Portugal´s Regulated Online Gambling Market “Clearly Failing”

Research commissioned by the Remote Gambling Association has found the majority of Portuguese online gamblers prefer to take their action offshore.

In April 2015, the Portuguese government passed legislation setting the framework for a regulated online gambling market. The legislation was widely criticized for its high tax rates (up to 30%) and the way they were applied (on turnover rather than revenue), and the massive commercial advantages given to the charity Santa Casa da Misericórdia de Lisboa; who – prior to the passage of legislation – had a legal monopoly on gambling in Portugal.

To date, the Portuguese legislator, the Serviço Regulação e Inspeção de Jogos do Turismo, has only issued nine online gambling licenses. Two each to four companies who operate online casinos and sports betting sites, and one to PokerStars. Initially the new regulated market performed well, as it coincided with the Euro 2016 soccer championship, but some operators are threatening to quit the regulated market due to the high tax burden.

In June this year it was reported BetClic Everest – the first recipient of a Portuguese operating license – had paid 66% tax on its Gross Gaming Revenues to date, leaving little to pay operating and marketing costs. Humbert Michaud – the company´s Compliance Director – was reported as saying that, without some form of tax relief, the company would be forced to reconsider its operations in Portugal. However, a review of the legislation is not anticipated until next summer.

With Better Opportunities Elsewhere, Gamblers Abandon the Regulated Market

With limited marketing costs, online operators are no longer able to offer attractive sign-up promotions. Compared to the average 68,500 new accounts opened per month during the first six months of the regulated market, just 9,600 new accounts were in June 2017. But it is not just a lack of promotions that is driving online gamblers offshore. Regulated operators in Portugal have to offer cramped odds on sporting events to maximize whatever profit they can make.

Regulated sports betting in Portugal accounts for more than 55% of operator turnover and – according to research commissioned by the Remote Gambling Association – 68% of Portuguese online gamblers prefer to take their action offshore because better sports betting odds are available. Unfortunately for Portuguese operators (and tax collectors), these appear to be the higher-value gamblers, as the “channeling rate” (the percentage of money wagered within the regulated market) is estimated to be just 39%. By comparison, the estimated channeling rate in neighboring Spain is 80%.

Commenting on the findings of the research, Pierre Tournier – the Remote Gambling Association´s Director of Government Relations – said:

The legal regime for online gambling that was adopted in 2015 is clearly failing to combat the unregulated market and change is much needed to make the regulation work. We strongly believe that the Portuguese government should follow examples of other European countries that have successfully regulated the sector by adopting a GGR-based tax and waiving some of the restrictions such as the sports catalogue, which would attract more operators in Portugal.

Dramatic Decline in Online Poker Players in Portugal

Although the market segment occupied by online poker is relatively small when compared to online sports betting, the decline in domestic action is easier to monitor due to their only being one licensed operator – PokerStars. PokerStars.pt offers the same sign-up bonus and “Chests” rewards program as its regulated neighbors in Spain, Italy and France, but charges a higher % rake (5.15% at 25NL compared to 5.00% in Spain and 4.50% in the UK) and has higher caps on how much rake can be taken in one hand.

Although rake percentages and caps are not much better at offshore poker sites, the player reward programs can be far more lucrative, there is a better spread of cash games and action available around the clock. Consequently the volume of cash game traffic is now less than half of what it was when PokerStars first launched in Portugal one year ago. And the dramatic decline in online poker players is not limited to cash players.

Compared to the million dollar tournaments being offered by offshore poker sites, the opportunities on PokerStars.pt are fairly insignificant. The site´s most valuable tournament is its “Sunday Special” which has a guaranteed prize pool of €10,000, while the total guarantee for all six of the site´s Sunday Majors amounts to just €28,000. Furthermore, although proposed Pan-European liquidity sharing should enable PokerStars.pt to increase the value of its tournaments, it is unlikely to reverse the trend of players leaving the regulated market in order to seek more lucrative opportunities offshore.

A Lesson for All Jurisdictions Considering Regulation

The legal regime for online gambling adopted by Portugal is failing the operators, failing the players and – if the trend of players leaving the regulated market is not addressed soon – will deprive the country of much needed income. Rather than regulation attracting operators to Portugal and encouraging gamblers to play on “safe” sites, the domestic market has become uninviting for both. A significant reconsideration of online gambling in Portugal is required; and, in order to be effective, it needs to happen sooner rather than later.