For iGaming, 2021 has been an interesting year. Globally speaking, the Covid pandemic has hampered land-based venues, but increased revenues in the online sector.
Also across the world, a dual tendency seems to be emerging — more places are legalizing online gambling and/or sports betting (e.g. several US states, Brazil, Germany) but at the same time regulators, especially in Europe, are tightening the leash.
Nevertheless, industry players seem confident that new opportunities lie ahead. According to the Research and Markets consultancy, the global online gambling market is expected to grow from $64.13 billion in 2020 to $72.02 billion in 2021 at a compound annual growth rate of 12.3%.
A lot of things are happening in iGaming and land-based gambling, so here at Sigma we are bringing you a handy overview of the most important events this year and an analysis of the most important industry trends.
Europe: New Markets and New Legislation for Online iGaming
Best exemplifying this twin trend toward new markets being opened and old ones being regulated tighter is Europe.
On the new markets front, there are Germany, the Netherlands, and in Eastern Europe, Ukraine.
For Germany, the new regulations that allow virtual slot machines, online casinos, and online poker came into force in July.
Uphill licensing battle for operators in Germany
Operators will now be able to apply for licenses, but the road to actually getting an online venue up and running is not going to be easy. At the focus of the online gambling debate in Germany is the possibility of addiction, so a lot of the provisions are aimed at countering it: game rounds must not be completed too quickly and any operator will have to develop concepts to protect minors and players.
While it’s great news for the industry that the market is opened, it’s clear that actually doing business in it will require unique technological approaches to fulfil the many criteria. Moreover, federal states will have an option of operating under state monopoly or giving out licenses.
At this point, it is too early how the German situation will shake out.
Netherlands will allow remote licenses… if the operator is from the EEA area
In the Netherlands, this October is the red letter day from which point offering online iGaming will be legal. Of course, only for those operators that the KSA gambling authority grants a license to. Remote licenses are in play too, with operators having to have at least a registered office in the EU or the EEA.
As licenses are being offered, the gambling authority has promised to crack down harder on those offering online casino games illegally.
The UKGC gets tough on video slots spending
In existing markets, there are also new regulations being enforced. The United Kingdom Gambling Commission (UKGC) has announced a package of changes that it says are aimed at making games safer by design.
What’s in the package?
An outright ban on four features of online slots: features that speed up play (so, goodbye turbo mode) or give the illusion of control over the outcome, spin speeds faster than 2.5 seconds, any auto play options, and sounds or imagery that give the illusion of a win when he return is equal to or below stake.
This means that many game providers will have to significantly alter their games, as in recent years exactly the features that UKGC describes (auto-play, “choice” of bonus types, etc.) have become very popular in newly released slots. Additionally, operators must clearly display total wins and losses and reverse withdrawals where money requested is pulled and gambled with again will no longer be allowed. The deadline for the implementation of these rules, October 31, has already passed.
These particular decision by the UKGC seem based on data that showing average spend on slots per month for players is £67 compared to £36 for other casino products and £45 for sportsbook.
Sweden: evolving, Ukraine: emerging
Sweden too has since 2019 introduced various strict rules for a previously unregulated industry. In 2021, the regulator has signaled that its current areas of concern are stronger regulations around gambling advertising, unlicensed gambling, and match fixing, Last year, the Swedish government has reacted to the Covid pandemic with temporary responsible gambling measures such as a SEK 5,000 limit on deposits (around €488 ) and a bonus limit of SEK 100 (less than €10).
These measures expired at the end of last year, but show the extreme responsiveness of the Swedish authorities that operators must take into account about the country’s online iGaming market.
In Eastern Europe, Ukraine is now an emerging market for iGaming products. After repealing the 2009 law that banned all gambling, the country’s state budget has received in February the first money from selling a license —to the tune of around €760,000.
But don’t think licensing is easy. According to Vox Ukraine, it took the company in question, Cosmolot, four tries with the country’s regulator to finally be approved.
USA: Online Gaming & Sportsbetting — An Unstoppable Tide?
The United States have had a long and complicated history with gambling and sportsbetting. Generally speaking, sportsbetting has been illegal in most US jurisdictions. This is due to a 1992 law that effectively banned it nationwide (with few exceptions).
Interestingly, on a federal level in the US, gambling is actually legal, but historically states have chosen to heavily restrict it. All this means that the US legal landscape around gambling in general is exceedingly complex.
So, let’s break it down.
