Economic Impact of Offshore Casinos on Local Gambling Markets

Jul 17, 2024 SEO

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Offshore casinos, which are based outside a country’s jurisdiction, enable players in unregulated markets to play casino games online. While they are viewed as convenient by players, the country itself can view them unfavorably as they potentially take money away from regulated land-based casinos.

In jurisdictions where all forms of gambling are illegal, governments may also point to societal problems caused by online and other forms of gambling, while the greater accessibility of offshore casinos may further compound these problems in areas where offline gambling is legal. Below, we look at some of the economic impact that off-shore casinos can have on local markets.

Offshore casinos are online casinos that are established, licensed, and run outside a local gambling market. Many such casinos are licensed in Malta, Curacao, Isle of Man, and Panama. However, for Guyanan players, offshore casinos can be those that are licensed in the US, Europe, or any other country.

They appeal to players because they are convenient and easy to access and because the best offshore casinos offer considerable bonuses to attract new and returning players. The introduction and implementation of cryptocurrency payments which, according to tech writer Krishi Chowdhary, are commonly found at modern online casinos, have also seen an increase in anonymous casinos. These casinos enable players from regions where gambling is illegal to anonymously place wagers without worrying about potential legal repercussions.

Many regions do not have laws specifically pertaining to online gambling. This means that players can play at offshore sites legally, but because the market is not open, it means that casinos cannot register or become licensed within the region.

It doesn’t make much difference to players whether a casino is licensed in their country or another country, but it does mean that the state and federal governments do not have any control over the way the casinos operate. It also means they don’t take any money in taxes.

Some countries choose to make online gambling illegal, either because the country prohibits all forms of gambling or because they want local gambling markets to benefit from the revenue and state coffers to benefit from taxes.

One reason that a lot of regions resist regulating online gambling is because they believe it will cannibalize, or take money away, from local gambling markets. If players are spending their money at online casinos, they will be less likely to spend money at a local casino.

However, one report looked at six states in the US where online gambling became a regulated market. Rather than reducing revenue at local casinos, opening up the market led to a 2.44% increase in quarterly revenue for land-based casinos. Local casino operators stated they had not seen any reduction in player numbers or wager values. In this respect, having a deregulated market could actually be holding land-based revenues back. One earlier report from a US state did show some degree of cannibalization of land-based casino revenue following regulation, but the methodology of that study is alleged to be flawed.

Where casinos and gambling venues are used to boost tourism, the likelihood of offshore casinos taking money away from land-based casinos is even lower. People specifically travel to an area to play at the casinos, and it is believed that land-based casinos attract a different market to those that play at offshore casinos.

Because visitor and wager numbers do not drop following regulation, it is reasonable to assume that associated revenue streams also stay stable, or increase. Casinos typically sell food and drink, and thriving entertainment complexes and streets can crop up around these venues. Restaurants, bars, and hotels accumulate in the area, attracting those who wish to play at the casinos.

With visitor numbers and physical casino revenue remaining steady, offshore casinos do not take money away from the state. However, regulating the market enables the government to more closely manage gambling in its many forms. They can restrict players so that they are only legally allowed to bet at locally licensed online casinos.

Offshore casinos offer players more choices. They aren’t restricted by physical size, which means casinos can include a greater range of games, including variants from around the world. They also operate with lower overheads, which is how online casinos offer sign-up bonuses and other bonuses that physical casinos do not. This opens up the market and gives players better opportunities. It also encourages physical casinos to up their game and offer more to attract players.

Beyond the economic impact of offshore casinos, an unregulated market creates something of a grey area for bettors. Typically, there are no laws that specifically prohibit offshore online gambling, which means the use of offshore casinos is not against the law. Governments are still playing catch up with the rapidly evolving iGaming market. They are trying to figure out how best to adapt, and this has left question marks over online gambling’s legality.

Although it is widely believed that offshore casinos negatively impact the revenue of physical casinos, studies suggest that the two attract different player bases. One study even showed an uptick in revenue for land-based casinos following regulation of the market and the licensing of casinos in some US states.

Offshore casinos do exist, and because the Internet is so free and open, for most people, it means that a failure to regulate the online gambling market means local and federal governments miss out on potential tax revenues.

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