Regulatory changes that ignore high-value players will enable the black market to thrive, warned Ed Birkin, Managing Director of H2 Gambling Capital.
Speaking at the Gaming in Spain conference, Birkin explained that legislation formed by analysing average player behaviour discounts the role of high-value players and disproportionately impacts a large majority of a market’s gross gaming revenue.
He said: “By basing regulations like deposit limits on an average player, it ignores the majority of the market GGR. When regulators say this new regulation will not affect 90% of players, that’s great, but what about the players who are 88% of your revenues?
“What you’re actually saying is that these regulations won’t affect 12% of the market revenue.”
Data from Spain’s regulator, the Directorate General of the Regulation of Gambling (DGOJ), revealed that 88% of operator profits in Spain come from just 15% of players. Similarly, in the UK, the top 1% of players deliver 25% of the market’s gross gaming revenue, rising to 60% of GGR for the top 5%.
As a result of this, Birkin continued, regulators face the tough task of balancing player protection measures while maintaining high-value players within the regulated market. This is mainly due to the differing needs of higher-value players compared to lower-value, more casual consumers.
Birkin presented data that revealed that high-value players in Spain choose their gambling operator based on the availability of products, compared to low-value players who primarily focus on ease of use.
32% of gaming spend by the high-value players surveyed was with unlicensed operators, as many cited that they believe such operators have a better product.
“It’s a very tough job to protect players while not driving high-value players offshore. It does not take a large proportion of players to move offshore to see a significant increase in the size of the revenue generated by offshore operators,” Birkin added.
“Pricing, product availability and winnings tax are key drivers in players choosing to use offshore operators.”
According to Birkin, the Spanish market has grown by 65% in the last three years, and is estimated to be worth €12.3bn in 2025. However, the black market is growing at a greater rate, due in part to the rise in popularity of crypto payments.
As a result, H2’s estimates for Spain’s channelisation rate, the percentage of total gambling spend that funnels through licensed operators, has fallen from 79% to 77%.
Despite this, Spain still outperforms comparative markets such as the Netherlands (50%) and Germany (between 20% and 40%), which lag behind due to “adverse regulations” and a “mass exodus” of the regulated market in the Netherlands caused by changes to deposit limits.
As a result, Birkin concluded, the key is “nuanced regulation” rather than “blunt” restrictions such as deposit limits. Currently, Spain mandates a per-operator deposit limit across daily, weekly, and monthly periods; however, regulators are seeking to bring the limits under a cross-platform model.
“The markets where regulators tend to meddle are the ones that push players offshore,” he said.
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