How the Gambling Industry Influences the Global Economy

Article by : Erik Gibbs Jun 17, 2024

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Updated: Jul 4, 2024

Have you seen a casino ad lately – no matter online or land-based one? We bet that if you live outside of China or, for example, Russia, it has already happened today or at least yesterday. This is due to the fact that the global gambling market and its capitalization are growing every year, while the most successful gambling companies annually replenish the budgets of the countries in which they operate with millions of dollars. In general, if you would like to learn more about how the development of the gambling industry affects the economies of countries, this material will be very useful for you.

Overview of the Global Gambling Industry and Its Size

According to the IBIS World data, by the end of 2024, the global gambling market size is going to grow to a record $305.8 billion and is projected to increase at a CAGR of 4.7% over the next five years.

This is facilitated by several factors at once: including the growing population (especially in third world countries where unemployment reigns and people are looking for any opportunity to make money), the development of digital technologies (in particular, technologies such as augmented and virtual reality, as well as artificial intelligence and blockchain can provide a better user experience and the security of their sensitive data), and the loyalty of local legislative frameworks around the world, which are adapting to consumer demand and, instead of prohibiting, regulating the activities of online and offline casinos.

Both entities – the gambling business and the state – ultimately benefit from such a symbiosis. The former receive permission to legally operate, and the latter obtain a new resource to increase their budgets.

The Significant Role of Gambling Platforms in Local Economies and Small Businesses

Indeed, given the fact that the legalization of gambling attracts new audience segments, it is difficult to overestimate its importance for local economies and small businesses. For example, in many countries, immediately after the legalization of gambling platforms, local tourism spots noted a significant influx of visitors (they were compiled by people from neighboring regions where gambling is prohibited by law). Similar observations are also taking place in stores with sports paraphernalia – the license for bookmakers to operate always leads to an increase in demand for their goods.

If we add to this that any gambling business, regardless of its scale, creates new working places, it becomes clear that the regulated activity of casinos and other gambling spots can bring a lot of benefits even at the local level.

Economic Benefits of Land-Based Casinos & Online Gambling Platforms

Looking at the developing landscape of the gambling business around the world, it is safe to say that its legalization carries enormous potential for the economy – both international and that which relates to a particular country.

So, what economic advantages can we highlight for online and offline casinos? In particular, here are just a few of them:

• Creation of new jobs, from dealers and waiters (for offline casinos) to developers, system administrators, and other IT personnel (for online casinos);
• Tax payments and purchase of licenses, which significantly replenish the budgets of countries in which this type of industry is permitted at the legislative level;
• Significant boost in the flow of visitors to the local business due to increased tourist activity;
• New sources of revenue for small businesses due to increased demand for advertising and sponsorship;
• Development of technologies, both related to the gaming experience and those aimed at protecting and ensuring the confidentiality of private data.

Ultimately, it is important to be able to assess the balance between the advantages and possible disadvantages from the point of view of a particular state in order to understand whether the gambling business is profitable here.

Economic Effects of the Gambling Industry on Various Sectors

Along with the possible benefits that we described in the previous paragraph, it is also worth noting the potential negative effects, including a number of social factors such as gambling addiction (and, therefore, the associated costs of treating patients), negative impact on the environment (few businesses, not only in the gambling industry, manage to maintain their sustainability and not provoke any harmful emissions or waste for the environment), as well as an increase in demand for additional public infrastructure or services.

Moreover, insufficiently detailed regulatory frameworks may not protect consumers’ rights well enough, which is why the latter risk losing their jobs, being subject to the activities of collectors, and even committing a crime in order to repay debts to casinos in the shortest possible time.

In general, the ideal scenario for regulating gambling activities in any state should concern each individual form of gambling and, in addition to the above factors, also take into account both tangible and intangible effects.

Strategies for Governments to Regulate and Tax the Gambling Industry Effectively

In order to ensure safe (primarily for the end consumer) operation of gambling institutions, both online and offline, governments must develop comprehensive regulatory strategies that include the following aspects:

