Industry predictions for 2020 - including grey markets, operator/regulator relations and sporting events

Stephen Ketteley, partner, Wiggin

Tougher times ahead for UK operators

The never-ending evolution of regulatory compliance in the UK continues to cause a mix of consternation and confusion within the industry. A number of relatively significant operators have simply left the market, concluding that the regulatory risk is not justified by the rewards. Such a contraction of the market, coupled with a sense of increased personal risk for senior management, may lead to further exits from the market which serves only to fuel further consolidation. The much-reported potential revamp of British gambling regulation will certainly not make the market more welcoming. Before long, the British consumer may have a choice of a handful of operators (and the various brands they operate) to choose from. The regulator will certainly see a corresponding benefit here on the basis that larger-scaled organisation may be better equipped to cope with regulatory challenges. What was presented to us all in 2005 as a truly liberalised, “de-regulated” market, has in less than 15 years, evolved into something of an oligopoly.

The lure of unregulated revenues persists but with added complications

As the European regulated markets, particularly the UK, fail to live up to their long-term commercial expectations for many operators and suppliers, there will continue to be more and more focus paid to deriving revenues from the markets in which operators are unable to obtain local licences (on the basis that they genuinely do not exist for private operators). The apparent acceptance for “grey” market revenues by a number of US regulators has somewhat emboldened the industry to seek further geographical diversification but this comes at a time when payment providers, banks and their own financial regulators are paying increased attention to the derivation of financial service providers’ revenues with the corresponding knock-on effect that operators and suppliers must really do their homework in order to be able to justify their legal position as the revenue balance within their organisations shift further towards unregulated revenues, away from the high-tax, high-regulatory risk regulated markets.

The relationship between operators and regulators becomes more contentious

Until now, a succession of enforcement cases by not only the British Gambling Commission but also a number of other regulators around Europe have been difficult to argue against, in principle, on the basis of the very clear regulatory failures evidenced. The next phase of regulatory development may see the regulators pursue even tighter regulation with requirements and restrictions making certain markets less and less attractive. Where enforcement actually proceeds to revoke operators’ and/or senior executives’ licences, one can envisage a situation where there may be a difference of opinion between an operator and a regulator as to the application of certain laws to their operations. As sanctions become more and more dramatic we may reach a tipping point at which we will see licence holders contesting enforcement actions through the courts. Regulatory litigation is commonplace in the United States and it is envisaged that European gambling regulators may begin to have their decisions scrutinised by the wider judiciary as the stakes get higher.

STS CEO Mateusz Juroszek

Compliance and regulations

We should expect a trend in which more and more countries will regulate their gaming markets. Due to the fact that many countries will continue to analyse various legal solutions implemented in different markets and then try to implement them in their own country. Further solutions in the field of anti-money laundering and responsible gaming should be expected. Operators will, therefore, have to adapt their services to the changing legal environment.

Two big global sport events

Next year, two large sporting events which will strongly influence the industry await us. The first is the Olympic Games in Tokyo; the second is the Euro 2020 Football Championship. These high-level sporting events mean increased activity for bookmakers due to the possibility of acquiring new customers. This, of course, also means higher revenues and expenditure on marketing activities.

Mobile solutions

Every year, online channels are responsible for an increasing part of bookmakers’ revenues. The trend in which mobile is the most important segment of a company’s sales is also strengthening within the industry. A functional and transparent application makes this sales channel dominant, and the number of customers using it is increasing. In 2020, we will continue to observe this phenomenon.