George Mamulaishvili: Two Years Later, Operators Adapt and Grow Under New Regulations

Key findings

•       According to the Revenue Service of Georgia, the online gambling industry grew rapidly in the first eight months of 2024; compared to the same period of the previous year, average growth was 35% in sports betting, 17% in casino and 19% in deposits.

•       The growth occurs despite tightening regulation: in 2023 the government increased the tax rate on the sector (gambling business profit tax from 10% to 15%, and winnings taxed at 5% instead of 2%), and the tightening process began in 2022. Two years were required for the industry to adapt to the new conditions.

•       The factors behind the growth include foreign players migrating to the region, local operators entering new markets, the professional work of local companies and the return of players who had previously chosen other markets. UEFA Euro 2024 influenced sports betting, but the upward trend was already apparent in Q1.

•       From the new year foreign citizens will be exempt from the 5% income tax on winnings, and the profit tax on income received from foreign citizens will be lowered from 15% to 5%, allowing operators to enter international markets, obtain new licences and attract foreign competition.

•       The gambling industry and related businesses such as IT, providers and developers make up 14% of the country's budget, and current figures would be even higher without the 2022 regulatory changes.

•       Preserving some advertising or reducing the tax burden would allow gambling companies to contribute more to the budget; meeting businesses halfway would have a far greater positive impact than imposing restrictions.

Main Analysis

Market Growth

The Revenue Service of Georgia reported that the online gambling industry has experienced rapid growth in the first eight months of 2024. This applies to sports betting, online casinos and deposits. Compared to the same period last year, average growth in sports betting was 35%, in the casino 17% and in deposits 19%.

These growth trends are occurring despite tightening regulations. In 2023, the government decided to increase the tax rate on the sector. New rules increase the gambling business' profit tax from 10% to 15%, and winnings are now taxed at 5% instead of 2%. The process of tightening regulation began back in 2022. Two years were required for the industry to adapt to the new conditions, improve business processes and adjust its offerings. As a result, companies were able to overcome these challenges successfully.

The gambling business in Georgia is well developed and has substantial potential, especially in the online gaming sector. Despite restrictions and new regulations, local operators were able to change the dynamics of the market and direct it in a positive direction. Positive results were achieved through proper management, new technologies and innovative approaches.

The products offered by local legal operators were able to attract consumers. Furthermore, legal businesses' high level of trust also attracted and engaged customers.

Operators, however, were faced with many difficulties due to the new regulations: taxes increased, and advertising was partially banned. It took time for companies to rethink their strategies and change the way they worked with clients.

Results so far this year indicate a growth trend that will likely continue in the years to come. This is particularly relevant because foreign citizens will be exempt from the 5% income tax on winnings from the new year. Moreover, the profit tax on income received from foreign citizens will be lowered from 15% to 5%. As a result, operators will have the opportunity to enter international markets, obtain new licences and attract foreign competition.

Factors Contributing to Growth

Many factors contributed to market growth, including foreign players migrating to the region and local operators entering new markets. The most important factor remains the professional work done by local companies.

It is encouraging that the country is developing and that local operators continue to have a positive reputation. A number of players who previously chose other markets have returned, which has contributed to growth as well.

In addition, some attribute the growth in sports betting to this year's UEFA Euro 2024. It is true that the championship influenced the growth, but the upward trend was already apparent in Q1. As a result, this is not a short-term effect; in the long term, the trend continues.

Gambling companies are not the only ones responsible for the success seen today; the companies that supply them with products and services are equally important.

The State's Position

Government officials are aware of the industry's growth, and there is hope that in the future it will adopt more business-friendly measures. A first step has already been taken: foreign citizens will be exempt from the 5% tax on winnings withdrawals, and there is a reduction in GGR tax to 5% for foreign players. It is clear from this that the government understands that excessive restrictions do not always lead to effective results.

The current figures would be even higher if not for the regulation changes of 2022. By preserving some advertising or reducing the tax burden, gambling companies could contribute even more to the budget and develop more rapidly. As of now, the gambling industry and related businesses, such as IT, providers and developers, make up 14% of the country's budget.

Recommendations

The growth seen today confirms Georgia's leadership in the region. The government should recognise this and meet businesses halfway, which would have a far greater positive impact than imposing restrictions. Preserving some advertising or reducing the tax burden would allow gambling companies to contribute more to the budget and develop more rapidly.

GCA provides regulatory analysis, market-entry strategy and expert assessments for governments, regulators and operators. Contact: gcauthority.com