This year’s Nobel Prize in Economics was awarded to Daron Acemoglu and James A. Robinson, authors of Why Nations Fail, a thought-provoking book that examines why some nations achieve prosperity while others spiral into poverty and dysfunction; illustrating how nations that start with similar foundations can develop along wildly different paths, with South and North Korea being one of the starkest examples. In a similar way, gambling jurisdictions worldwide have taken divergent paths, with some thriving under effective regulation and others struggling in a sea of unlicensed operators. If someone were to write Why Gambling Markets Fail, it could offer crucial insights to governments and regulators globally.
With so much accumulated experience from diverse jurisdictions, there’s opportunity to design regulatory frameworks that truly work. The ultimate measure of regulatory success is channelisation – the extent to which gambling occurs within the regulated market instead of drifting to unlicensed operators. Successful and failing gambling jurisdictions demonstrate key differences that are impossible to ignore. We’re not just talking about monopolies where a single government-backed entity dominates – an outdated model that hardly counts as regulation anymore. In open licensing markets, where multiple operators can apply for and obtain permits, results vary widely based on the design and enforcement of regulations. Among these licensed markets, many regulatory frameworks fail by ignoring a fundamental truth: Consumers will ultimately choose where they want to place their bets. No amount of IP blocking or transaction restrictions will prevent them from turning to unlicensed offerings if those are more appealing.
This is why a successful regulatory model cannot rely solely on punitive measures against unlicensed gambling. It must also focus on creating conditions that allow licensed operators to compete effectively. This is where many policymakers and regulators struggle. Why? Because creating an appealing licensed market often means permitting features like bonuses and advertising – elements lawmakers typically try to curb. Yet this conflict is unavoidable. While these attractive features help draw consumers to the regulated market, they can also act as triggers for compulsive gambling. Effective regulation acknowledges this tension, accepting that certain popular yet potentially problematic features, like bonuses and advertising, are necessary to draw consumers into the licensed ecosystem. Striking this balance is essential, but in practice, it’s a difficult concept for many policymakers to embrace.
Rather than confront this trade-off, many choose to perpetually tighten restrictions on licensed operators, unintentionally making the unlicensed market more attractive. Adding to the challenge is the structure of regulatory agencies, which are often divided between departments with competing priorities. One department may focus on enforcing rules against unlicensed operators, while another is tasked with implementing consumer protections within the licensed market. Though these protections are important, they can sometimes reduce consumer appeal, weakening channelisation and undermining the core purpose of regulation.
Lower channelisation means fewer consumers benefit from the safeguards of a regulated market, which ultimately compromises overall consumer protection
Departments focused on safer gambling often contend that channelisation isn’t their responsibility, leaving enforcement teams to battle unlicensed gambling – an almost impossible task when measures from within the agency continually erode licensed market appeal. My position is clear: To make meaningful progress, regulators need to move beyond the pursuit of a “perfectly safe” market that restricts all potentially harmful features and instead focus on building a sustainable, regulated market.
This approach doesn’t mean ignoring safer gambling measures; rather, it means designing them to respect consumer choice while retaining market appeal. In other words, a successful regulatory framework creates a market that consumers want to choose – not one they feel forced into. Ultimately, the gambling industry and its regulators may never completely agree on the ideal balance between engaging features and their associated risks. Nonetheless, this debate is necessary and can even be productive. We must all recognise that gambling regulation inherently involves trade-offs. Otherwise, regulators risk emulating King Xerxes of Persia, who, furious with the sea for defying him with a storm, ordered his men to whip the waters – a futile display of authority.