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If you want to start an online casino, you should check the regulations of the various markets to find out whether gambling in the specific iGaming markets you plan to target is regulated.
Why should you operate your online casino business in the regulated gambling market? Because regulated countries offer a safer environment for your business and your clients. It increases the credibility and authenticity of your business, and you are not at risk of shutting down, being fined, blacklisted, experiencing bankruptcy, or total financial loss.
If you need to find out more about the process of starting your iGaming business, you should check out our article about how to start an online casino. Afterward, we also recommend you to read about how to market an online casino. These two articles will give you a detailed outline of the whole process of building your iGaming business in a step-by-step manner.
In the given article, we will discuss different types of gambling markets from a legal viewpoint. Specifically, we will talk about the white, grey, and black markets, their major characteristics, and explain each market through the cases of specific operators and examples of various jurisdictions.
Different types of iGaming markets
As mentioned above, gambling markets are often categorized in line with regulations and laws. Some countries are regulated, meaning that there are clear, concise, and sometimes even strict policies that define what type of gambling is admissible in the given region and what are the rules that govern the process of gambling, used technology, licensing criteria, and process, guidelines for marketing and promotional activities. The regulated markets are known as white markets.
On the other side of the range, we see black markets. The country is considered a black market if it completely outlaws and bans gambling activities. However, this is not the major case; sometimes, we can find online casinos operating in the black market or from the black market. They are unlicensed, unregulated, rogue online casinos that may also perform other illegal practices.
Grey markets are unregulated markets, but the difference is there are no rules that either govern or prohibit online gambling. Thus, in such countries or regions, we face a complete lack of regulations or judicial loopholes and an ambiguous, uncertain frame of conditions. Now, let’s discuss each type of market in detail.
White (regulated) iGaming markets
Countries that are openly allowing and regulating online gambling belong to the white market category. The regulated system of gambling was introduced and actively embraced by European countries. Afterward, it started to spread to the major markets in other regions of the world.
Generally, regulated iGaming markets are the most prosperous and wealthy ones. Therefore, online casino operators always tend to establish or upscale their business by entering into new markets, which are regulated. White markets offer a license to online casinos, which is an essential prerequisite for starting an online casino in the given region.
Regulators in many nations require operators to maintain a local license. Nevertheless, some jurisdictions around the world issue licenses of international recognition and prestige. Such jurisdictions include Malta, Curacao, Kahnawake, Isle of Man, and Gibraltar. You can view our article about online casino licenses to learn more about these jurisdictions and why it is necessary to obtain a license before launching your iGaming business.
Regulated iGaming markets might also have their own challenges. These challenges mainly include increased taxes or measures of social responsibility concerning the field of gambling. Furthermore, local licenses often come with stiff, high prices, and added to this, sometimes we face strict regulations regarding the marketing and promotions of the online casino.
When it comes to regulated markets, one of the first countries that we have to reminiscence is the UK. The British gambling industry is quite large and extensive. To illustrate, there are almost 100 000 people employed in the online and land-based gambling sector. Furthermore, the Gross Gambling Yield (GGY) of the online sector represented £5.89 billion from 2010 until 2020. Because of the approving, tolerant regime, the UK has been an important venue for many online casino operators.
On the other hand, Malta was the first European Union member state, which adjusted the setting for online gambling regulations. There is no doubt that Malta is one of the most highly acclaimed, famous gambling jurisdictions around the world. Unlike the UK, which provides the local license, Malta Gambling Authority issues the international gaming license, giving you the right to offer your services to players from the EU countries.
Black iGaming Markets
Black markets are at the other end of the scope. Countries that belong to the black markets entirely prohibit gambling. Often, it is justified for cultural, religious, or political reasons. Countries can ban online, offline, or both types of gambling. This is true for most countries with a Muslim population at most, in Asia, North Africa, and other regions.
Sometimes we face similar issues in Europe too. For instance, Albania in Europe implemented an all-inclusive ban on gambling in 2019. This happened because of the supposedly doubtful connections between local operators, the criminal underworld, and others.
Regardless of the restrictions, some online casinos still operate in the black iGaming markets. While they may enjoy the fleeting advantage of not paying money to the jurisdictions by bypassing the law, they are at great risk of shutting down and being arrested.
Black market operators will likely face serious roadblocks in their so-called quest for growth and expansion. Unlicensed casinos will not be allowed to process gambling transactions at banks or financial institutions. Licensing authorities verify that the applicant has no criminal records and do background checks. Banks view licenses as a guarantee that their institution will not be used for money laundering. And if there is no license – there are no safety guarantees for your business. On the contrary, such operators are always under the threat of serious legal accusations.
