During September’s SBC Summit in Lisbon, LeoVegas Group CEO Gustaf Hagman asserted, “The solution is straightforward: if you’re participating in the market, you need a license.”
Hagman, participating in a panel with other gaming industry leaders, discussed strategies to combat the rise of the black market in Europe. He proposed a comprehensive licensing framework that extends beyond operators to include B2B suppliers, payment processors, and affiliates. This approach, he argued, could curb the prevalence of unlicensed operators.
This concept isn’t entirely novel. The UK already mandates B2B supplier licenses, Sweden adopted similar rules last year, and Finland is transitioning to a licensing system as it moves away from a monopoly. However, Hagman’s inclusive approach to licensure is particularly noteworthy.
Historically, affiliates and payment providers have been able to promote and facilitate unlicensed operators across Europe, playing a crucial role in driving traffic and facilitating transactions. Hagman’s proposal could significantly disrupt this dynamic.
In an interview with EGR, Hagman noted that while there’s no “silver bullet” to eliminate the black market, adopting a comprehensive, continent-wide strategy could help stem its growth.
In the UK, where B2B supplier licenses are enforced by the Gambling Commission, a Betting and Gaming Council study published in September highlighted that £2.7 billion is wagered online in the black market annually.
When asked about requiring licenses for all industry stakeholders, Hagman expressed his desire for sustainable, effective, and enforced legislation, lamenting that current regulations are inadequate. He highlighted the negative societal impacts of booming black markets, including lack of consumer protection, unpaid local taxes, and ineffective industry regulation.
While Sweden’s introduction of B2B licenses represented progress, Hagman argued it wasn’t enough on its own to drive market change. Sweden’s re-regulation in 2019 included B2B licenses brought to market in July 2023, with fines for suppliers providing content to unlicensed operators.
For example, Hacksaw Studios and Panda Bluemoon faced fines totaling SEK3.3 million in May for supplying unlicensed operators accessible from Sweden. Hagman, however, criticized the Swedish Gambling Authority’s (SGA) fines, arguing they came too late to address the harm already inflicted.
According to a study by horse racing operator AB Trav och Galopp (ATG) published in June, Sweden’s online casino channelization rate could be as low as 57%, with 77% for sports betting. In contrast, the SGA’s research estimates an 86% overall gambling channelization rate.
Hagman remarked, “Too little, too late, too irregular. The channelization rate keeps declining as black market operators target the customers whom regulators claim to protect.”
He stressed the importance of not giving players reasons to seek unlicensed alternatives, urging regulators to focus on why unlicensed operators attract customers.
Gustaf Hoffstedt, secretary general of the Swedish Trade Association for Online Gambling (BOS), advocated for a more comprehensive licensing system, particularly for payment providers.
In Sweden, the SGA fined payments firm Zimpler SEK25 million in 2023 for servicing unlicensed operators. However, Zimpler successfully appealed the ruling after a court found insufficient grounds for the SGA’s injunction. The SGA is currently appealing the decision.
Hoffstedt stated, “A system extending B2B permits to more subcontractors, especially payment providers, is beneficial. It pressures them to cooperate only with licensed gambling companies in Sweden and enhances dialogue with the SGA.”
**A Double-Edged Sword**
Romania introduced a comprehensive ecosystem licensing regime, requiring licenses for operators, suppliers, payment firms, and affiliates.
The framework showed promise with local giants like Superbet and international firms buying Winner.ro, boosting existing operations.
Ivan Kurochkin from 4H Agency highlighted that while a broad licensing regime can foster trust, it can also impose financial burdens that deter small businesses.
He noted, “Romania showcases both sides – a successful market with significant gambling revenue but restrictive licensing, limiting participation to local entities. Offshore operators partner with local businesses to bypass licensing.”
Hagman identified Denmark as striking a licensing balance and suggested that pan-European collaboration could yield better outcomes.
Although a Europe-wide licensing system might be challenging due to regulatory differences and legacy policies, synchronized measures across anti-money laundering, responsible gambling, and marketing could be beneficial.
Hagman observed, “Regulators still need to learn the ropes due to the industry’s ‘immature’ state. While they agree on consumer protection, now is the time to enforce regulations and protect locally licensed markets.”
Kurochkin cautioned against viewing a universal licensing regime as the ultimate solution, advocating for consistent, transparent regulation, reasonable licensing and tax policies, government support, and incentives for compliant industry actors.
Eradicating Europe’s black market remains improbable due to diverse national regulations. Hagman, despite concerns about unregulated operators’ growth, remains skeptical about near-term improvements, citing divergent rules and legacy market complexities.
The black market will likely stay in the spotlight, with the Gambling Commission preparing research into the UK’s illegal sector and CEO Andrew Rhodes urging operators’ CEOs to ensure partnerships don’t support unlicensed activity.
The necessity for actionable solutions, whether industry- or regulator-driven, is evident. The post “Licence and registration, please: Could pan-industry licensure crack the black market?” first appeared on EGR Intel.