Much has been written about the likely impact of the impending increase in Remote Gaming Duty (RGD) on UK-licensed operators. As the Government looks to recover an expected £400m shortfall in tax revenue resulting from its pledge to slash maximum FOBT stakes from £100 to £2, it has its sights set firmly on the online betting industry.
At this stage, we still don’t know the exact percentage increase. Some experts predict that the duty, which currently sits at 15%, could rise as high as 25% and be brought in as soon as April 2019. Understandably, many in the industry, including the Remote Gambling Association (RGA), have serious doubts about the rationale, objectivity and likely implications of the increase.
Whatever the increase in RGD, with the sector coming under increasing scrutiny, and now a less appealing tax environment, operators may want to look at other territories to make up for the fall in profits that they’re likely to suffer in the UK.
But is the picture much different in other major markets around Europe and North America? As governments look to balance the books amid slower than anticipated economic growth in most regions, are they too looking to increase tax revenue from online gambling, and are they also looking to increase industry regulation to protect the vulnerable?
When it comes to weighing up the opportunities for entering or expanding in different territories, operators need to look at the size of the market and current trends within betting behaviour, as well as the existing regulatory and tax landscape.
As you will see from the list below, highlighted are some trends and likely developments in a few key markets. Across number of territories, there is uncertainty surrounding future or planned legislation and how it might impact upon operators.
Spain: operators looking to target a new market with huge potential for growth could do a lot worse than consider Spain. For a multitude of reasons, the market in Spain has remained relatively small, but the signs are that things are starting to change. Recent figures showed 14.5% year-on-year growth in sports betting, and a staggering 51% increase in casino and 42% growth in poker. The launch of a shared liquidity network with France will surely see the poker vertical grow further still.
Whilst Spain remains a relatively immature market with strict regulation, there is certainly an opportunity for more supply, hence why more operators have recently been allowed to apply for licenses. There is still a long way to go before Spain really scales up and becomes a big player at the European level. However, it can no longer be ignored.
Portugal: the Portuguese gaming regulator (SRIJ) opened a consultation into the country’s online gaming regulations in January, effectively putting the entire sector under review. The market up until this point has been stagnant, with regulation and high taxation rates making it very hard to drive any sort of margin through sports betting.
Experts predict the Government may lower duties and streamline the requirements to obtain licenses in an effort to open up the market to foreign investors in order to drive growth (and its own tax income).
Beyond this, we may also see the introduction of new categories and types of gambling into what up until now has been a very restricted market (only fixed-odds sports betting, mutual or fixed-odds horse racing and games of chance are currently available). The picture in Portugal is likely to change significantly over the next couple of years, and shrewd operators will be closely monitoring developments.
Germany: With the licensing debate still on-going, this creates much uncertainty around processing, especially in the wake of recent developments surrounding online casino, which led to a few high-profile operators pulling out of the market. Despite this, the German market still remains lucrative and is one of the largest in Europe.
Sweden: the Swedish government recently published its revamped national gambling policy, which will place a greater emphasis on consumer protection. The new legislation will also open a licensing window for online gambling operators, with the application process beginning on August 2018 and the new regulations coming into force on 1st January 2019.
New Swedish online gambling incumbents will be taxed at 18% gross gaming revenue charge, with the government placing no taxes on consumer play or winnings.
Now that there is clarity over the new regulatory framework, it is definitely an attractive proposition for operators. Of course, that means that competition for licenses and share of wallet is set to become even fiercer.
United States: as has been widely reported, we’ve seen two US states (Delaware and New Jersey) take their first legal sports betting transactions over the past few weeks. Other states that have already passed legislation, such as Nevada and Pennsylvania, are likely to follow soon.
Analysts have predicted that the sports-betting industry in the US could generate at least $7bn annually. Already we’ve seen UK operators applying for licensure in New Jersey, and this trend is set to continue as UK operators eye up what could well be the biggest opportunity in online gambling for several years.
Of course, each state is different, with its own regulatory and tax framework, so operators need to assess the opportunity in each state individually. Some states will take longer than others to become regulated. Given the populations of larger US states, it’s highly likely that over the coming years the US will become one of the most attractive markets for sports betting operators.
Evidently, the sheer scale and pace of change occurring within many territories offers operators new opportunities for growth and expansion. In an increasingly turbulent regulatory environment, operators need to ensure that they have the agility to react quickly to what is happening in any given market. The online gambling industry has always been characterised by constant change, but you get the sense that things are about to speed up a whole lot more!!