What the world can learn from Europe's approach to online gambling regulation

You're witnessing an intriguing paradox develop in gambling regulation worldwide. The majority of countries have rigorous prohibitions on the majority of types of gambling, but citizens are rushing to offshore sites in record volumes. Worldwide offshore gambling revenues were projected to be over $50 billion annually, a gigantic capital flight that otherwise would flood domestic government coffers.

So what drives this underground boom, and how do governments make regulatory nightmares opportunities? The answer is to look to Europe's progressive model for online gambling regulation.

Current gambling laws in the majority of states create what professionals call "regulatory vacuums." Such states permit few state-licensed alternatives like lotteries or forbidden sporting odds, while in other aspects, citizens always make use of foreign sites, thus building profitable offshore gray markets that completely go beyond government regulation.

This has nothing to do with individual preference; this has to do with economic reality. If you prohibit something technology has made available and convenient, you don't eliminate demand. You simply export the revenue. Each dollar bet on sites overseas is lost tax revenue and lost regulatory influence.

The sums are staggering. While the majority of countries see their regulated operators create modest revenues in hundreds of millions, total domestic gambling spending tends to amount to billions. That is vast capital flight that can be preserved intact with prudent regulation.

It is not necessary to dig deep for instructive models of regulation. Europe offers several models that balance consumer protection against economic benefit.

In first position stands the United Kingdom, with its Gambling Commission governing a £14.3 billion a year industry. Its approach centers on three pillars: keeping crime out of gambling, fairness, and safeguarding vulnerable consumers. The result? A 21% gross gaming revenue tax that collected £3.1 billion in 2023 alone.

Malta does things in a different way, positioning itself as a licensing hub. The Malta Gaming Authority has licensed over 300 operators, created thousands of jobs, and given back about 12% GDP of the country. This island nation has transformed regulatory expertise into a strong economic influence.

Germany has just revamped its gambling model, shifting from prohibitive to liberalized regulation terms. Its Interstate Treaty on Gambling, which went live in 2021, legalized online sports betting and casino games under tight regulation. Preliminary observations suggest improved player protection and healthy returns in taxes, exactly what responsible regulation ought to deliver.

That's where the serious interest starts. While governments of most nations negotiate regulation, individuals are not sitting idle. They're going online to global sites, and they typically choose from the top 100 betting sites in the world with European licenses in Malta, Gibraltar, or the UK.

Why are these European-controlled websites so popular with overseas internet players? The reasons are persuasive ones. European-controlled sites tend to offer higher odds, better consumer protections, and vastly wider betting markets. They're also required to offer responsible gaming features like deposit limits and self-exclusion features, protective features that shield players far more than blanket prohibitions.

The irony stings: international cash is funding European regulatory systems, and none of the regulatory windfalls or tax revenues are finding their way back to the home country. It's as if your neighbors get to harvest a garden you might be cultivating yourself.

What can the nations of the world learn from Europe's success in regulation? The lesson is realizing that successful gambling regulation is not moralizing, it's practical consumer protection augmented by economic opportunity.

European regulators establish core principles that would have to be included in any home system. Firstly, they insist on strong age checks and money laundering protection. Secondly, they institute responsible gaming features like spending limits and cooling-off periods. Thirdly, they instill fair play stipulations like game testing and transparent disclosure of odds.

Tax models vary, but in Europe, jurisdictions typically tax 15-25% of gross gaming revenue. For many countries, that would translate into hundreds of millions annually in tax revenues, funds that could be used to subsidize schools, hospitals, or road building.

If countries adopted European-style model regimes and retained even half of the cash that would otherwise fly offshore, most countries would bring in hundreds of millions more in annual tax takings. That doesn't account for economic multiplier effects from approved operators, jobs, and reduced enforcement costs.

You're not discussing tax revenue here at all. Regulation provides consumer protection, keeps kids out of gambling, and ensures that games are fair. These aren't philosophical gains; they're tangible enhancements in player security that prohibition is simply incapable of delivering.

The employment opportunities are no less significant. Malta's gaming sector has direct employment for more than 9,000 people, whereas the UK gambling industry, which is regulated, is sustaining more than 100,000 jobs. These are value-added employment opportunities in tech, compliance, and customer service that create monumental economic value.

The issue is not whether citizens will continue to gamble on the net; they already are. The question is whether nations will capture the economic benefits and provide sufficient consumer protection or continue to send revenue and regulatory control to European nations.

The experience of Europe indicates that sensible regulation trumps moral arguments with hard facts. Intelligent regulation suits everybody better than pointless prohibition, whether or not you support gambling.

Those nations that are holding on to prohibitive policies have a simple option: keep on observing local money going to overseas operators, or take a leaf from Europe to adopt regulatory frameworks that safeguard consumers while tapping economic gains.

The European model is not only out there, it's been a success. The question is whether other countries will be wise enough to apply these lessons to their own situations, or keep on forfeiting billions of potential tax receipts to European regulatory havenry.

The decision, as they say, is theirs. But the cash, for now, is in the hands of Europeans.

This article was written in cooperation with Qetya Kirpichich