Regulatory chanllenges for online sports betting operators in Hungary
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The rate of sports betting in Hungary has increased dramatically over the past few years. While many technological innovations have shaped this change, a lot of the growth has to do with the positive social attitudes towards sports betting. After all, with more people embracing the thriving communities centered on betting, sites like Whistlesports have proven to be instrumental in helping would-be punters find reputable bookies. But even with these positive social and technological factors, sports betting operators in Hungary have been grappling with regulatory challenges. We explore what they are, how they affect the operators, and how operators have been addressing them in their quest to sustain their operations and profits.
What Regulatory Challenges Are Facing Bookies in Hungary?
Favorable economic, environmental, social, and technological factors have paved the way for a thriving sports betting industry in Hungary. However, the following political and legal challenges have proven to be setbacks:
Strict Licensing Requirements
From a punter’s perspective, strict licensing requirements ensure that they remain protected and receive their payouts per the bookie’s terms and conditions. But to the bookie, complying with Hungary’s Gaming Act is no easy task. After all, a bookie must have worked as a gaming operator for at least five years within the European Economic Area (EEA), have a clean record, and meet all the other minimum entry requirements. Thanks to these conditions, many bookies do not qualify for a license. What’s more, the bookies who meet these requirements must undergo a lengthy verification process before they can finally get their foot in the door. It’s no wonder that the number of new operators in the industry barely meets the influx of punters.
So, how are operators dealing with these requirements? Many of them have been partnering with existing bookies in the EEA to meet the 5-year threshold. They have also been liaising with the licensing authorities to find practical yet effective ways to reduce the licensing requirements without putting the punters at risk.
Limited Marketing Opportunities
Besides licensing bookies, Hungary’s sports betting laws also delve into how operators can market their products and services to punters. As things stand, bookies are forbidden by the law to engage in any of the following activities:
- Suggesting that gambling offers guaranteed financial returns.
- Marketing their products and services to minors.
Additionally, while bookies can work with celebrities and influencers to market their sites, these ads are subject to heavy restrictions. In many cases, marketing departments have to rework their ideas to ensure that they do not come off as aggressive, as this is against the set marketing laws. Thanks to these barriers, many bookies spend a lot of money and time coming up with alternative marketing methods, such as sponsoring sports teams.
As bookies wait for their negotiations with the licensing bodies to bear fruit, they have turned their focus to digital marketing strategies, which allow them to foster parasocial relationships with punters without breaking the law. They have also turned to initiatives like loyalty programmes to encourage customer loyalty.
A High Taxation Rate
Most countries legalize betting in the hope that they can generate revenue from the taxes and license fees that they will charge the bookies. And Hungary is no different. In fact, bookies are subject to a gambling tax, which is charged on the gross revenue. Additionally, they must pay corporate taxes.
While providing betting services is a lucrative business, these taxes and licensing fees reduce the profit margins that the bookies can maintain. It’s not uncommon for bookies to struggle with remaining competitive to the point of leaving Hungary in search of a region with more favorable taxes. Moreover, some bookies choose not to expand their services as they realize that doing so also increases their tax obligations in a country where financial uncertainty has quickly become an issue.
Is there a way out? Why, yes! Given the mutually beneficial relationship between bookies, the government, the punters, and everyone who benefits from sports betting, it’s clear that a change in policies would serve everyone. With this in mind, many bookies have chosen to reduce their operational spending as they lobby for fairer tax policies.
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