In this review Slotegrator has made an analysis of how legislation affects iGaming worldwide, in particular, the way this kind of business adapts and reacts to the slightest changes in lawmaking, as well as what should be expected in the near future.

Article summary

  1. Worldwide gambling
  2. Legislative practice
  3. Different approaches to legislation
  4. Legalization of online gambling
  5. Development of certain areas of gambling driven by prohibition of the rest
  6. The outcomes of legalization of cryptocurrencies
  7. Taxation
  8. State monopoly
  9. Conclusion

Worldwide gambling

The iGaming industry has shown signs of sustainable growth. Year by year percentage of online gambling is increasing in terms of total revenue of iGaming worldwide. Back in 2014, the share of online gambling accounted for 8, 8%, while in 2015 this number increased up to 9,6%, followed by 10,9% in 2016.

Online gambling growth dynamics

According to the H2 Gambling Capital research group, betting prevails in the general structure of online gambling in 2016, followed by casinos, lotteries and similar types of entertainment.

The structure of the online gambling market in 2016

A study advisory group called Global Betting and Gaming Consultants (GBGC) has also conducted a comprehensive analysis of the industry of online gambling in 2016. Its results practically coincide with data obtained by H2 Gambling Capital: the most highly-sought gambling service includes betting with its share of 48, 5%.

For the past 10 years the popularity of betting increased by 3%. Moreover, during the same timeframe the share of online casinos has also raised: from 23, 1% in 2005 up to 29,2% in 2015. The share of lotteries increased only by 1-9% compared to the total share of gambling on the market. Online poker shows significant decline in popularity rates. During the last decade its share on the market decreased by two times : from 23,2% to 13,4%.

GBGC experts predict that by 2020 the total revenue of gambling operators will exceed $21 billion. At the same time, specialists from the company Casexe, a leading developer of gaming software and content, believe that the turnover from online gaming platforms increases by 8–10% annually.

Additionally, specialists point out that the increasing popularity of online betting and casino will remain as a trend in the near future. There are several solid reasons for the said tendency to last:

  • Gamblers and bettors are very content with the possibility of gambling remotely.
  • Rampant development of mobile technologies making gaming platforms and applications available worldwide.
  • In the majority of countries legislation is quite loyal to sports betting and sweepstakes, unlike to other types of gambling.

Legislative practice

Legislation is one of the main aspects influencing development of the current gambling market. Governments cannot ignore this type of industry that practically brings billions of dollars.

The total turnover of online gambling worldwide, according to the recent report by Yogonet, based on survey provided by data analytics company Juniper Research, is going to increase from $550 billion (2016) up to $950 billion by 2021. Numbers mentioned above are sufficient enough for the governments to start taking online gambling seriously.

However, a lot of legislators have completely different approaches to gambling all around the world. In Russia and practically in all CIS countries, for instance, gambling and online casinos are officially prohibited, as well as in some of the countries of Middle East, in the USA, Japan, China, etc. In some countries this type of entertainment is allowed, though restricted. The most condoning attitude toward games of chance is established in the European Union. Gambling is officially legalized there, however in some countries like Italy, France and Germany is strictly regulated.

In those countries where the access to gaming websites is prohibited, legislators are unanimous in their unwillingness to legalize gambling, despite of the fact that gambling is a very nice resource of state funding. In some cases such prohibitions are based on religious views, in some cases on safety considerations, in other countries it’s just one of the ways of fighting ludomania.

It should be noted that the market of online gambling is experiencing hardships due to its recent status and current instability. One of the biggest problems of the said industry is difference in gambling legislation in different countries. For instance, several countries permit commercial functioning of land-based casinos, as long as they contribute to development of tourism, however, they still put thousands of restrictions on online gambling. Among such countries there can be named: South Korea, Japan and Norway. The European Union doesn’t have enough legislative power to regulate the gambling industry as a whole, that’s why each country of the said union does it on its own.

However, it is getting harder and harder day by day to restrict and prohibit online gambling. Contemporary Internet technologies enable users to avoid blocking via VPN and get unrestricted access to foreign gaming platforms by the means of proxies. Additionally, implementation of international bank cards and payment systems permits free input/withdrawal of funds.

