Our gambling market predictions for 2020 deal with regulatory challenges that might reshape the sector for the coming years, analyzing whether the predictions for 2019 came true and what future we should expect for the market.
- Different might no longer be enough against the large operators
My gambling predictions for 2019 referred to the possibility that “Different will matter more than bigger”.
The mergers between large operators that occurred over the last years are creating economies of scale but, at the same time, a high level of internal bureaucracy, which limits their flexibility in adjusting to market changes. On the contrary, medium-sized operators that are still under the control of their founders have more limited resources. However, these companies can focus on the specific and immediate needs, with decisions taken in a short timeframe, being able to meet the market needs in a timely manner.
The above circumstance is still correct for 2020 where we see additional mergers between large operators. However, the radical change is that gambling regulations of countries like Italy are creating barriers to the entrance of small/medium-sized operators, increasing costs and creating a regulatory environment that only large operators can afford to deal with.
The rationale behind such a change is that a more limited number of operators is easier to control. However the disadvantage is that there will be less competition with players that will pay more for the same quality of service. At the same time, I do believe that the black market will grow after years of fights against it.
- It will finally be the year of Germany and The Netherlands
In my 2019 gambling predictions, I referred to the US as the market to watch, while – looking at the next 12 months – Germany and The Netherlands are likely to take over that spotlight.
We have been discussing the licensing regime in Germany and The Netherlands during the last decade, but not much had changed. There were challenging proceedings against operators offering their games to Dutch players during the last year which led to the so-called “cooling off period” in which they will not be able to apply for a Dutch gambling license. Also, German authorities already pointed out that sports-betting providers on the German market would no longer be tolerated without a German sports-betting license. The German gambling authorities expect that sports-betting providers who continue to operate in the German market will have to apply for a license promptly, otherwise they should be aware of possible prohibition procedures against them.
The German land-based and online sports-betting regime is in place with effect from January 2020 and from this date operators can now apply for a license. On the contrary, the coming into force of Dutch gambling regulations was expected to occur in January 2020, but it has now been postponed to January 2021. However, over the last year, the Parliament has been announcing several provisions that will set out the applicable regime.
To be ready for the opening of the Dutch gambling market, operators will have to do a considerable amount of work in 2020, but the efforts are likely to pay off.
- Courts will set the rules of the gambling market
My predictions for the gambling market in 2019 were that it would have been a quite litigious year, and unfortunately, the same predictions carry through to 2020.
Governments rarely have in-depth knowledge of the gambling market and its implications and are always looking for additional tax entries from it. The result of this problematic mix is that they are introducing limitations to their operations to “apparently” protect citizens, with measures like the Italian gambling advertising ban that was even challenged by the regulator, AgCom. AgCom adopted guidelines that tried to make the ban consistent with constitutional principles and EU freedoms, but the result is still highly controversial and questionable.
At the same time, the incessant increase of gambling taxes in several jurisdictions shows a short-term strategy that will damage not only operators and players, but also local economies due to the growth of the black market.
In such a situation, courts are the last hope to find the right balance between these regulatory limitations and the overall regulatory framework where the gambling industry is part of the economy of most of the countries worldwide, like any other industry. There are still considerable prejudices against the gambling market, but hopefully, courts will adopt a mature approach and remedy to the mistakes performed by governments.
During the last decade, we saw the “shrinking” of .COM markets where operators could offer their games in several jurisdictions with a Gibraltar or Maltese license to the benefit of the .COUNTRY markets. However, unless courts (or better governments) promptly cure the local regulatory errors, we will end up with markets where few operators dominate the regulated market, but there will still be many operators acting under a foreign license on the basis of the contrast between local regulations and the regulatory environment.
You can read the other predictions on the hottest topics of 2020 from my colleagues at this link.