• Licensing and regulation. The first thing to start with is the development of a set of requirements that gambling operators must meet to make their activities in a particular country completely legal. Typically, these requirements include compliance with consumer rights, monitoring the activities of operators to avoid scams and money laundering, ensuring the proper level of protection of players’ sensitive information, etc. In practice, verification of all these aspects is usually carried out by independent organizations and associations.
• Fair taxation. Depending on the level of income of a particular operator, fair taxes should be implemented to not lead to losses in their activities. At the same time, taxation should also be structured – that is, include gross income from games, player bets, and other aspects. Along with that, taxes have to be high enough to increase the entry threshold for operators and thereby prevent the operation of those who use fraudulent schemes.
• Transparency of financial reporting. Operators should have certain obligations related to maintaining transparent records of their financial activities in order to be able to promptly notify tax authorities of the amount of their income for a fixed period of time. In addition to this, governments should develop and implement tools for real-time monitoring of the activities of these operators, which allow them to identify inconsistencies and violations related to tax evasion.
• Adoption of liability measures for consumers. Governments should implement a set of rules for consumers that ensure that their gambling activities are as safe as possible for them. These rules include age restrictions, the implementation of KYC policies, self-exclusion programs, and limits on betting amounts. They should be relevant for all operating gambling instances, while the latter also have to be obliged to inform their consumers of their existence.
• Cooperation with reputable organizations in the gambling industry. Governments should involve reputable organizations in the industry, including reliable gambling operators, researchers, and others, in developing regulatory frameworks. Such a comprehensive approach will help them close all the gaps in gambling legislation and make it as fair and objective as possible for all parties.
• Globalization of legislation and expansion into related industries. Given that many gambling businesses operate internationally these days, government agencies that regulate them should be able to monitor them outside their own country to prevent money laundering and other fraudulent schemes. These agencies should also extend their responsibilities to related industries such as cybersecurity.
• Support for affected players. Players should also be able to receive government support if they have disputes with specific operators or if they are faced with illegal debt collectors or gambling addiction. This support could include the implementation of support services, hotlines, and player awareness programs.

Case Studies of Successful and Unsuccessful Regulatory Approaches in Different Countries

Finally, let’s check out some successful and, on the contrary, unsuccessful cases of implementation of regulation at the state level of the gambling industry. Let’s start with the successful ones.

The United Kingdom is known worldwide for its thriving gambling industry – that is why operators from all over the world seek to obtain a license here. The main regulatory provisions are described by the Gambling Act 2005, and the activities of operators are monitored and tracked by the UK Gambling Commission. Since its entry into force, this act has been supplemented with new provisions and modernized many times, but its foundations remain the same and consist of focusing on the protection of consumer rights. Thanks to such meticulous thoughtfulness of the regulatory framework for gambling operators, the United Kingdom annually receives billions of pounds sterling in its budget.

Another outstanding country in terms of gambling regulation is Denmark, which has been actively involved in this since 2012. The framework of this state is also focused on protecting consumer rights and, at the same time, ensuring a stable inflow of budget funds. The Danish Gambling Authority is involved in monitoring operators here, being also engaged in issuing licenses and monitoring the legality of online and offline casinos.

Not far behind Denmark in this is Sweden, which presented its gambling regulations to the public a little later, in 2019, in the form of a new Gambling Act. The regulatory authority here is the so-called Spelinspektionen, which issues licenses to operators who meet local requirements and maintains responsible gambling.

As for unsuccessful regulatory approaches, we cannot fail to mention China in this list. In particular, this country strictly prohibits any gambling businesses, allowing only state-run lotteries to operate legally. This approach obviously provokes the prosperity of illegal, backstreet gambling businesses, whose consumers are punished with huge fines and even prison terms. on the contrary, those who want to gamble without breaking the law have to resort to tourism and travel to countries where it is allowed.

Greece is not far behind China in this regard, which, despite having an up-to-date regulatory framework for the gambling business, has not worked on it effectively enough, so it has many gaps because of this. Moreover, this framework is difficult to master, so novice gambling operators often encounter ambiguous requirements in it, and, therefore, inadvertently violate them and are then subject to fines or bans on their activities.

A few more words about Australia – here, gambling activities are permitted only for those operators who are not residents of this country. In this regard, many local operators work outside the law and thus, the country itself loses enormous potential for increasing its budget. Also note that many players have to personally find out where the operators they have chosen received a license, which is why they regularly encounter fraud.

And, finally, another bad example is Russia, which has strict restrictions on the activities of operators (in particular, they are prohibited in most regions). As in the previous cases, this also affects the development of backstreet networks of online and offline casinos, giving rise to criminal actions both on the part of players and on the part of the casinos themselves (here, we mean the bloodthirsty measures that collectors sometimes resort to in order to collect debts from losers).

All these examples were given so that you could understand what typical mistakes states make when regulating the activities of operators and, conversely, what strong provisions some of them were able to implement. Perhaps, having analyzed all these aspects, you will understand which country is the best for you as an operator or a player.

Final Thoughts

We hope that we have helped you analyze the main advantages of the gambling industry for the global and national economy, and now, you have an objective understanding that this type of business will rapidly develop and scale in the coming years. If you want to get even more valuable insights about this industry, be sure to check out our blog – there, you will find a lot of interesting and useful things!