By Tatiana Martins, journalist at G&M News.
In your 2025 study examining taxation and market channelization across 29 European countries, you and your co-authors found no evidence of a negative correlation between tax rates and channelization. What are the main implications of this finding for governments designing online betting regulations?
First of all, is important to explain that channelization is the share of total gambling activity in a country that flows through licensed, regulated operators rather than offshore or black-market sites; the single most important metric regulators generally use to judge whether a market’s rules are working. Before our paper, there were some previous industry reports suggesting a link between taxation rates and channelization. These reports were based on a smaller sample of countries. We therefore wanted to do the same analysis more systematically by including a larger number of European countries. Our paper showed that there was no correlation between tax rates and channelization. We also found that some countries with a very high taxation rate can also have a high channelization rate. Similarly, we found no observable decline in channeling in countries that had increased their taxation rate during the period of observation. The study has several implications for governments. First, I would highlight the importance of evidence-based policy. It is possible that gambling taxation decisions have been made in some countries based on erroneous assumptions about channeling. Second, I would highlight that individual choices to gamble in the licensed or in the unlicensed market cannot be explained by simplistic push and pull factors like taxation. We have ample research showing that people gamble in the unlicensed market for many reasons (typically self-exclusions). Furthermore, especially in the case of online casino products, people are rarely very aware of the return to player percentages. Most people who gamble are therefore unlikely to be sensitive to gambling tax rates. As we also conclude in our paper, it seems that tax policy and channeling policy are two separate questions. Third, I would highlight that channeling should not be the objective of online gambling regulations. It can be one of the measures to achieve objectives such as harm prevention and security, but it is a poor object in itself. If channeling is seen as a policy objective, it can actually become counter-productive from a harm prevention perspective.
What factors are most important in encouraging consumers to use licensed operators rather than offshore platforms? How effective are enforcement measures, payment blocking, and other regulatory tools in addressing the unlicensed market?
People gamble with unlicensed operators for many reasons. For example, the British Gambling Commission has published research on consumer journeys to unlicensed gambling. They found four distinct groups: (1) self-excluded individuals who seek to continue gambling; (2) skilled advocates who knowingly seek out unlicensed platforms to bypass legal restrictions; (3) social explorers who stumble upon offshores sites via social networks and recommendation websites; and (4) accidental tourists who end up on unlicensed gambling sites by chance. We therefore need different strategies to prevent these different groups from gambling in the unlicensed market. In the case of self-excluded individuals, the best way to prevent unlicensed gambling would be to prevent harm in the first place. Making offers safer in the regulated market would also reduce demand for self-exclusions. Support and treatment also need to be widely available. In the case of social explorers and accidental tourists, it is important to actively block unlicensed gambling websites and their advertising. Research shows that these measures can be effective, but they require resourcing, automated tools, and collaboration with online infrastructures. Preventing unlicensed gambling is more difficult for the skilled advocates group. Payment blocking and friction to access unlicensed websites may be effective for some, but some of these individuals might not want to gamble in the regulated market regardless. However, I think it’s important to highlight that just because there is a group that cannot be “channeled” it does not mean that these other groups should not be protected.
How can governments balance taxation policies with the financial sustainability of licensed operators and the goal of keeping consumers within the regulated market? What risks arise when tax policies place excessive pressure on licensed operators?
Our research shows that taxation and channeling are separate policy questions. I don’t think these need balancing. High taxation can also be a public health tool, if these funds are used to provide resources for treatment and prevention of gambling harm, as well as developing more effective blocking systems. Evidence from countries like the Netherlands and France show that licensed operators can operate even with significant tax burdens of around 40-50% of the GGR. French land-based casino operators are taxed at even higher rates. So far, I haven’t seen a tax burden that would have placed excessive pressure on licensed operators.
Different jurisdictions use distinct tax models, including taxes on gross gaming revenue (GGR) and taxes on betting turnover. What are the main advantages and disadvantages of these approaches, and how can the choice of tax model affect market competitiveness?
There have been no studies investigating what people who gamble think about different gambling taxation mechanisms. There has been some evidence that turnover-based taxation can impact operator profits and odds and therefore be less advantageous from the perspective of the industry. However, literature is very scarce on this topic, and it is impossible to draw any conclusions. Several European countries do have turnover-based taxation for sports betting products in particular, and these countries still have an operational licensed gambling market so it is unlikely that the effects are major.
Based on your research and the European experience, which indicators should policymakers monitor to assess the effectiveness of online betting regulation? Beyond tax revenue and market channelization rates, what evidence can help determine whether a regulatory framework is protecting consumers and addressing the offshore market effectively?
I don’t think tax revenue should be a primary indicator. The primary indicators should be indicators of harm at different levels. For example, you should monitor population-level participation and problem prevalence figures, youth gambling figures, helpline statistics and the number of self-excluded individuals. It’s also important to do research to understand why people gamble in the unlicensed market if they do, and correspondingly, why other people don’t gamble in the unlicensed market. Channelization rates are also a difficult indicator, because there are so many different ways of measuring channeling. To accurately measure channeling, you would need reliable data on participation and consumption in the licensed and in the unlicensed markets. We do not have the figures for the unlicensed markets. Therefore, all figures estimating channelization are more or less based on assumptions and subject to many biases. For example, you can use survey data, but we know that people rarely recall or report their gambling accurately. You can also use web traffic data, but this has many shortcomings with regard to what people actually do on different websites and who these people are. The difficulties in reliably measuring channeling were also one of the shortcomings of the taxation paper and any work attempting to look at associations between gambling policy measures and channeling. If channeling is used as an indicator, policymakers and regulators should first establish what they are looking at and using what kind of methodology. This is something that a lot of countries around Europe are discussing at the moment.
