A report from PwC commissioned by the Betting and Gaming Council (BGC) warns that high taxes and restrictive regulations across Europe are driving players toward unlicensed websites and weakening the performance of regulated operators.
The study, titled “Impact of the Taxation and Regulatory Environment on European Online Betting and Gaming Markets,” draws clear links between regulatory tightening and black-market growth, concluding that jurisdictions with tougher restrictions and higher compliance burdens tend to see declining channelisation, slower GGR growth and poorer outcomes for consumer protection.
Tax Rates Above 25% Show Diminishing Returns
Taxation plays a central role in market performance. Markets with gambling duty rates above 25% of GGR delivered annual tax revenue growth of just 9% between 2019 and 2024, compared with 13% in more moderately taxed jurisdictions.
The analysis warns that measures such as advertising cuts, product limits and increased taxes often make licensed operators less competitive compared with offshore websites. In countries such as Germany and the Netherlands, rising tax rates have coincided with shrinking GGR and a weakening tax base.
High-value customers, who generate around 80% of stakes, are particularly sensitive to worsening odds, reduced bonuses and higher costs. PwC notes that these players are the most likely to migrate offshore when regulated products become less attractive.
Operators Adjust Business Models Under Tax Pressure
Operators facing higher taxes and tougher controls have been forced to respond by raising margins, reducing bonus offers and cutting marketing spend. While these measures may protect profitability in the short term, they lower the appeal of licensed products.
In the year following a tax increase or new regulatory restriction, 13 of 19 major operators reduced gaming bonuses as a percentage of GGR, and 15 of 21 cut marketing expenditure. In France and Spain, bonuses fell by as much as 47% after new advertising rules. In Germany, the introduction of a 5.3% turnover tax led to a contraction in available games and a 50% decline in tax receipts from online slots and poker.
PwC also notes a growing number of operators exiting highly restrictive markets. In Italy, the cost of licence renewals rose from €200,000 to €7 million, while the number of licensed operators in France declined by more than half in the first five years after market opening.
Black Market Growth in Restrictive Jurisdictions
The report identifies a consistent pattern across the continent: markets classified as restrictive recorded falling stakes, lower GGR per capita and reduced channelisation. Countries such as France, Sweden and the Netherlands have seen large proportions of their gambling markets move offshore, with black market shares of 57%, 35% and 37% respectively.
In Western Europe, PwC notes a “strong correlation” between tighter rules and falling revenue, with channelisation declining by an average of 2% year on year in tightening jurisdictions. Countries with stable frameworks recorded average channelisation growth of 7%, while those liberalising rules saw increases of around 15%.
By contrast, Spain and Denmark, where tax rates are moderate and licensing systems open, maintain higher levels of onshore participation, with only around 11% of gambling taking place outside the regulated sector.
UK Market Faces Potential Risks
While the UK still benefits from strong competition and high levels of channelisation, with an estimated 5% of online betting and gaming taking place on unlicensed sites, PwC warns these advantages are not guaranteed to persist if reforms collectively make the regulated offer less attractive.
The UK’s average tax rates now stand at 25% for horse racing, 21% for casino gaming, and 15% for sports betting. The rise in Remote Gaming Duty from 15% to 21% has increased operating costs and could lead to reduced marketing, fewer promotions and widening price gaps between licensed and offshore sites if further tax pressure is applied.
PwC warns that the introduction of frictionless financial risk assessments is likely to alter customer behaviour, particularly among high-spending players who are historically the most sensitive to added friction.
“Britain has one of the safest gambling markets in Europe but if the Treasury isn’t careful, we could quickly end up like France or Sweden, with huge black markets contributing nothing in tax, offering zero player protection, and providing no funding for sport or the economy,” said Grainne Hurst, CEO of the Betting and Gaming Council.
“Well-balanced regulation and fair taxes protect players, raise more revenue for the Treasury, and support thousands of jobs. Unlicensed operators do none of those things.”
The findings come as the UK Treasury prepares its Autumn Budget and reportedly considers potential changes to remote betting and gaming duties. PwC concludes that predictable regulation and gambling duty rates below 25% of GGR deliver the strongest outcomes for consumers and tax revenues, whereas excessive restrictions increase the risk of channel loss and unintended harm.
PwC warns that aggressive enforcement measures, high compliance costs and reduced marketing flexibility can reduce the visibility of licensed operators, creating openings for offshore businesses.
Source: PwC / Betting and Gaming Council
