Different Shades of Grey

TAGs: Betfair, Breon Corcoran, bwinparty, gambling, iGaming, Lee Davy, poker news, PokerStars,

The fluctuation of the regulated landscape in iGaming is in a constant state of flux. But in recent times it has appeared to be in an even greater state of flux than before.

Different Shades of Grey

This impression has been created by a small number of high profile withdrawals from European gaming markets, markets that we ignorantly refer to as ‘grey’. In reality these are countries or states where online gambling isn’t regulated and certainly isn’t approved of by the respective government, but because online gambling is such a new phenomenon in the wider scheme of things, there isn’t any legislation which expressly prohibits it.

Betfair have been one of the companies leading the way out of certain markets after having signalled their intentions back in December. Breon Corcoran has stopped investing in countries which they regard to have ‘unclear regulatory outlooks’. For them this has mainly consisted of Greece and Cyprus while the exit from Germany made a strong statement that they weren’t going to jump through any hoop placed in-front of them.

Likewise, have been cautious over where they welcome players from and understandably so after having paid $105 million in an attempt to wipe their US slate clean in 2009. April saw the announcement of departures from 18 different countries although rather than doing so completely they’ve just stopped accepting new players.

This means that players from Argentina, Armenia, Belarus, Brazil, Columbia, Croatia, Cyprus, Finland, Greece, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Serbia, Slovenia and Ukraine will continue to use products as normal, but no potential first time depositors will be allowed in.

But, contrary to how it might have been in years gone by, the exit of iGaming companies from grey or even just very strictly regulated markets has not been confined to public gaming companies. For one reason or another, even the private operators have been taking marching orders.

America’s Good Influence

One of the catalysts behind the attempts being seen across the industry to be cleaner than clean is a willingness to be able to enter the United States when the time is right. It’s this desire to be included in what is the largest gaming market in the world that is aligning the strategies of both public and private gaming companies.

Former legal counsel at and co-founder of James Barnes explains how private companies have come around to the stick market listed way of thinking.

“Private companies, such as Pokerstars, who don’t have shareholders could take a more relaxed risk approach. You could argue that Pokerstars’ decision to stay in the US was the right one as they had several years of making good money with far less competition. Even with the settlement, you’d argue that they’re better off having stayed in and paid the penalty,” he says.

“But Pokerstars is now also trying to keep its nose cleaner. This, in part, is due to the desire to be part of the new US regime, and be part of other licensing opportunities as they open up – i.e. If you want to get a licence don’t do anything that might preclude that.

“So the difference between those companies embracing grey markets is no longer a PLC/private split. But the difference of course, is that if revenues do ultimately moderate, private companies don’t have the peaks and troughs of shareholder sentiment.”

But it’s not just the US that has caused operators to toe the line more. Betfair, for example, have been placed well for official entry into what are likely to be newly regulated markets. In Europe these markets are consisting of Italy, where they withdrew from in November 2010, Spain, where they blocked access in June 2012, while also keeping one eye on the United States where they expect to gain exchange licences in New Jersey and California.

One Company’s Trash is Another’s Treasure

Interestingly, Belgium has been the one area of two-way traffic. While the likes of PKR and Pokerstars – both private companies – have been leaving the country, bwin announced on the same day as its exit from multiple countries that it is now fully licensed for all products in Belgium.

But for all this change, there are some things that remain the same. While large gaming companies (note, no longer just public companies) are ensuring that they’re being seen to do the right thing by leaving grey markets, the players in these markets aren’t going anywhere. This explains the decision by to keep active accounts open in some countries but still leaves plenty of opportunities for others.

Barnes explains: “In this vacuum left behind smaller operators will flourish. Privately-owner run business will target one or a few profitable grey markets and will make them their own. They’ll continue to make business decisions on a purely risk managed basis as the big players did back in 2005 and before.”

“The gaming industry has come a long way since 2005. Just as the industry has matured, the people have changed as well. The risk takers have made their money and moved on with the classic exit in the form of an IPO. These trailblazers and pioneers have been replaced by grey haired board members – grey hair for grey markets.”

It’s this change in personnel that we can attribute changes in strategy to. Risk taking is simply not an option for many companies anymore and, unless we see bids such as CVC’s for Betfair becoming successful, that’s one thing that we should expect to stay very much the same.


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