GBGC Says Gray Gaming Markets Still More Profitable Than Strictly Regulated Ones, But Future Trends May Change That

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GBGC gray market profitability
The GBGC says that although gray markets are still raking in profits, a shift towards regulation may change that going forward. (Image: GBGC logo)

Global Betting and Gaming Consultancy (GBGC) CEO Warwick Bartlett says that gray gaming markets are still the most profitable for operators, at least based on the numbers from the last five years.

The GBGC leader says that these are the conclusions that can be drawn from his company’s recently published index of iGaming companies, listing the top gambling companies in the world by market capitalization.

The top three, Betfair, Amaya, and Playtech, have all engaged with markets where the legality of online gambling is unclear because of a lack of regulation in place: thus the term “gray markets.”

However, while the statement may be true of the last five years, it may not be the case moving forward. The online gambling industry is facing a period of regulatory flux shift as countries across the world are increasingly adopt legal frameworks to govern online gaming. Regulated markets are beginning to represent stability and sustainability, especially to larger operators.

Compliant Future

Meanwhile, many heavily regulated but desirable markets, such as the UK and the US, for example, are now demanding international compliance as a condition of licensing. Under new UK gambling laws, potential licensees must provide legal justification for operating in markets for which they hold no specific license.

While it may have proved profitable in the past, both Betfair and Amaya are now preaching compliance and have recently pulled out of gray markets. Betfair began refocusing its marketing efforts on “more sustainable” regulated markets in 2013, ceasing operations in a number of countries, including Germany and Greece.

Amaya’s PokerStars and Full Tilt ceased operations in several gray market countries suddenly and without warning in October last year, the majority of those in Africa and the Middle East. Many, though not all, of these countries were those with which the US had traditionally had longstanding diplomatic disputes, such as Iran, North Korea, Burma, and Cuba.

Betfair is Biggest

While the move may have been inspired by the implementation of the new UK licensing regime, it’s also possible to speculate that it could be a precondition, set by New Jersey gaming regulators, for receiving a license in New Jersey.

Meanwhile, previously gray market countries that have regulated, but set tax levies too high, are being snubbed as well. Portugal is the most recent case in point, with a number of major operators, including PokerStars, packing their bags due to the prohibitively expensive cost of doing business with the new regulatory regime.

According to the GBGC index, Betfair is now the biggest online gambling company listed on a stock exchange, with a market cap of $3.8 billion. It is also the 17th largest gambling operator in the world. Amaya is close behind with a market cap of $3.7 billion.

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