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Legal vs illegal markets: a fight operators ‘can’t win’

The fight between legal vs illegal markets is a “hard fight” for operators and one it “can’t win”. Those were the thoughts of Tim De Borle, CEO at Napoleon Sports & Casino, at last week’s SBC Summit Barcelona.

Participating in a panel session entitled, ‘Growth through innovation and regulation – The CEO view’, De Borle noted that players will always find a way, whether it is through the legal or illegal markets but stressed the ecosystem “has to work”.

Asked by moderator, Valentina Franch, Senior Manager and Gaming Industries Specialist at KPMG Malta, on how to strategise around entry and the importance of regulation for industry growth, Napoleon’s CEO emphasised that the market will grow, depending on internet penetration.

He continued: “It plays a major role, I think the most important one. It plays a major role for the growth of the legal market. The market will grow anyway, depending on the internet penetration, depending on technology, depending on the product, etc, etc.

“Now, the balance of channelisation, as we call it, legal vs illegal market is the task of the regulator. And it’s a very important task, which needs to be very well balanced, which needs to be future proof.

“And I think there are three important goals. One is player protection, making sure it’s a safe environment. Second, is making sure there’s a level playing field and a clear legal framework, not only for the existing legal operators, but also for the illegal ones so there’s a clear distinction.

“The third one is the fight against the illegal market, which is also a task of the regulator. I think, for us as operators, it’s a hard fight. It’s the fight, we can’t win. There’s not really the same weapons.

“We can do the best in terms of technology, we can offer the best products we can offer the player protection or responsible gaming programme, but if there’s no fight against the illegal then it’s a fight which has lost a prompt.


“The player will find its way, whether it’s legal or illegal. And I think the whole ecosystem has to work. The regulator has to play the role, we have to play the role as operator, and the legislator has to play the role in making sure that it’s future proof, well thought, and something that is working.”

Joining both De Borle and Franch on the panel was Américo Loureiro, Director at Solverde SA, Colin Stewart, CEO at Palasino Malta and Ross Parkhill, CEO of Rhino Entertainment.

It was the latter of the three who delved into Rhino’s strategy process of entering a new market, expressing that on the regulatory side there are “a lot of different factors”, and stressed that it all depends on “what size company you’re at”.

He stated: “The size of the organisation that we are now, first we look at ‘can we make money in this market?’ Also, what does the regulation mean to the player? Is there a deposit limit, withdrawal limit or play gameplay limits which might impact how much revenue can be generated there? How is the player experience?

“If the regulation is a certain way where the player experience is maybe per, we would also worry about is there likely to be a big black market there?

“So firstly, we’ll decide okay, can we make money in this market? From there, we’re going to try and see okay, how can we grow as a brand? Can we actually take a product live and grow?

“Things we might look at there… Again, what’s the competition like? At the moment, we are a casino led brand. Can we go one with a casino or do we need sports to be competitive? What size is a market? What’s the gambling culture demographics that you have to look at? That’s still very important.

“And then if we do start growing? How do we localise? Are we able to get staff in the country? Can we open a business in the country? If we have to do CS and local languages? Are we able to grow that? Are we able to manage that?


“Now it is the tech side. Most regulations may require you to do some type of work on your platform. We don’t own our own platform. So we rely on our partner to make sure they are licensed for the market? If not, how long would it take? What would we have to do on the front end? And it might not stop going in the market but you definitely have to consider it in your timelines.”

Echoing the thoughts of Parkhill, Loureiro pinpointed three key factors, although he expressed he could “name 10 immediately”.

“First, internet penetration, because our business, its internet is through internet, mobile coverage as well. Are the new players using mobile first?

“Second, really important, can customers afford it? What is the gross domestic product per capita, and we look into the population numbers.

“Third, their regulation. Is it a regulated market or not? What products are being regulated? With casinos, what can we do? Is there live casino, with slots, which kind of games, sports betting, sports betting regulated, which leagues? Which markets?

“If I can say for competitors, black market against regulated market, and black market coverage that is the worst competitor, because it’s an unfair competition.”

Rounding off the regulation coverage of the panel, Stewart provided his thoughts from a land-based perspective, though he noted he was not sure “where to start”.

He concluded: “I’ve worked just under 40 years now and worked in various countries with different regulatory setups. It’s very difficult to find a regulator who is actually willing to come to the table, and sit down and listen, and look at things from an operator’s point of view.

“What’s even more surprising for me these days, you hear these stories of what’s happening in Australia, with Star, what’s happening in the UK… Do the regulator’s actually know what they’re doing? That’s the question that’s out there.”


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