majority of unlicensed activity was initially generated by grey market ‘legacy’ operators. Te lack of legislation governing the online market in Hungary until the recent Gaming Act (Feb 2022), created a vacuum that was filled by major European gaming brands.
Ismail Vali Founder & CEO, Yiled Sec
In 2022, Yield Sec’s Ismail Vali presented the gaming industry with the analogy of an online gaming marketplace as an iceberg – the visible snowy cap representing the white market we’ve been led to believe is the entirety of the online gambling market, plus the enormous grey/black mass beneath the waterline that’s the illegal/unlicensed market activity dwarfing everything else.
It’s a picture that’s repeated across Europe, but it doesn’t represent all countries equally. Channelisation is different from country to country, with the highest bar currently set by the UK (Legal GGR channelisation of 96 per cent – Yield Sec 2023). However, what’s been illuminating as we’ve explored exclusive data provided by Yield Sec, is that markets with incredibly low rates of legal channelisation face clear problems, but the potential consequences and solutions are anything but clear cut.
ILLEGALS OVERWHELM & OVERPOWER
Yield Sec describes Hungary’s online gambling marketplace as a convoluted and out of control ecosystem where illegal, unlicensed options overwhelm and overpower legal operators. In 2023, the illegal market outweighed the legal market 93 per cent to seven. Tere are three legal, licensed operators in the restrictive market, which is served by 244 illegal operators actively targeting Hungarian players, with 221 affiliates only promoting unlicensed operators.
Hungary is a recently regulated (2022) ‘white’ market that has tied its online betting and gaming licences to three pre-existing land- based operators: Tippmix Pro,
Vegas.hu and
GrandCasino.hu. Over the course of two years, however, illegals in Hungary control 93 per cent of the online marketplace – that’s more than three times the global average for illegal online gambling share in any marketplace. For perspective, Hungary channels gambling activity to licensed sites and apps almost 90 per cent less effectively than the UK, the world's most legally regulated marketplace.
In 2023, licensed operations accounted for just seven per cent of the revenue generated by online gambling activities in Hungary. Te vast
Chief among the brands operating in Hungary before the new Gaming Act were Bet365, Unibet and GameTwist. Each of these brands continued to operate in Hungary beyond the introduction of the new Gaming Act and as of the first half of 2023, Bet365 took a 63 per cent share of the market, followed by Unibet at 18 per cent and GameTwist with five per cent. Hundreds of unlicenced operators formed an additional seven per cent, with the three licensed operators splitting the final seven per cent.
WITHDRAWAL SYMPTOMS
Two factors changed in the summer of 2023. Te online gambling licensing system in Hungary (introduced January 1, 2023) entered into force on July 1. By August, the Supervisory Authority for Regulatory Affairs (SARA) stated that it was now able to issue a series of fines (up to €250,000), commence IP blocking, and issue criminal reports to the police for illegal gambling against operators and possibly against banks (domestic and foreign) that failed to comply with the strict payment blocking expectations. Te second factor saw Yield Sec delivering its report on the size and scale of illegal activity in the gaming market to Hungarian clients.
Te week commencing November 28, 2023, long-term unlicensed legacy operator in Hungary, Bet365, pulled out of the marketplace. Bet365 had been the number one sportsbook and casino operator in Hungary since the beginning of Yield Sec’s monitoring. Ads and affiliate links are still present in many places, but directed to a “sorry, you have been blocked’ page. Bet365 had controlled almost two-thirds of the GGR revenue channelisation in Hungary. Tey remain the number one searched for term across the vast majority of audience keywords and phrases on Google in Hungary. But now they’re gone – and the fallout has been dramatic.
Te first revelation is that the three licensed operators, each land-based with tied online gambling licences, have not gained any additional market share. Te removal of the dominant 63 per cent market shareholder, Bet 365, has not benefited any of the licensed operators in Hungary, whatsoever. Te chaos caused by the departure of Bet365 saw the creation of new and more aggressive affiliate offers from an increasing number of offshore, unlicensed entrants. Bet365’s withdrawal drew more illegal operators to Hungary as a land-grab peaked in the market to replace Bet365 links with other illegals. Te market also saw an
Yield Sec describes Hungary’s online gambling marketplace as a
convoluted and out of control ecosystem where illegal, unlicensed options overwhelm and overpower legal operators. In 2023, the illegal market outweighed the legal market 93 per cent to seven. There are
three legal, licensed operators in the restrictive market, which is served by 244 illegal operators actively targeting Hungarian players.
increase in the size and scale of affiliate bonus offers for unlicensed brands, with affiliates driving the marketplace and few, if any legals, even so much as included on popular affiliate sites.
Bonus offers in the market have spiralled in Hungary, with licensed sites unable to compete with offers from unlicensed operators that are, on average, at least 2.5x more aggressive than the leading local casino brand,
Vegas.hu. According to Yield Sec, bonus offers in addition to smart keyword-focused domains that target events and products, as opposed to marketing solely casino/betting brand names, ensure that unlicensed operators retain the upper hand in the market. Licensed operators are largely invisible to the vast majority of the HU audience who find their bets, and the links to them, via HU affiliates, and have done for years – the legacy effect in action. In Hungary, a shocking 85 per cent of all affiliates only promote illegal brands, with a further five per cent promoting both legal and illegal brands side by side. It’s disturbing to find that six per cent of affiliates promote other affiliates – to further compound their relevance and authority across search and social – but only four per cent of all affiliates promote only legal brands. Te problem is, hardly any Hungarian consumers visit or convert via those legal-promotion only destinations.
What Hungary has shown is that moving the marketplace needle from unlicensed to licensed regulated gambling is not as simple as just targeting against one or two illegal operators for enforcement. Every action against large illegals splinters the marketplace in favour of even more illegal entrants. Entain’s recent announcement of mass market withdrawal in jurisdictions where they are unlicensed is likely to create exactly the same negative vacuum effect, but on an international level.
WAS HUNGARY DESTINED TO FAIL?
Any system introduced by governments with best intentions, but without proper monitoring, policing and enforcement (MPE) is, according to Yield Sec’s Ismail Vali, doomed to fail. “A system imposing tied-licences, strict pricing policies and limited offers with the aim of raising money from taxation to pay for social welfare and healthcare systems, is very laudable, but without monitoring, policing and enforcement (MPE) – it’s simply not going to work, in practice,” states Vali. “Going from brick and mortar to online doesn’t mean that MPE is impossible, it’s just harder, which is why we created the Yield Sec platform in the first place: to see, know, value and action across the total marketplace, from an audience and activity perspective, and not just hope for legal channelisation in the face of falling or impossible legal operator profitability and sustainability.”
Crime has always been interested in the gaming industry, but for the most part its focus has been upon money laundering activities as opposed to actual operations. However, things are changing according to Yield Sec and their surveillance and data shows that the European marketplace is migrating from ‘soft’ to ‘hard’ criminal activity on a rapid timeline.
WIRE / PULSE / INSIGHT / REPORTS P95
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