bigger poker rooms would be going bankrupt is very small, as the industry is highly profitable and if a player would face bankruptcy, it would naturally get bought up by an external party that would take over operations and honor player holdings.

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