Banning Gambling in Slovakia: A Boost for the Black Market

Last year, statistics revealed that gamers in Slovakia placed a staggering €21.4 billion (£18.3 billion/$23.1 billion) in bets, as disclosed by representatives of the country's Gambling Regulatory Authority.

Martin Bohos, the director general of the regulator, highlighted that players in Slovakia received €20.4 billion in winnings. Furthermore, tax contributions to the state saw a notable increase, exceeding €50 million compared to the previous year, totaling over €301 million. Of this sum, government contributions amounted to €93 million, with fixed odds betting contributing €80.48 million and land-based casinos adding €61.9 million to government revenue.

Despite the dominance of the online market in Slovakia, with 90% of Slovaks preferring online betting, online lotteries accounted for only 14% of bets. This suggests a clear preference among residents for online betting platforms over traditional lottery options.

The Menace of the Black Market and the Battle Against Illegal Operators

Bohos highlighted the ongoing challenges faced by Slovakia's regulators concerning illegal online operators and the country's gray market. Despite these obstacles, he emphasized that the fight against illegal gambling in 2023 showed promising results. Authorities effectively curbed the illicit operation of slot machines in bars, pubs, and other entertainment venues lacking proper licensing.

Efforts to combat illegal operators extend to the online realm as well. The regulator actively blocks and sanctions advertising from black market operators, particularly those involved in loot boxes in computer games.

Bohos elaborated on the risks associated with municipalities considering a ban on gambling. Such prohibitions could inadvertently drive gamers toward the potentially hazardous black market. This scenario not only deprives the state of significant tax revenues but also exposes players to unregulated gaming conditions, increasing the risk of gambling addiction.

“I would like the topic of a ban on gambling and the consequences of this step to become the subject of a wider public discussion, because if someone thinks that by banning legal gambling in a large city, gambling will be done away with, then yes, Legal gambling will end, but the risks of illegal gambling will remain too high. This is very dangerous for gamers, because on the black market no one cares about responsible gaming. And this is very unprofitable for the state - the budget will lose billions of euros.”

In May 2023, the regulator announced a significant increase in inspections, with 2,511 conducted in the first quarter—a rise of 201 compared to the same period in 2022. Digital audits also surged by 90% compared to the previous year's first quarter. 

Threat of Reduced Tax Revenue from Land-Based Casinos

Despite contributing €61.9 million to the state budget in 2023, the regulator anticipates a 22% decrease in this figure by 2025. This decline is attributed to restrictive regulations imposed by certain municipalities.

Local governments wield authority over gambling regulation within their jurisdictions, granting them the power to prohibit land-based establishments and impose various restrictions, including limiting gambling activities to specific locations.

Bohos voiced criticism toward Slovak cities and municipalities for their purported lack of attention to the country's gambling development program. He argued that land-based gambling establishments hold untapped potential to bolster budgetary funds. These establishments are highly favored among tourists and neighboring citizens, such as Germans, who demonstrate a willingness to spend substantial sums on gambling within Slovakian borders. Such foreign spending could yield significant economic benefits for the state.

Slovakia Emerges as a Prominent Destination for the Gambling Industry Since 2019

Since 2019, Slovakia has garnered attention as a promising hub for the gambling industry, particularly online ventures. With sports betting, horse racing, poker, and casinos all falling under officially regulated gambling products, the landscape offers a diverse array of opportunities. However, lotteries and bingo remain under the purview of the state monopoly company Tipos.

The enactment of Slovakia's gambling law on March 1, 2019, marked a pivotal moment, allowing private operators outside the country to seek licenses for sports betting and casinos. While the issuance of sports betting licenses commenced on July 1, 2020, the regulatory landscape further evolved in 2022 with the publication of a "white list" comprising sites operated by licensed entities within Slovakia.

Taxation plays a significant role in the regulatory framework, with fixed odds subject to a 22% tax on gross gaming income (GRI) for online operators and a 6% tax on turnover for land-based companies. For online casinos, the tax rate mirrors that of fixed odds at 22%, while land-based casinos face a 27% tax on the gross income directed to the state and an additional 3% allocated to the municipality hosting the casino.

Despite facing opposition from segments of society and certain government officials, Slovakia's gambling legalization law has spurred active market growth, yielding billions of dollars in revenue for both the country and operators alike. The accessibility of licenses for foreign operators, coupled with moderate tax rates, has positioned Slovakia as an attractive destination for gambling ventures seeking expansion opportunities.