A complicated legal landscape makes progress slow on legalizing online betting
The 1992 law was repealed in 2018 when the Supreme Court declared it unconstitutional. This has opened the way for states to legalize the practice. Note that despite the Supreme Court decision, the final verdict on what kinds of gambling, if any, are legal always falls to the individual states.
Right now, when it comes to sportsbetting, it’s about an even split in legality across the 50 US states.
The situation becomes more complex when we factor in online offerings. This is because the Federal Wire Act of 1961 prohibited interstate wagering on sports. In 2006, the Unlawful Internet Gambling Enforcement Act did not ban online gambling but it did prohibit financial transactions involving online gambling service providers. This move essentially shut down most of the offshore online venues that served US customers.
So, now, it’s really about individual states and what they choose to do and the court cases that might be brought before the state courts.
Where and what of online gambling is legal in the United States?
As of now, online casino, online poker, and sports betting are fully legal in New Jersey, Pennsylvania, Michigan, and West Virginia. In other states, the situation is a bit more complex.
For instance, Illinois, Virginia, Colorado, Tennessee, Indiana, Iowa, New Hampshire, Oregon, Rhode Island, Montana, Wyoming, and Arizona have legal online sports betting but no other types of online action such as poker and casino.
Delaware allows online casinos and poker, but not sports betting and Nevada allows poker and sports wagering but not online casinos.
In Louisiana, retail betting is now live, while its online cousin will have to wait until January of 2022. DraftKings, Ceasars, FanDuel and BetMGM are some of the operators that have confirmed they will launch online betting once it becomes legal.
Moves to legalize the online world of iGaming are happening in other states too. In December 2021, after several years of ongoing legal kerfuffle the state legislators have made a decision to pass the House Bill 29. Online sportsbook will be legal and regulated in the state by the end of 2022.
A regulated online sportsbetting and casino market could be a chance for European operators
It is now clear that after many years of grey market and offshore dominance, the iGaming industry is set to break through legally in the United States. Many of the leading UK brands are already partnered with US sportsbook operators.
For European operators, the liberalization and regulation of the US market represents a real opportunity — these top online sportsbetting sites and operators have extensive experience and catalogues that could prove to be an edge over the competition.
Asia: Japan pushes forward on Integrated Resorts, Philippines, Macao remain regional gambling hotspots
Gambling wise, the Philippines and Macao remain industry hubs in the Asian region.
But recently, Japan has been making a play for a piece of the land-based casino gambling pie with the concept of the integrated resort (IR). These planned resorts, of which there will be three, are expected to be completed in the late 2020s, with 2027 being mentioned as a realistic date for at least one to start operating.
Three Plans Submitted for Integrated Resorts but Casino Gambling in Japan Still up in the Air
Integrated resorts will be casino-heavy luxury tourist attractions including hotels, conference halls, and other high-end amenities. In late September, three proposals for the construction of integrated resorts were submitted, after the prefecture of Yokohama dropped out from the race in August.
The IR in Osaka’s Yumeshima island district is set to be operated by a consortium of MGM Resorts and Orix Corporation. In Wakayama, the Toronto-based investment company Clairvest Group has submitted a proposal and in Nagasaki it is Casinos Austria International.
But all three applications could very well be denied. The deadline is April 2022 so a lot could change until then.
IRs are a massive undertaking for Japan where gambling has so far been tightly regulated and where the most popular game of chance is played in the traditional pachinko parlor. Japan’s previous Prime Minister Yoshihide Suga was one of the main proponents of the IR concept to boost tourist income in the country. Taking a leaf out of Singapore’s book customers will be limited to three visits a week, locals will pay a ¥6,000 cover charge and foreigners can enter for free.
Philippines Gambling Industry Recovers in 2021 Amid New Taxes for POGOs
Meanwhile in the Philippines, the gambling business is booming. Both Q2 and Q3 have seen high revenues, despite the Covid-19 pandemic. For 2021, the Q3 revenue was $538 million representing a 52.5% increase year over year. This indicates a strong recovery for the embattled land-based industry as the Covid-related health measures have seen casinos closed for months on end.
But even more interestingly, Q2 2021 was also the first time that the country’s regulator PAGCOR has allowed domestic online casino gambling. In April, it allowed Tiger Resort, the operator of Okada Manilla Resort to offer online services. In August, the Asian gaming provider Jade Entertainment also received a license to start offering sportsbook products in the Philippines.
At the same time, the government has targeted the so-called POGOs (Philippine offshore gaming operators) which offer services to gamblers outside of the country and until recently were the only online operators, with new taxes. POGOs will be required to pay a 5% tax on their gross gaming revenue while workers at the casinos who make $11,900 or more will have to pay a 25% withholding tax.
