Can the Netherlands remain profitable for licensed operators?
The Netherlands has become a particularly tough gambling market to navigate following very strict measures to curb advertising and sponsorships and minimise customer activity. But stakeholders have been extremely critical of the government for taking such a hardline stance in the years following its legal online gambling launch in 2021.
A primary concern for operators and legal experts is the proliferation of the black market as players seek out frictionless products that don’t require deposit limits or affordability checks, as the legal sector does.
But these measures are only expected to continue, as the government prepares an update to the gambling laws, which it says will seek to better protect players than the previous version. In February, State Secretary for Legal Protection Teun Struycken said a new gambling bill was expected by the end of the year.
This, he suggested, could include measures like increasing the age limit for higher-risk products like online slots.
Market experts expect the jurisdiction may hit a turning point and lawmakers will pull back on the restrictive approach, once they realise increasing measures are damaging legal offerings.
Could lawmakers U-turn on strict measures?
“If and when the black market really starts to take over, I think the government may then start to look at relaxing certain laws. The problem with politicians though is always the same. They start rescue action when the victim has already drowned,” Justin Franssen, co-founder and head of law firm Franssen Tolboom, told iGB at iGB Live in London in July.
July figures from regulator Kansspelautoriteit (KSA) reported a 93% channelisation rate in the Netherlands. But in terms of total number of bets, research from H2 Gambling Capital showed the market is split 50-50 between legal and illegal operators, based on a total market size of €2.10 billion.
This figure paints a bleak picture of both the current situation in the Netherlands and its immediate future. And by 2030, H2 has forecast that regulated online operators will make up €1.21 billion of gross revenue, giving the legal sector just a 45% market share.
Regulatory changes like player deposit limits and increased tax contributions for operators have also led to high-profile exits from the market by LiveScore Bet and Flutter-owned Tombola last year.
At the time LiveScore said the market was “no longer viable commercially” for the business.
Earlier this month, a ban on gambling sponsorship for sports clubs and competitions was also implemented. This was the last stage of a two-year strategy for additional marketing restrictions, following the ban of untargeted gambling advertising via most media channels in 2023 and the prohibition of programming and event sponsorship in 2024.
There could also potentially be a ban on online slots incoming, but this has not yet come to fruition despite being voted on in Parliament in 2024.
Rise of the black market
The black market issue is increasingly concerning for Dutch stakeholders, as it appears to be growing faster than in some other European markets.
Peter Rampertaap, coordinator operational supervision for the KSA, has warned that player education on which products are legal versus illegal is needed.
Speaking during an iGB Live panel session, he said: “Not every player knows the difference between a legal operator and an illegal operator. Our research particularly showed that young people struggle to tell the difference. When the illegal operator doesn’t have to pay tax, you can see why it’s a profitable business.”
The KSA said earlier this month that deposit limits had resulted in average monthly losses among players falling 31%. However there has been a rise in consumers searching for the top 100 illegal gambling websites in the Netherlands, further supporting claims that the black market is thriving.
How did we get here?
The opening of the market was impaired by a long and stretched out political process. The Remote Gaming Act was first proposed in 2014, then adopted by the Dutch Lower House in 2016, but the market launched five years later.
Government restrictions are seen partially as the result of a heavy quantity of marketing from operators upon the market’s opening. It began with 10 legal online licensees, but this has since expanded to 27 licensees, with 22 current active websites.
Speaking at iGB Live, Mike de Graaff of BetComply, used the Netherlands as an example of how regulated markets can get things wrong.
“People should be treating the market as an opportunity and not as a cash grab,” he warned.
“In the Netherlands, there was finally a regulated market with a pretty clear playing field. But then the market participants come in, aggressively compete for market share and they complain when more rules are made, saying that the black market is thriving.”
Franssen agrees: “When the market opened, operators didn’t hold back. The bombardment of advertising led to public opinion turning against operators and [caused] a tremendous backlash politically. This is all the result of an industry which doesn’t learn from mistakes made in other jurisdictions.
“Before the market was regulated, [prominent operators] were broadly tolerated by the public. Gambling was not as negatively perceived as it is now. I think the public perception of gambling is now very similar to alcohol and tobacco,” he adds.
A missed opportunity for Netherlands legal gambling
Two of the market’s original licensees are owned by the state; land-based casino Holland Casino and state lottery Nederlandse Loterij.
There is an argument the government could have utilised its position as an investor in these brands to ensure stricter self-regulation which could have prevented further restrictions.
“[The state-owned operators] were number one and two in terms of marketing spend. They should have been the guiding lights [for other operators] but they weren’t,” comments Franssen.
“The great irony is those two brands were government-owned and the government then created their own political backlash. They had more direct influence on themselves than anything [the private operators] could do.”
Political uncertainty makes for unclear future
So where can the Dutch gambling market go from here? Political instability in the Netherlands is not helping the situation. On 3 June, the Dutch government collapsed when Geert Wilders, leader of the far-right Party for Freedom, withdrew from a four-party coalition, leading to a snap election set for 29 October.
“The political situation certainly makes a difference,” Franssen admits. “Teun Struycken is very anti-gambling. His party, the New Social Contract Party, previously announced plans to abolish online gambling in their manifesto.”
After the election, the Netherlands legal gambling industry may find that politicians seek to relax restrictions to improve the market’s long-term position.
“We need to create regulated markets that enable licensed operators to be creative and innovative. By having super restrictive markets that you cannot really flourish in, it makes it very difficult for operators to bring any innovation to the market,” De Graaf advised during his panel session.