The UK online casino space is finding life a little tough at the moment. In an industry which has increased over 70% in the last ten years, 2019 has seen a dramatic change in fortune – and it is all down to the UK Gambling Commission.
The UK Gambling Commission (UKGC) showed remarkable leeway for the iGaming sector dating back to the start of the millennial, but fast forward some 20 years later, and the gloves are off. In 2019, the UKGC dished out an unprecedented number of finds, revocation of operating licenses and implemented strict new regulations. They are resulting in iGaming companies facing their worst year ever.
UKGC – a fine year for fines.
In 2019, the UKGC handed out a hefty number of fines. Platinum Gaming was fined £990,200 for handling stolen money and Gamsys £1.2m for failing to prevent gambling harm and breaching money laundering regulations. In May 2019, InTouch Games Limited was fined £2.2m along with Betit Operations Limited £1.4m and MT Secure Trade £700,000. Even the likes of Ladbrokes suffered the wroth of the UKGC, receiving a £5.9m for past failings. Other operators fined include Petfre and Silverbond Enterprises Limited the operators of the Park Lane Club in Mayfair. The message is clear, adhere to our regulations or leave the UK.
To be fair to the UKGC, the fines have worked. Online operators are scrambling to prove their compliance and ensure they meet both their anti-money laundering and social responsibility obligations for all customers. The threat of further fines or worst, cancelling the operator’s license is forcing many operators to either comply or leave the UK voluntarily.
The impact on licensed operators
The main implications for UK license operators are on profit, impacting both operational costs and top-line revenue. The ongoing compliance and operational costs are impacting smaller operators harder. The likes of Hero Gaming and ComeOn, both previously licensed UK operators have opted to leave the UK. And they aren’t alone as many other small to medium operators simply can’t afford to operate in the UK. New regulations are also impacting revenue.
For example, a new regulation which requires age verification before playing demo slot games is preventing legitimate users from playing until they hand over credit card and identification information. Not everyone wants to share their personal data, and for those who do, the new checks represent a barrier. This ultimately affects player sign-ups, player deposits and casino revenue. Such new rules have turned a simple process into a complicated mission and consumers are having second thoughts, even if it’s just to play on Videoslots.
Barriers to consumer new player acquisition, restrictions in betting amounts, the high cost of compliance and the threat of revoking UK licenses have hit revenue and expected revenue hard. This has led to some massive declines in the share prices of big industry players.
As a reference year to date, casino operator LeoVegas is down 30%, gaming software developer NetEnt is off 32%, and the largest affiliate marketing company Catena are down over 60%. But it’s not all bad news for some big gambling companies.
As with any regulation, there are winners and losers; for those companies able to adhere to the new strict regulations, they are likely to win through less competition. The likes of Flutter Entertainment, Paddy Power and Betfair owners, and William Hill share prices have increased over 30% year to date.
What can operators realistically do?
With new regulations impacting profit and the UKGC willing to swing the scythe operators will need to focus their attention on implementing cost-effective compliance tools or leave the UK marketplace and focus on other jurisdictions.
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