Fascinatingly, the French gambling industry has become a hotbed of controversy as rumours of a potential increase in tax engulf the industry, shaking up operators and investors alike. Media reports about the French government considering a tax hike on Internet gaming spurred speculation that Prime Minister Michel Barnier’s plan to raise €500 million would include one. The news caused a ripple effect through the market as major gaming companies including Française des Jeux (FDJ)a, saw their shares knocked down.
The reports then caused the stock price of FDJ, the French national lottery operator, to fall by 9.7%. Nevertheless, the gambling tax increase was quick to be nipped in the bud by the company, which said it has no reason to believe the gambling tax hike will make an appearance in the upcoming Social Security budget. The reassurance notwithstanding, the market reaction reflects how sensitive the gambling sector is to any potential regulatory change and how much these decisions can do to impact on investor confidence.
According to the horse racing operators, the proposed tax increase is part of a €1.6 billion tax raid on the gambling industry, which they say they are concerned may have negative effects on their businesses. Such a thing could make a big difference regarding the profitability of a French gambling company’s operation and, whatever changes happen on the level of industry’s competition.
At this stage speculation about the tax hike although it’s still just that, it reflects the problems the French gambling sector continues to struggle with. Online games are still illegal in the country, while its regulatory environment is very complex; the country regulates lottery, sports betting, horseracing and poker. As a result of this partial prohibition, a black market has sprung up that the French gambling regulator, L’Autorité Nationale des Jeux (ANJ), estimates represents between 5 percent and 11 percent of France’s gambling market.
To cope with the issues of illegal gambling operations, the ANJ has started the 100% Winning campaign which aims to deal with illegal online casino sites. It hoped to remind players about the dangers of betting on illegal platforms and being in an environment where you have to gamble to win. It marks the regulator’s determination to protect French gambling market integrity and its consumers from any harm.
The country is also becoming serious about underage gambling, and the ANJ has done its part there as well. The National Union of Family Associations (UNAF) signed an agreement recently with the regulator across the board to promote responsible gambling and keep minors from accessing gambling services. The cooperation demonstrates the need for a multi stakeholder approach to dealing with the issues surrounding gambling regulation and protecting consumers.
One of the potential regulatory changes and initiatives in threat for the French gambling industry to keep a close eye on are developments and their effect on operating business. Increased taxation may encourage consolidation in the industry, as smaller operators may not be able to absorb the added cost. It could also lead some players away from the regulated market and back to the unregulated black market, subsiding the government’s ambitions to have a well regulated gambling environment.
BROADER trends in European gambling regulation support the idea that governments are trying to find a balance between the economic benefits of strong gambling growth; and the need to protect vulnerable individuals and to ensure social responsibility in general. With online gambling gaining more and more popularity, regulators have to keep up with its new technologies and behaviour change.
The French gambling industry has been left in limbo for now, waiting to see what shape the potential increases to the tax and regulatory rates will take. The government’s announcement on the Social Security budget and what it means for the gambling sector will be closely watched by operators, investors and industry observers.
With flux poker pending, the field of French gambling is at a junction. These next few months could shake up the industry, with the decisions being made setting new precedents for gambling regulation across Europe. The changes are likely to benefit operators and regulators or add further challenges to the gambling environment in one form or another. It’s certain that the French gambling industry is about to experience a great disruption and all the stakeholders are going to need to adjust to the developing regulatory environment as a way of ensuring the sector’s durability and survivability for the long run.
