ICE, the largest gambling trade show in the world, is taking place this week in London. As always the event kicks off with ICE Vox, which combines conferences on important industry topics such as the future of land-based casinos, payments, betting and, of course, regulation of online operators; and it is that last topic that is the theme of this week’s column.
Three of the early panels at the ICE Vox World Regulatory Briefing, to give it its full title, caught this reporter’s eye. Regulators from major markets started the day’s discussion panels by highlighting the key trends, products and technologies that are likely to impact their work in 2024.
Reducing rates of problem gambling, paying close attention to marketing levels and fighting off illegal operators in markets as diverse as South Africa, the Philippines or Malta, were all put forward as key priorities by the different regulators.
The next discussion covered gray markets and how far unregulated operators could push the envelope in light of recent industry consolidation, more markets regulating, the European Commission raising its money-laundering threat levels for online gambling, and governments ramping up resources to try and stamp out illegal operators.
In many ways, that panel was one of the best illustrations of the regulatory tensions at the heart of the online gambling industry. In most legal markets and whatever the region, there is a mixture of regulated and unregulated operators (along with the suppliers providing them with their platform, odds, trading or casino technologies) vying to grow their market share; and listening to the panel shone a spotlight on how all these factors interact and feed off one another to produce the online gambling industry that we see today.
Share it fairly, but don’t take a slice of my pie
As moderator, Ismael Vali, founder and CEO of the regulatory intelligence platform Yield Sec, said the “point of gambling is (to make) money and in many markets there are always legal and unregulated operators” because, for the latter, it is much easier to generate profits by operating without a local license.
As an example he pointed to the Hungary market, which, he said, was a market that ties its online model to land-based casinos and according to his company’s research: “There are 244 illegal operators, 221 affiliates promoting illegal websites and 93% of the (online) market is illegal” as a result of regulations that tie online operators to a limited number of offline resorts. And in common with most other regulated markets, Hungary has few ways by which it can prevent illegal websites targeting their players.
Vali then asked the panel if “gray was just another shade of black”, to which James Scicluna, partner at the Malta-based law firm WH Partners, unsurprisingly replied: “It varies from one jurisdiction to another, whether we’re dealing with local and national licenses, where the contract is signed, what the law says and the policy approach from governments.”
The reason Scicluna mentioned those issues is that Malta licenses many operators that target European regulated markets from its shores. He added that Hungary was an example of an “individual market that doesn’t comply with EU law” and had set up regulations that are so restrictive for licensed operators that it becomes a highly attractive market for unlicensed operators to target.
Scicluna added that if consumer demand for certain products is not met by regulatory frameworks that are too restrictive in what they allow, then inevitably unlicensed operators will be only too happy to fill the vacuum with offers that pay no attention to those restrictions.
To which Vali replied rhetorically but, one has to admit, accurately: “If there is a jurisdiction that requires a specific license and operators have exclusive access: if illegal operators come in (and target the market), how is that legal?”
I’m free, to do what I want any old time
Hillary Stewart-Jones, who as a longstanding gaming lawyer has dealt with many of these issues and is currently advising the Curaçao authorities on reforming their iGaming regulations, said: “There are two elements of black markets, you can look at Turkey where it’s being used by criminal interests or you can dance on a pin of the EU freedom of movement argument.”
It’s worth recalling that many of the unregulated operators currently targeting Europe’s major markets are based in Curaçao, while as mentioned European jurisdictions like Malta have also long regulated operators that target major European markets from the island.
Alexandra Costello, VP of Government Relations at the American Gaming Association, noted that the U.S. system is much simpler. “If you don’t have a license to operate in specific states you’re illegal.”
Costello said this doesn’t stop illegal “offshore sites operating outside the U.S.” from targeting the market, especially in the states that haven’t regulated sports betting, while unregulated online casino operators continue to generate substantial revenues from North America generally – and, with the spread of regulated gaming, confusion among consumers about which sites are legal or not has also risen.
Stewart-Jones made the point that “it’s better to regulate than do nothing. Also, customers can’t be saved from themselves. It doesn’t matter if the site (they play on) is regulated or not, the more you regulate, the more you cooperate with the industry. In addition, if the sector is regulated the higher the consumer protection levels and policing activity to flag up illegal operators”.
Fade to gray
As outlined by the panelists and their peers at previous conferences, the issue seems fairly clear cut. The reality, however, is a lot more nuanced and gray, no pun intended.
The list is also far too long to mention, but looking at every regulated market, and every major operator or supplier in the industry, you will see companies generating substantial revenues from markets that most observers would consider to be illegal. That is not meant as a judgment on their activities. This reality has been with the market since its earliest days and is not going to change anytime soon.
Industry executives, regulators and lawyers will continue arguing over the details for many more years to come. The bottom line, however, is that the situation will not change.