Is tougher regulation good for the gaming industry?

Tighter regulation and an ongoing clampdown on the online gaming industry has critics speculating about the uncertain future of the sector.

On Sunday, the Financial Times claimed that the UK gambling market was “under siege” with suggestions that restricting consumer limits could cause a significant downturn in the industry.

However, tougher regulation could result in being a positive for the industry that has had its public image scuppered by negative press and discussion over the past year.

Positive step

The implementation of gambling controls like deposit limits, self exclusion and time-out periods have proved that gaming companies are conscious about the potential dangers of gambling, thus improving the sector’s credibility.

The recent changes have made the sector “more investible” according to Simon Gergel, chief investment officer in UK equities at Allianz Global Investors, who went on to say that the industry needs to continue to “self-regulate”.

One thing the UK industry will want to avoid is a blanket ban that swept across the United States over the past decade, with just five of the 50 states offering online gambling platforms.

Over-regulation in this respect has the potential to be damaging to consumers as it will drive them away to illegal venues, thus increasing the size of the black market.

“Beware the law of unintended consequences,” said Kenny Alexander, GVC’s chief executive.

“If licensed operators become less attractive to punters then the size of the black market in the UK will only increase.”

A rise in gambling addiction is one of the main reasons why regulators and lawmakers are beginning to clamp down on the industry, but Gambling commission surveys have shown signs of improvement in recent years.

Ultimately, both the gaming companies and regulators need to strike a balance by protecting consumers while enabling the industry – which employs more than 100,000 people in the UK alone – to continue flourishing.

Crypto industry

The cryptocurrency industry has also been faced with similar issues, with the FCA looking to ramp up its approach in targeting illicit cryptocurrency firms across the country in order to protect investors.

But it remains a double-edged sword as over-regulation will undoubtedly stifle innovation and suppress talented entrepreneurs.

Some believe that retail-facing cryptocurrency derivatives products like BitMEX and Deribit should be considered as gambling, with scare stories increasing about how addicts are swapping sports betting for crypto trading.

For both industries to prevail there needs to be a structure in place that not only helps vulnerable consumers but also caters for the rapidly-increasing demand, which is ultimately up to the regulators to decide.