Grey iGaming Markets
Grey markets are the jurisdictions that do not ban online or land-based gambling but lack regulations and licensing processes to provide a sufficient judicial backbone for gambling activities in the given territory.
As a rule of thumb, big, rich markets shift to local licensing models. They create new regulations and start issuing licenses to the online casino operators who want to enter into their market. Nevertheless, smaller markets often end up being unable (or unwilling) to provide a strong regulatory or supervisory service. Thus, they stay in the grey market category.
One also has to consider that sometimes boundaries between the categories may become vague and inconsistent when discussing a certain jurisdiction. This happens because of the differentiation between land-based and online gambling, casino gaming, and sports betting. For instance, some jurisdictions legalize only land-based gaming and ban online gambling activities (Such as the jurisdiction of Macau) or regulate sports betting activities while leaving casino gaming in the shade.
There is a grain of truth in the opinion that grey markets can be an excellent option for new operators. Indeed, grey markets permit operators to offer their services without the need to get local licenses or become subject to any regulations. Despite that, Grey markets are highly unstable, volatile, and prone to rapid changes in the judicial and economic environment. Therefore, in such territories, online gambling businesses can be very vulnerable. As a result, you will not be able to maintain your business’s long-term stability and sustainability.
A variety of operators thought that grey markets in Southeast Asia or Africa were easy ways of making money. Nonetheless, they turned back to the regulated markets with their tails between their legs after a while.
One such example was the case of William Hill, an iGaming and sports betting operator. In 2014, William Hill announced that it would restrict player access to certain grey regions to improve its regulatory oversight. In reality, William Hill abandoned 55 grey markets in the given year due to regulatory issues, legal complications, and instabilities. The list of the countries included: Thailand, South Africa, Nepal, Niger, Rwanda, Morocco, Madagascar, Ethiopia, and many more.
Newly regulated iGaming markets and their possibilities
Operators have a unique opportunity to establish themselves quickly in previously unregulated markets that became regulated. Newly regulated markets can offer many advantages to online casino businesses if the transition from the “grey to white” is carried out smoothly and effectively.
The Netherlands launched its online gambling market in October 2021. This ended a long-standing ban that prohibited operators from running their businesses legally inside the borders. The Dutch market is expected to generate revenues that slightly exceed €500 million in the first year and rise to €2.27 trillion by 2025. If the prognosis will be right, the Netherlands will be one of Europe’s biggest markets in the nearest future.
Ontario was another example. The government of Ontario, one of the major provinces in east-central Canada, confirmed in April 2022 that an online gambling market had been launched in Ontario. The fledgling industry included online casinos as well as e-sports betting websites. Many provincial bettors were active on the grey market before it was legalized, and their wagers flowed offshore. Nevertheless, after the legalization, all measures were taken. Consequently, the officials started issuing the Ontario gaming license to the already established and new operators.
According to the estimates provided by VIXIO Gambling Compliance’s Online Data Dashboard, the Ontario market will generate GGR (Gross Gambling Revenue) of approximately C$1.6billion ($1.25billion) in its first year. This figure will rise to C$2.36billion ($1.84billion) in 2023 and C$3.27billion (USD 2.54billion) in 2026.
These cases are also examples of one of the main benefits of grey markets. Although they are volatile, operators who target them do not face the repercussions and charges after the regulation. On the other hand, black market operators who target illegal markets could face legal consequences and denial of future operations due to blacklisting.
Frequently Asked Questions
There are many ways to answer this question, but the first thing you should bear in mind is that regulated iGaming markets are the most thriving and wealthy ones. Furthermore, white markets offer a license to online casinos, which guarantees safety and officially acknowledges that the service you provide to clients is eligible, tested, fair, and trusted.
Grey markets may offer the advantage of allowing operators to propose their products and services to users without obtaining local licenses or being subject to strict regulations. However, the flip side of the coin is that grey markets can be volatile and highly unstable, prone to rapid changes in the legal and economic environment. As a result, starting an iGaming business in such territories can be quite a risky venture.
The US is a combination of all three gaming markets. The US market is a mixture of legal and illegal options, as you would expect from a market that is divided into 50 different markets. Online gambling is illegal in some states, but some states allow online casinos. The rest of the states have no laws that either prohibit or allow online gambling.
Conclusion
Choosing the right market to enter is an essential, very important decision for online gambling operators. This is one of the first steps you must take to launch or expand your online casino business. Due to the complexity of various markets and regulatory requirements, asking professionals before embarking on your mission is always helpful. Upgaming can help you in this process by providing consultative services regarding licenses and jurisdictional issues. So, if you are troubled by specific questions, feel free to submit a form and send your queries. Our lawyers will reply you in the shortest time possible and give full information regarding the topic.
