The various compliance and taxation measures being imposed on the UK e-gaming sector are beginning to have an impact both for UK-licensed operators and new ventures considering which markets to target.
There was evidence for this at the Casino Beats Summit in London in September 2018. In a panel session on the future of online casinos, one panellist, the chief executive of a new online casino business, said that he had decided not to target UK customers, despite it being a major European e-gaming market.
The session immediately afterwards was on the topic of the “UK tax hike” in remote gaming duty (RGD). It was noticeable that the audience was much smaller than the preceding session on the future of online casinos. The seemingly lesser interest in such a key topic could be a signal that existing operators have accepted the tax rise, knowing it is inevitable, and new ventures are avoiding the UK, so the tax rise does not affect them.
Further evidence that the measures are beginning to bite on operators came shortly after the conference when 888 Holdings reports its interim results. 888’s revenues in the UK fell by 18% versus the same period in 2017. The UK’s contribution to 888’s total revenues was 32% (H1 2017: 39%).
The company explained, “This was driven in part by revisions to our practices to align with the stricter regulatory environment across the market as well as the decision by the Group to redeploy marketing investment and focus on the areas of the business that are generating the highest returns.”
The extra pressures that the UK e-gaming sector is facing come at a pivotal time. Firstly, the repeal of PASPA in the US and individual states looking to regulate both sports betting and e-gaming mean that operators’ attention moves to the US at the expense of the UK.
The UK Treasury is also in the process of considering exactly how great the rise in RGD should be to cover the loss of Machine Games Duty (MGD) from B2 machines. If the Treasury believes that growth in UK e-gaming will slow in future because of the stricter compliance measures, it could opt for a higher increase in RGD to cover itself and ensure it gets the tax it needs. This heaps further costs on the sector and makes it even less attractive. A downward spiral ensues.