These measures are aimed at filling the state’s coffers left empty due to Covid-19 pandemic and represent a blow to the POGOs earnings.
Domestic online gambling is still very new in this country, but regulations in online gambling typically open new opportunities for operators so it will be interesting to see how the situation keeps developing.
Macau Casino Operators Drop Massively in Value as Beijing Cracks Down
Things have been challenging for operators in Macao, another gaming hub in Asia. Amid a Beijing crackdown, US casino operators in the world’s biggest gambling hub have lost as much as $4 billion in market value. Shares have dived as the government has announced that there will be new regulations for operators.
Wynn Macau has dropped by 34%, Sands China by 28%. Peers MGM, Galaxy Entertainment, SJM, and Melco Entertainment also fell. In total, the drop is $18 billion.
Licenses are up for renewal next year, and the regulator has signaled clearly that there will be a significant and far-reaching revisions of the Macau gaming laws.
The Chinese government has become increasingly wary of Macao’s reliance on gambling, experts say. Stock analysts in Hong Kong have downgraded their view on near-term prospects for operators. All the operators in Macao will have to rebid for their licenses when they expire in June of 2022.
It’s not know exactly how the regulations be overhauled, but areas of interest seem to be the number of licenses, regulation of employee welfare, and the addition of government supervisors to daily casino goings-on.
By all accounts, 2022 will be a make or break year for the city that is often called the “Las Vegas of Asia.” But with the Chinese Communist Party’s distaste for gambling being well know as well as Beijing increasingly cracking down on the autonomous regions such as Hong Kong, there is a lot to be concerned about for operators and their investors.
Latin America: The Great Boom
In Latin America, it was Colombia that first set out to regulate its online gambling landscape. Since 2016, it has emerged as the continent’s most exciting hub for iGaming.
Colombia’s iGaming Market Keeps Growing
With a population approaching 50 million that according to studies loves to gamble (over 60% of adults in the country regularly place wagers) it’s easy to see why, in the Internet age, iGaming has also took off.
Colombia is often the foothold for offshore operators into Latin America thanks, in part, to the ability to receive a single license to cover all games.
It seems this strategy is working well for Colombia, as the gambling industry has reported increased total sales in 2021. Between January and July (H1) of this year, the nation’s gambling sector has generated around $6 million in total sales, representing a 120% increase compared to last year.
In the online gambling sector there has been a positive growth too: in 2020 it grew by 73% and then the growth increased to 128% in 2021, according to the country’s regulator Coljuegos.
Latin America, in general, is now considered one of the fastest-growing e-commerce markets in general: e-commerce sales to the region grew 36.7% to $84.95 billion in 2020. Brazil, Mexico, and Argentina are leading this growth.
Brazil is Aiming to get its Sportsbetting Market Regulated ahead of the Qatar World Cup
As such, many operators would love to get a piece of a vast market like Brazil (212 million population) but the road to getting there won’t be easy. Similarly to the United States, Brazilian gaming law is a complicated issue, as both legal and cultural landscapes remain hotly contested.
Currently, things like casinos are illegal and so are the online versions. Bingo and slots were legal for a while, in the 1990s, but were once again made illegal.
In 2018, however, sportsbetting was finally legalized, but the first wager on a sports event is yet to take place. It was originally expected that the regulatory framework would be complete by the end of 2021.
But, according to a recent interview Gustavo Guimarães, secretary of SECAP (a ministry of finance entity involved in making the rules), gave to Brazilian media it seems the new aim is to have everything ready before the kick off of the Qatar 2022 FIFA World Cup in November.
Not surprisingly, rules on taxation of sportsbetting seem to be largest stumbling block for regulators.
So, both prospective punters and the operators circling to get a piece of what is expected to be a huge market, will still have to wait. Industry experts have forecasted that once regulated, the sportsbetting market in Brazil could reach a value of $1 billion.
Other forms of gambling have a much less certain future. Two bills are the currently in front of Brazilian legislators: one in the House of Representatives and on the Senate. Both would see gambling legalized and regulated.
However, this isn’t the first time such bills were put forth, and attempts to legalize gambling have always caused a lot of resistance in Brazil’s large and politically influential Evangelical Caucus.
International iGaming Operators Descend upon Argentina as Provinces Regulate the Market
In Argentina, it seems things are progressing at a faster clip.
As online iGaming trade papers have reported, five online gambling sportsbetting sites have gone live in the City of Buenos Aires. Codere, Jugadón, and Bplay are already operating, while Super7 and BetWarrior are set to go live soon.
