The World Cup is a unique avenue to growth for iGaming operators; however, higher taxation rates, tougher advertising restrictions and an unabating black market mean the regulated sector is faced with a significant challenge.
During the SBC World Digital Day, a panel of experts underpinned that the major threat facing the regulated market at this World Cup is to get ahead of the black market in terms of acquisition.
Myke Foster, Group Head of Gaming and Commercial Strategy, FEG, emphasised the importance of education, relaying the knowledge of the industry to customers and players as we head into the World Cup, where marketing will be intensified.
He stated: “The real challenge with the black market — or grey market, whatever you want to call it — is that in the mind of the customer, it doesn’t really exist.
“If someone can go onto an app store, download an app, register with their Google ID in 15 seconds, deposit with Apple Pay, bet on a match, win some money and withdraw it the same day, they’ve had a great experience. As far as they’re concerned, they’ve simply used a sports betting product.
“Concepts like ‘grey market’ or ‘black market’ largely exist within our industry. Customers don’t think in those terms. If they see a brand name on a shirt or a sleeve and the product works, they assume the company is legitimate, and they’re happy to bet with them.
“In that sense, the problem of the black market exists largely within the industry – because for customers, that distinction often isn’t there.”
On a wider note around customer acquisitions, he also laid out that whilst gaining new customers remains valuable, the seasonal customers who come back for the tournament once every two or four years are key.
The challenge around educating customers about the threat of the unregulated market, as Aviv Sher, Chief Executive Officer of Codere Online, emphasised, is that ‘most customers are not really aware of the difference between regulated and unregulated brands’.
He continued: “Regulators are very effective at imposing rules, taxes and restrictions on licensed operators to keep play safe — but in many markets we rarely see the same effort directed at chasing black market operators.
“A few governments take it seriously, but in most places the action is limited. Meanwhile, those operators have far fewer restrictions, and major events like the World Cup are a huge opportunity for them to recruit players.
One of the clearest examples is when you look at search results in the UK for things like ‘how to overcome betting limits’ or ‘how to gamble if I’m self-excluded’. You’ll often see unauthorised sites offering exactly that. They target players who are restricted from regulated operators.”
This battle has been elevated by the steady incline of taxation rates across Europe, forcing operators to adjust their marketing spend and ensure profitability.
Many operators have warned that this has opened the door for the black market to thrive and grow, engaging a whole new spectrum of players.
Damir Bohm, CEO of Tipwin, said: “In Germany, more than 50% of the market — both online and retail — is already black market activity. We’re struggling with that, not just because of the high taxes, although the 5.3% turnover tax is a major factor.
“We also face heavy advertising restrictions and significant compliance costs, which reduce margins. That means reckless acquisition simply isn’t possible.
“Paradoxically, the tax pressure and the black market may actually reduce regional spending from weaker operators. In the end, well-capitalised and efficient brands will compete — but everyone has to operate with a much sharper pencil.”
Marco Marchioro, Sportsbook Manager at Superbet, highlighted that when it comes to player engagement for the World Cup, time zones could well be a hurdle for the upcoming tournament.
“Time zones are an interesting factor for this World Cup. I live in Brazil, which is actually a very convenient country from a time-zone perspective. We can watch the European leagues in the morning, the Brazilian leagues later, and still have good times for US sports — everything fits into the day.”
However, he also warned: “In Brazil, the black market discussion is also very relevant. There’s a lot of debate right now about tax increases — even things like potential deposit taxes.
“Last year, the Responsible Gaming Institute here estimated that the black market actually has more turnover than the legal market. And you can see it in everyday life. If you walk a few streets from where I live, you can still find physical places where people go to bet.
“Brazil is not yet a mature market like Europe. Many operators arrived through .com operations before regulation, and the market is still testing different approaches. Some operators are pushing boundaries to see what is possible before regulators step in.
“With higher taxes and new rules, we’ve also seen more player limitations across operators. That’s why the black market remains one of the biggest competitive pressures right now.”
Dainis Niedra, Chief Operating Officer of Entain, also pinpointed the black market as the biggest threat to the regulated sector during the World Cup, heightened by an increasingly challenging regulatory environment.
Niedra remained bullish, though, as he added: “At the same time, our ambitions haven’t really changed. Everyone will still show up for the World Cup with their budgets and acquisition targets because the opportunity to gain market share is too important to ignore.”
