Intentions are good, results are questionable – this is how many regulatory initiatives in the gambling sector can be characterised. Casinos attract the attention of legislators like a magnet: their desire to protect citizens from addiction and criminality often results in draconian measures. But what if the regulations themselves become the catalyst for the problems they are meant to avoid? From economic stagnation to the flourishing of underground gambling, analysis from PokieReview.nz shows how good intentions pave the way to gridlock.
Economy Under Pressure: When Regulations Stifle Business
Compliance is expensive. Take Nevada casinos as an example: every year they spend up to 12% of their profits on AML (Anti-Money Laundering) compliance, including transaction tracking systems and player verification. For small businesses, these costs are becoming fatal. According to the US Gaming Association, 27 small Midwest casinos have closed since 2018 precisely because of the growing bureaucratic burden.
But even the big players are not immune. In Japan, a 2018 law on integrated resorts turned into a fiasco. The requirement to allocate a third of the space for museums, parks and theatres increased construction costs by $1.2 billion for each complex. The result? Only one of the ten announced projects has been realised. Investors are fleeing to Southeast Asia, where the rules are softer and the risks are predictable.
Innovation in The Cell: Technology vs. Regulators
While the world is moving towards Web3, the gambling industry is treading water. Blockchain could revolutionise the sector: transparent transactions, smart contracts for fair payouts, NFT lotteries. But regulators are asleep and see the threats. In South Korea, the use of cryptocurrencies in gambling carries up to five years in prison. The result? Local startups leave for Malta or Gibraltar, taking taxes and jobs with them.
The online sector, where innovation matters most, is facing absurd bans. In India, where 70 per cent of internet users are under 35, digital gambling has been outlawed. But instead of eradicating the problem, the authorities have had the opposite effect: every day 2 million Indians bet through offshore sites, and the state loses $1.5bn in taxes every year.
Increase in Compliance Costs
One of the most direct negative impacts is the increased cost of regulatory compliance for casino operators. These costs include hiring additional staff to ensure compliance, implementing complex transaction tracking systems and paying increased taxes or fees. Such costs may reduce the profitability of the casino, which in turn may lead to higher prices for players or a reduction in the services offered.
Example: In the US, the Bank Secrecy Act requires casinos to report transactions over $10,000 to prevent money laundering. This has led to significant investment in tracking systems and staff training, which has increased operating costs.
Economic impact: Studies show that such costs can represent a significant portion of a casino’s budget, especially for smaller operators, which can limit their ability to compete in the market.
Social Wounds: The Wrong People to Protect
Restrictions often hit those they are supposed to save. In Singapore, a $150 entrance fee for citizens has created a new class – “casino-tourists”. People fly to Macau or Malaysia, spending more on tickets and hotels than they would lose at home. Addiction has not disappeared: according to the Ministry of Health, 1.2% of the population suffer from pathological gambling – the same number as before the tax was introduced.
The situation with young people is even more tragic. In Germany, a ban on betting for under-21s has led to a boom in “grey” betting apps. ID fraud has become widespread: 18-year-old students buy fake IDs for €50 on Telegram channels. Instead of protection, it’s involvement in crime.
The Rise of Illegal Gambling
Overly strict regulation can push legal activities into the underground sector, where consumer protection mechanisms are lacking. Illegal operations, such as offshore online casinos, may not be subject to any standards, increasing risks for players, including financial losses and involvement in criminal activities.
In countries with strict restrictions on online gambling, such as some US states, many players turn to unregulated offshore sites that often offer no protection for consumers.
Consequences: This may increase criminal activity and reduce the government’s ability to control the market.
Balance is Possible: Cases of Weighted Approach
Not all scenarios are pessimistic. The UK, where the regulator (UKGC) works closely with operators, shows a different path. Here:
- Licensed platforms implement AI algorithms that block accounts at signs of addiction.
- Casino advertising is prohibited, but risk awareness campaigns are allowed.
- Taxes are lower than in the EU, but fees are rising: the industry brings in £3.2bn annually to the budget.
Result: 89% of players use legal resources, the level of problem gambling is 0.3%.
Conclusion: Regulation as Art, Not Warfare
Banning casinos is like banning rain: useless and naive. History teaches us that tough measures only shift the problem, not solve it. Successful cases – from the UK to Uruguay – prove that regulation works when it is built on three pillars:
- Pragmatism: Rules should take into account realities, not ideals.
- Technology: Blockchain and AI are allies, not enemies.
- Dialogue: Operators, regulators and psychologists at the same table.
The gambling industry will not disappear. But it can be transformed from a threat into a tool for growth – if you have the wisdom not to cut it off at the drop of a hat.