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Regulation Killing French Internet Gambling Business

30 November 2010 by admin

I have always been wary about the idea of having the government regulate online gambling. While I support the full legalization of online gambling in countries where there is no current fully legal market – such as in the United States – I don’t support government regulation of that market. That is because governments have shown time and again that when you allow them to regulate an industry, they end up over-regulating it, which chokes out the industry and destroys profits.

For only the most recent example of government regulation crippling an online gambling market, take a look at France. The French government was praised for recently expanding their online gambling market to allow overseas competition for the first time earlier this year. While allowing competition for the first time was a good thing, the government regulations imposed by ARJEL are hurting everyone who enters that market.

french-parliamentThere are many problems with the overbearing regulations, but the two biggest problems are taxation and the capped rate of return. The first problem is obvious. Companies that enter a new regulated market have to bear the extra cost of being taxed by that government. An international online casino is likely to be taxed by many different governments at the same time, which leaves little profit remaining. With a tax rate that is higher than the European average, France’s taxation is especially bad.

While big governments overtaxing industries is certainly nothing new or unexpected, the rate of return cap is egregious. By French law, any gambling website that operates in their jurisdiction has to abide by a cap of an 85% return rate to the players. As BetClic chairman Stephane Courbit stated, that means they “cannot distribute more than 85% of money. Everywhere in Europe, but also in France if you did not license, you redistribute 96%.”

The rate of return is the percentage of money that is paid out to players. Since there is a house edge, on average, players will lose money to the casino. However, casinos with a high rate of return allow the players to keep more money. Obviously, that is a better deal.

GreedIf you take a look at our featured online casinos here on Suite, all of them have a payout rate of more than 97%. Go Casino even has a 98.4% payout rate, meaning that on the average, the casino only takes 1.6% of a player’s money. Online casinos that operate elsewhere in Europe and those that illegally operate in France are able to offer high payout rates like that. Those casino websites that are legally licensed by France’s ARJEL, however, can only offer an 85% payout rate, meaning the casinos will take 15% of the player’s money. Considering those options, where would you rather play?

It is absurd regulations like those that have led Courbit to call French regulations the “worst online gambling laws in Europe.” Because of the government regulations, licensed casinos are losing business to unlicensed operators. Since the government states that they need to license casinos to ensure that they’re safe (which isn’t true), then those regulations are especially counterproductive.

ARJEL and other government regulatory agencies claim to protect people and businesses, but they do more harm to both than good. If France wants online casinos in their jurisdiction to succeed, they need to scale back the regulation and make it a freer market. Or they can do away with their own regulation entirely. After all, despite the myth of the unregulated online casino, any reputable online casino is regulated already.

One Response to “Regulation Killing French Internet Gambling Business”

  1. claire jacobs says:

    why does this government agencies prohibit the use of online casino sites. Let them try to play the casino games so they’ll understand how great it is.