Germany: Poker – a game of skill?

In a ruling of 31 October 2012, the Finance Court Cologne (Az. 12 K 1136/11) found that poker is not a game of chance but rather a game of skill.

The plaintiff is a professional poker player who was ordered by the financial authorities to declare his winnings and to pay taxes on them. Under German law, winnings made from a game of chance are not taxable. The authorities argued that poker is a game where the outcome can be determined by skill and that due to the fact that the plaintiff played professionally, he conducts a trade (i.e. non-professional players are not required to pay taxes on winnings). The Finance Court Cologne followed that view, comparing poker with a sport. Interestingly, the court argued that it is not decisive whether the ability to win depends on luck with respect to the average player. It is, however, significant whether a specific player is able to influence the outcome repeatedly due to his skills. Seemingly, the finance court uses a subjective definition of what constitutes a game of chance. Since the reasoning of the decision is yet to be published it is not possible to comment on this in more detail. The decision can and will most likely be appealed by the plaintiff.

The decision is in clear contrast to a ruling of the Federal Court of Justice (Az. I ZR 93/10) and several administrative courts which held that poker, in particular in the Texas Hold’Em variation, is a game of chance in the meaning of German gambling regulations. For the time being, it is therefore unlikely that the gambling authorities will change their stance on poker as a game of chance. However, operators should watch the proceedings before the Finance Courts closely as they may provide additional arguments that poker does not qualify as a game of chance. Also, the question whether professional players are required to pay taxes on winnings may have a commercial impact on operators.