For this very reason in a range of countries crackdown on online gambling is brought to another level. In such cases legislators stipulate administrative accountability or even criminal sanctions for gamblers. For instance, in the United States responsibility is both on gamblers and online casino operators providing access to online resources.

Different approaches to legislation

Today there exist 195 independent countries in the world. More than 85 countries have already legalized gambling online, while the remaining 10 are still in the process of changing their legislation. In such a way, according to the data provided by KeyToCasino, an independent Internet portal, there can be distinguished two main approaches to gambling used by legislators worldwide:

  • In 17% of countries of the world online gambling is officially banned.
  • In 14% of countries local operators do not have the right to launch gambling websites; however it is still possible to place bets on international websites. This kind of situation is typical for undeveloped countries with weak economies, so that such governments simply do not have enough means for blocking access to foreign gambling platforms.
  • In 14% of countries online gambling is legalized, however local operators have to obtain a certain license from a local regulator. Foreign operators can accept bets having no local licenses.
  • In 13% of countries it is obligatory for gaming operators to get a license from a local regulator only.
  • In more than 40% of countries functioning of online casinos is not prohibited but requires licenses from any regulator.

Legal regulation of gambling in different countries of the world

Legalization of online gambling

Current demand for gambling online is continuously increasing. And this trend can’t be overlooked. That’s why year by year more and more governments and authorities of different countries are thinking about proper regulation of gambling. And such practices seem more effective than bans. For gambling operators such approaches open new markets worldwide and new prospects for expansion and growth of business. Already today some of the authorities of separate states in the USA are discussing current amendments to the local legislation, while in New York it is already decided to legalize online poker. According to expert opinions, Donald Trump and his victory on the US elections contributed to legalization of gambling in the country, as long as the said politician is said to have business interest in this industry. Moreover, in the near future there are expected some changes in legislation of Germany, Japan, India, Brazil. Each of these four countries is a very important market in its own sense. And when online gambling is going to be legalized in these regions it will become a huge step ahead for each of them. The total number of population in these countries makes up around 1,7 billion of people, which is very important for general development of this market.

Relatively recently regulators started issuing the following licenses:

  • In July of 2016 the Portuguese gaming regulator (SRIJ) issued a first license enabling online casino activities that encompass and comply with all the newly introduced rules of interactive gambling market. By summer of 2017 it was already its 8th license.
  • In July 2017 Columbia issued its first online gambling license.
  • In February of 2017 – Czech Republic Чехия.
  • Bulgaria and etc.

According to experts from Slotegrator, legalization of online gambling contributes to:

  • Clear delimitation of rights and responsibilities of all participants of the gambling market;
  • Protection of gamblers’ rights;
  • Development of legal business, transparent and clear relationships between all participants of the gambling market, upholding of marketability, improvement of quality of offered products and services;
  • Prevention of shadow economies and markets;
  • Integration of local operators into foreign and international markets;
  • Significant funding of the state budget from taxes;
  • Development of adjacent segments of business: tourism, sports, etc.

In its turn bans on gambling and bans lead to:

  • Appearance of different kind of approaches aimed at overcoming blocking, creation of mirroring webpages, implementation of anonymizers, VPN and etc.;
  • Registration of online casino websites on foreign domains;
  • Development of shadow markets and offshore banks that leads to uncontrolled flow of money.

Development of certain areas of gambling driven by prohibition of the rest

This is another trend that is getting huge popularity nowadays. Businesses are trying to adjust to current changes in legislation in order to meet the needs of contemporary gamblers. In the majority of countries where online casinos are prohibited, though betting is still available, fantasy sports is not considered to be gambling at all. That’s why betting offices and owners of betting terminals are using such a possibility in order to promote their businesses and attract the maximum amount of gamblers. A vivid example is the US where Fantasy sports is bringing billions of dollars to the state budget.

