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The Philippines’ regulated online gambling market is facing a pincer action of increased competition from formerly illegal operators and a massive, enduring unregulated market, but overall market growth is likely to kick the enforcement can down the road.
One of the fastest growing gambling segments in the world, the domestic Philippine online space is heading toward a compliance correction as some underground operators look to join the regulated market.
But an amnesty by gambling regulator PAGCOR will prompt tighter competition as gentrifying underground operators flood marketing and payments spaces, according to Evan Spytma, CEO of leading online operator Casino Plus.
Spytma told the ASEAN Gaming Summit in Manila on Wednesday (March 19) that PAGCOR’s efforts to “show the way” and persuading unregulated operators to join the regulated market via material tax cuts have borne fruit.
“The unregulated market here traditionally has been about 70 percent; there have been some statistics that [show] it’s now 65 percent because essentially those illegal operators are converting into PIGO [domestic online gambling] licences and becoming fully regulated,” he said.
“I think it has been a smart play by the government here to not come in too heavy-handed in terms of just shutting down the illegals immediately.
“What they did is, they wanted to show the way. Show that [with] the regulated market you can generate more, or equal to more than what you’re doing in the unregulated market.”
Spytma said a certain tightening of the payments space for online gambling operations, or the prospect of one, has also helped to bring underground operators above ground.
“Once payments are cut off, of course, things start to change,” he said.
“If you speak to the largest illegals in the market, they’ll say the market is more 50-50 right now” between the regulated and unregulated spaces.
Spytma said this is evidence that illegal operators “are coming on board at a faster rate, and what you’re going to see this year is a lot of those local grey sites launching in the local market as a regulated entity.
“And that’s going to cause a whole new round of competition, which will probably see all the way through, I would say, this year, with the shakeup here occurring next year.”
But for that to happen, PAGCOR must first re-open its door to new applications.
PAGCOR chairman and CEO Alejandro Tengco told Vixio GamblingCompliance after his summit presentation on Tuesday that the regulator is reviewing the February 2024 “abeyance” moratorium it imposed on online gambling licence applications to stabilise the market.
The review has been prompted in part by additional pressure from a surge in local and foreign interest in online licensing for the Philippines, a phenomenon triggered by the country's exit from the Financial Action Task Force’s money laundering grey list.
On top of these factors, Tengco’s pre-moratorium invitation to illegal operators to come in from the cold via an “amnesty” must continue to apply, because PAGCOR has no other carrots to offer them, suggesting that additional licensing could be imminent.
In the context of his comments on a licensing resumption and relentless references to job generation, Tengco’s comment to the summit on Tuesday that the Philippine gambling industry is “at its defining moment” becomes more than a keynote slogan.
“The best days of Philippine gaming are still ahead of us,” he said.
At the same time, numerous entities listed on PAGCOR’s webpage for licensed online gambling operators have yet to commence some or all operations for which they have received licences, pointing to possible preparations by affiliated underground interests to cross over to the regulated market at an optimal time.
In any case, Spytma predicts that a new wave of licensing will inflate advertising and other marketing costs, including physical ads and “super app” services such as GCash and Maya that include payments channels.
“There’s going to be a lot of rising costs, whether it’s on advertising billboards, on these super apps … it’s going to be a competitive year, but it’s going to drive a lot of revenue and that’s what we’re here for,” he said.
Super apps came into their own during the coronavirus pandemic as a primary payment option for Filipinos and have flourished in a market with high connectivity and exceptionally long periods of personal smartphone use.
Spytma said that upcoming super app entrants such as Viber are going to intensify competition in that sector, with ramifications for online gambling marketers.
Meanwhile, Tengco emphasised on Tuesday that PAGCOR is not an enforcement body, adding that a crackdown on any segment of the gambling industry requires extensive coordination with multiple government agencies.
With the Philippine domestic online gambling market enjoying triple figure year-on-year growth and set to overtake the entire land-based industry this year in terms of gross gambling revenue, there seems to be enough new business in the pipeline to satisfy PAGCOR revenue needs and wider tax mandates without resorting to enforcement campaigns against domestic interests.
And the negative impacts of the unregulated industry, while damaging to compliant companies, have yet to generate the same degree of political and corporate hostility or demands for legislative intervention and enforcement action that finally brought down the Philippines’ foreign-facing online gambling operators (POGOs) in 2024.