On a national level, the city now joins Argentinian jurisdictions where online gaming has already been operating: Mendoza, Santa Fe, Corrientes, Chaco, Misiones, San Luis, Tucumán, Entre Ríos, La Pampa, Neuquén, Río Negro and Santa Cruz.
Other provinces are beginning to regulate online gambling in 2021 as well. Corrientes has approved a resolution that regulates online gambling, including sportsbetting, horse racing, casino and live casino games, and bingo. In December, legislators in the province of Cordoba have put forward a similar bill, that also aims to regulate the same types of online gambling.
Latin America is a wide and emerging market in many respects and with the ongoing efforts to regulate online iGaming, there is opportunity for online operators to expand their presence. The rush of international gambling companies into Argentina clearly proves it.
What’s in Store for 2022?
From everything we put forth so far, two main conclusions are clear. One, that online iGaming’s spread and growth is unstoppable. Second, that iGaming companies will have to contend with more stringent regulations going forward.
Europe’s Regulators get Tough, Mostly on Video Slots
This is especially true in Europe, where it seems that regulating bodies have grown teeth they are not afraid to use. in the UK, at least, slots are seen as a major issue. And it is true that in recent years features such as auto-play which speed up the game considerably and “bonus choice” features that offer the image of control, have proliferated.
If other jurisdictions follow the UKGC example, it is very likely game providers will have to rein these features in.
The future of the UK gaming market will be impacted by the new and very stringent regulations, but given how developed the sector is, it is likely that it will be able to comply and thrive anyway despite the setbacks.
The End of Illegal Bookies in the United States?
You’ve seen it in movies and in TV shows, the shady bookmakers operating out of backrooms of bars. But “ten Gs in the hole with the mob” seems to be a thing of the past now. As more and more states legalize sportsbetting, punters will have access to legal and safe wagering.
While a full legalization of all online gambling is still quite far away, legal online sportsbetting may give operators the legal and business power and influence to eventually sway the pendulum in that direction.
But one thing is clear, online sportsbetting is about to blow up in the United States.
Trouble in Paradise for Macao, while Philippines Taxes POGOs
It’s not just European regulators that have tightened the leash recently. For reasons more political than business, Beijing has clearly signaled it intends to crack down on Macao, sending financial shockwaves through the city’s thriving casino industry.
However, it is highly unlikely that the CCP (Chinese Communist Party) would do anything to truly jeopardize the casino cash cow. More realistically, gambling in Macao will continue unabated, just with more CCP-aligned officials in key positions.
Meanwhile, Japan is still betting on the integrated resort concept, despite Covid-19 shaking the traditional tourism industry. In the Philippines, the government decided to tax the POGOs, pointing to a possible trend in regulation — will gaming taxes get higher for states to fill their Covid-depleted coffers?
Is Latin America the Next Big Thing in iGaming?
Colombia has led the way since 2016, Argentina seems to be following but the biggest prize in LatAm for the global iGaming businesses will undoubtedly be Brazil —once it gets regulated.
The sportsbetting part alone could quickly grow to over $1 billion but a future in which online casinos are legalized in the most populous country on the continent is the stuff of dreams for iGaming companies.
Covid Negatively Affected Land-based, but Boosted Online Casinos
A broad trend during the Covid-19 pandemic was the shift to online everything. Online work, online happy hour. Many companies based in e-commerce and online services saw dizzying growth as locked down populations turned to the Internet for work, shopping, and entertainment alike.
According to Research and Markets, the pandemic impacted the online segment of the gambling industry positively as consumers turned to online platforms. A study from Sweden’s Lund University also found that restrictions in sports events due to the pandemic have caused gamblers to explore online casino content such as video slots as a replacement for sportsbetting.
Just like with other e-commerce sectors, it is possible that punters who started doing gambling online due to lockdowns will continue to do so after. This has proven true for other online services and it could very well prove true for gambling, which is good news for iGaming.
What is Next for the Online iGaming Industry?
The most important events in the industry so far are the openings of new markets across the world. Both across Eastern Europe, United States, and Latin America, previously unregulated jurisdictions are bringing online gambling into the legal system.
While this is an opportunity for legal operators, it does mean the maneuvering room for less-than-regulated operations will shrink.
Crypto is likely to remain a trend in the industry going into 2022, as more and more online casinos are accepting currencies such as Bitcoin.
Overall, despite a worldwide pandemic, online iGaming has had a good year in 2021, and this positive trend is set to continue in 2022.