Georgia sent alarm bells ringing throughout the compliance departments of public gambling companies this week after Prime Minister Irakli Garibashvili told a government session on 29 November that wide-ranging restrictions were coming for online casino operators.
What did he say?
Garibashvili said the new restrictions would block access to both online and land-based casinos for up to one million adults. Crucially, the ban would apply to any Georgian citizen under the age of 25, increasing the previous limit of 18 by seven years.
Other demographics would also be banned from casino gambling. These include civil servants, individuals who apply to be self-excluded via the tax revenue service and also people who are blacklisted from gambling by court decision on the request of their families.
The clampdown did not stop there. Garibashvili also said that gambling advertising would be outlawed on television, advertising boards and online. Sports sponsorship appeared to be the only exemption.
Accountants were also left scrambling after Georgian Finance Minister Lasha Khutsishvili muscled in on the act, claiming the tax base of the country’s remote gambling sector would be increased by up to 70% following the introduction of a 10% GGR tax and a 2% tax rate on player winnings and withdrawals. Operators are currently subject to a 7% monthly turnover tax for online gambling.
To make matters worse, the PM hinted the restrictions would provide a first line of defence, while a potential second phase could see online casino banned completely in the country.
How far has the legislation progressed?
There is a silver lining for operators, because the answer to this question is not very far at all. “There is still no news of a physical bill to surface out of Georgia,” says Ilya Machavariani, senior partner at 4H Agency, an iGaming sector consultancy firm.
Instead, the government comments provoked a reaction from operators, many of which are keen to start a dialogue with legislators via the Georgian Gambling Association trade body.
Which gambling operators will be affected by the new rules?
Flutter Entertainment (Adjarabet), Entain (Crystalbet) and Betsson (Europebet) are the public gambling operators that will be majorly impacted by the new restrictions should they be implemented.
Adjarabet is part of Flutter’s International division, which recorded total revenue of £680m in H1 2021. It described casino execution across the brand as “excellent” during the period. Flutter’s all-share July acquisition of B2B software provider Singular was completed with one eye on the fact the business was already fully integrated with Adjarabet.
Entain grew Crystalbet revenue by 52% year-on-year in H1, claiming 33% market share in the country. Performance was so strong that the FTSE 100 operator purchased the remaining 49% of equity in the business for £150m in July 2021 to eliminate any non-controlling interest.
Stockholm-listed Betsson is more guarded about its Georgian operations. In Q2 2021, it said operations were “developing well” amid an undisclosed increase in annual revenue, while the brand has since been extended into Belarus.
The above operators are all said to be monitoring the situation closely but were reluctant to provide a comment as there is no official documentation yet for them to respond to.
What about B2B providers?
The impact on B2B providers will largely depend on whether they target international markets from Georgia or supply their services directly to Georgian citizens.
Live casino provider Evolution launched a studio in the Georgian capital of Tbilisi back in 2018. Evo is one of the largest private employers in the country, with more than 3000 staff on call to ensure the studio can broadcast for 24 hours a day, 365 days a year.
Evolution head of investor relations Carl Linton moved to reassure shareholders in an email note seen by iGaming NEXT shortly after Garibashvili’s comments were publicised.
“We have very little revenue from Georgia,” he said. “Our revenues are so well diversified, so if the revenues from one country disappear, there are very few countries in the world that would have a real impact on the total revenues. Georgia is not one of these countries.
“This proposal does not apply to every company to conduct business in the country, i.e., that we have a studio there. We are one of the largest foreign employers in Georgia and we discover that most people believe that we have a positive impact on society in the country.”
What happens next?
The head of the Georgian Gambling Association, Giorgi Mamulaishvili, painted a grim picture of the future for operators if the government pushes forward with its proposals.
“According to the announced changes in legislation, the tax burden for the online sector will increase to almost 70%,” he said at a press conference yesterday (2 December). “Some businesses simply won’t be able to keep going.”
He said this was particularly noteworthy given the fact the industry has previously had a significant influence on the formation of state and local budgets, indicating an unfavourable shift in tone from those in power.
Fighting the sector’s cause, Mamulaishvili added: “If the government continues to adhere to a one-sided position and refuses to conduct in a constructive dialogue, we will be forced to optimise costs by abandoning a number of socially significant projects, including sporting sponsorships.”
Flutter and Entain made acquisitions in Georgia in part because regulation was tightening in more mature European markets like the UK and Sweden. It reduced their exposure to regulatory headwinds and provided a high-growth territory at a crucial time.
Operators will cling to the fact that no bill has been presented yet, but the Georgian honeymoon period looks to be well and truly over.