The outcomes of legalization of cryptocurrencies

A couple of past years have witnessed the rapid increase of Bitcoin-gambling. Bitcoin is a decentralized and anonymous type of cryptocurrency. Unlike ordinary money, this currency is not subject to different rules and limitations. Gamblers can withdraw or input their funds absolutely freely and anonymously. That’s why these types of transactions are gaining more and more popularity among gamblers worldwide.

Moreover, block chain technologies that are the cornerstone of any cryptocurrency, gain a very practical implementation in many other areas of commercial activities. For this very reason some governments have already legalized Bitcoins and the rest of cryptocurrencies.

Relatively not long ago a corresponding law has been introduced in Japan stipulating legalization of cryptocurrencies to be used in the gambling sector. The same tendency can be tracked on Malta too. Last year the British regulator known as the UK Gambling Commission, pointed out that Bitcoin can be used as one of the legal means of payment for online gambling in the United Kingdom.

All the major gambling operators have already started using this type of cryptocurrency. Gambling markets see this possibility as something that might lead to more transparency in financial operations based on the fact that block chain technologies are prone to strict calculations. Thus, each spin, turn of the roulette or each roll of dice can be tracked and recorded, thus calculated. It is practically impossible to hack such a system or falsify any type of data. On the other hand, such technologies are available for everybody so that any gambler can easily tell whether gaming portals are playing filthy games or not.

Taxation

Regulation of online gambling, for sure, contributes to development of the said sector of industry. However, on the other hand, this type of business is a subject to higher tax rates and operational expenses. Due to increasing expenses, gaming operators are trying to reduce taxes and their own expenses by all means. That’s why we can currently witness the process of gradual transition of various gambling operators from one jurisdiction to another one. Moreover, this contributes to appearance of new promising and regulated markets all around Europe (Germany, Netherlands, Romania), as well as creation of new jurisdictions with simplified licensing requirements and minimal taxation, like Malta, for instance.

One of the most illustrious examples that can be remembered is the one that happened in the UK back in 2014 after there have been introduced a 15% tax on consumption that affected greatly the majority of online operators providing gambling services to local players. Gibraltar has been unsuccessfully trying to challenge this issue at the European court of justice. The Gibraltar Betting and Gaming Association (GBGA) has been trying to prove that taxes are discriminating the right of foreign operators and basically disrupt and infringe the legislation of the European Union. However, the fact that Gibraltar is a foreign territory of the UK turned out to have more weight as an evidence in court.

In relation to this incident, operators functioning under one of the most popular jurisdictions (the jurisdiction of Gibraltar) started changing their jurisdictions or trying to find other ways to reduce operational expenses.

State monopoly

Another important matter that influences greatly the whole path of development of the gambling industry. Among vivid examples where this industry has been turned into a state-owned monopoly are Russia, Ukraine, Germany, Swede, etc. The estate monopoly on gambling sometimes is viewed as a form of crackdown on illegal sectors of gambling. However, it’s a mistake. As a rule, the main partisans of this idea are lobbyists aiming to destroy competition on the market. According to the general believes state monopolies lead to appearance of legal cushy jobs for certain individuals, bringing nothing to the state treasury.

One of the examples is the infamous case of “Gosloto” initiated by the Russian Audit Chamber against one unfair operator that eventually has been charged with a RUB 2 billion fine. However, in the majority of countries state monopolies really function. However, they are organized in the way that they contribute to development of competition on market. However, the controlling block of paper belongs to the government.

Conclusion

Gambling is a secure source of state budget funding. That’s why its proper regulation contributes to sustainable profits and regular pumping up the budget. In the majority of European countries this business was legalized a long time ago. Currently, it is possible to gamble freely in such countries as Great Britain, France, Spain, Portugal, Iceland, Sweden, Latvia, Estonia, Finland, Norway, Macedonia, Germany, Monaco, Luxemburg, Belarus, Malta, Gibraltar, Montenegro, Italy, Poland. In the rest of parts of the Old world legislators still working on legalization of online gambling. Governments should create effective models of regulation of the gambling business based on world experience of gaming promotion worldwide. As the most vivid example of effective functioning we might take the European Union.

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