China to end ‘high-frequency’ lottery products, virtual sports betting


China’s beleaguered lottery operators – and UK gambling operator GVC Holdings – are facing further regulatory restrictions just as they’re finally getting back on their feet.

Last week, China’s Ministries of Finance and Civil Affairs issued a joint statement regarding the “orderly delisting” of lottery games that feature a short duration between purchasing a ticket and learning the outcome of one’s wager.

In January 2019, Beijing ordered its sports and welfare lottery administrators to halt the promotion of ‘high-frequency’ (sports) and ‘quick-opening’ (welfare) lottery products. The products, which were estimated at the time to account for between one-quarter and one-third of lottery sales, were apparently leading to “large-scale irrational purchases” by impatient players.  

The Ministries’ recent announcement claimed these marketing restrictions had “played a positive role in curbing the unauthorized use of the Internet to sell lottery tickets and restrict large-value betting.” But further curbs are apparently required to ensure these gains aren’t lost.

As of November 1, lottery administrators in each province or autonomous territory will be limited to offering a single quick-draw product, “including virtual sports guessing football games.” Following next year’s annual Spring Festival holiday, “all high-frequency quick-open games will stop selling.”

Lottery administrators will be responsible for ensuring that none of its sales agents continue to sell such products following the new rules, while ensuring customers are apprised of the changes and any remaining prize pool funds are responsibly distributed.

The Ministries claim lottery administrators have a duty to ensure that the products they offer are “less irritating, lowly addictive, and highly entertaining,” which sounds like making ‘nuts & gum’ a thing, but here we are.

The change could have a dramatic impact on the fortunes of Hong Kong-listed AGTech Holdings, which for years has provided its e-Ball Lottery virtual football product to the lottery administrators in Jiangsu province and a Lucky Racing Formula 1 product in Hunan.

On Monday, AGTech warned investors that it was still “assessing internally” the impact on its operations from the cessation of these two products. In 2018 and 2019, these products accounted for 24.7% and 20.1%, respectively, of AGTech’s overall revenue. In the nine months through September 30, the share was 38.2%.   

The Lucky Racing product marked a rare east-west co-venture between AGTech and UK bookmaker Ladbrokes. The latter firm is now part of GVC Holdings, which holds a 49% stake in the AGTech Holdings joint venture. GVC has yet to publicly comment on China’s new rules. 

China’s lottery market has only recently resumed positive growth after 18 months of annual declines thanks to stricter regulatory oversight and the pandemic halt of retail sales. Suffice it to say, the new quick-draw restrictions will likely prove an impediment to extending that growth streak.