Today's iGaming industry is playing out a fascinating "Tale of Two Cities." On one side, there are regulated markets that adhere to rules, hold licenses, and have clear banking channels; on the other side are unregulated domains that primarily use cryptocurrency payments, act swiftly, and bear minimal tax burdens. Investors are faced with a dilemma: should they opt for stable but slow-growing sustainable returns, or embrace high-risk, high-reward short-term cash flows? Recently, even giants like Bet365 have withdrawn from some gray areas, watching as their market share is taken over by cryptocurrency platforms like Stake, a story worth delving into.
Market Dichotomy: Compliance and Cryptocurrency Dual Track
Frankly, the industry is now clearly divided. Regulated businesses rely on audited cash flows, licenses, and relatively clear rules for long-term sustainability, but their growth is slow. On the unregulated side, especially in crypto gambling, it's truly "light-armed," with almost no taxes, minimal compliance costs, and astonishingly high profits, with cryptocurrency funds circulating rapidly.
This division brings a clear trade-off: the former can slowly accumulate real enterprise value, while the latter can quickly recoup investments, but don't expect it to become a century-old enterprise, as its capital value is often not sustainable.
Player Migration Under Strict Regulation
However, in recent years, the notion that "regulated markets equal certainty" has become somewhat untenable. One key reason is that regulatory policies in some major markets are becoming increasingly heavy-handed. For example, Pennsylvania taxes online slot revenues at 54%, New York takes a 51% cut from sports betting revenues, and Germany even taxes the turnover of slot machines and poker, forcing operators to lower their return to player (RTP) rates. As a result, players vote with their feet, heading to unregulated sites where the odds are more favorable.
This is actually quite simple: gambling occurs on the boundless internet, and VPN usage rates in some key markets exceed 40%. Governments manage online gambling with the same mindset they use for physical "sin goods" like tobacco and alcohol, ignoring the elasticity of demand—players won't stop gambling because of high taxes; they'll just go elsewhere. This excessive taxation and crude restrictions may ultimately reduce national revenue and push players towards overseas platforms that often pay little attention to responsible gambling and may even target vulnerable users.
Capital's Choice: Short-term Gains vs. Long-term Value
So, what does capital think? By 2025, an interesting phenomenon emerged: some unregulated crypto iGaming startups were valued as high, if not higher, than their regulated counterparts. Frankly, capital is now somewhat "eager for quick success." Against a backdrop of high financing costs and a cold M&A market, investors are more focused on short-term cash generation capabilities.
Regulated "safe" assets are being squeezed by red tape and legal frameworks, extending the investment return period. Thus, hot money flows towards those that can offer high double-digit growth, almost no capital expenditure, unrestricted products, and borderless operations—true "cash cows." However, the risks here are not small. The example of Australia is quite instructive: since 2017, its Communications and Media Authority (ACMA) has blocked about 1000 illegal websites, causing over 200 overseas operators to exit. A single regulatory change or a coordinated payment blockade can collapse the economic model of such businesses overnight.
The Future of the Industry: The Struggle Between Persistence and Transience
In the long run, which trends will persist and which might just be fleeting? As long as regulators continue to apply pressure, the market vacuum left by high taxes and weak guidance effects will persist, and flexible "gray" players will fill it, chasing high returns and risk capital will continue to flow in.
But the macro environment will change. When interest rates fall and liquidity is more relaxed, it usually benefits regulated gambling stocks. Cheaper capital also makes the cash flows of auditable, licensed, compliant businesses appear more valuable. Over time, as enforcement and on-chain traceability capabilities strengthen, valuation premiums may shift back towards licensed operators.
For investors, the lesson is clear: don't pay too high a premium for "cash cows." If a business's equity value has a ceiling, then price it based on cash flow discounting, and don't fantasize about unrealistic exit myths. Assess its ability to obtain licenses and access compliant revenue. At the same time, its payment channels and anti-money laundering (AML) frameworks must be scrutinized—these determine the business's "bankability." In today's era, the premium for so-called "anonymity" has long vanished, and blockchain transactions can ultimately be traced.
(Further reading: For more insights into global gambling regulations and in-depth analysis, refer to the PASA official website industry insights section.)
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel:https://t.me/pasa_news
Original deep channel for gambling:https://t.me/gamblingdeep
Free data reports: @pasa_research
PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
