Winning The Taxation Challenge With GiG

Indubitably regulation–when executed with precision–is a force for good, writes Claudio Caruana, General Counsel at Gaming Innovation Group (GiG). 

In the global iGaming ecosystem, a robust regulatory framework enforces corporate accountability, guarantees player safety, and champions sustainable business practices. 

It should serve a vital hygienic purpose: Cutting off the oxygen to abusive operators, stamping out fraud, and disconnecting the industry from any historical associations with illicit or criminal activity. 

Without question sustainable markets require sustainable rules.

But there is an important distinction between regulating an industry for the public good and cannibalising it to plug macroeconomic fiscal black holes. Only one of them provides for a sustainable market that stamps out illegalities. 

We are currently witnessing a global regulatory squeeze, driven not by a sudden concern for player ethics, but by a desperate hunt for quick tax revenue. 

Western governments, saddled with soaring national debt burdens and facing structural socio-economic deficits, are treating the digital gaming sector as an infinite ATM.

This short-sighted cash grab is fundamentally doomed. There is enough empirical evidence demonstrating that when governments over-tax and over-regulate a consumer habit, they do not eliminate the demand. They simply hand the keys of the market to underground cowboys.

Desperation Over Logic?

The most stark example of this trend is playing out in the United Kingdom. 

Facing mounting national debt, the UK government has turned to aggressive fiscal measures, heavily impacting the digital entertainment sector. 

Chancellor Rachel Reeves’ now-notorious Autumn Budget delivered a shocking blow to the industry, in the form of an unprecedented increase in the Remote Gaming Duty (RGD) on online casinos from 21 percent to a staggering 40 percent, and a delayed increase of 10 percent in Remote Betting Duty, increasing it to 25 percent, starting next year.

The stated goal is clear: Extract an extra £1.1 billion annually by 2030 to bridge the Treasury’s financial deficits.

Why has the government targeted gambling? 

Sin Taxes

The brutal and morally-compromised answer, I believe, is because its alternative “sin tax” streams have entirely collapsed. 

Historically, tobacco was a reliable revenue generator for the state. 

But recent data highlights a severe shortfall. Legal tobacco sales have halved over a four-year period, forcing overall tobacco duty revenue to drop from £10.4 billion to £7.9 billion. High tax rates pushed an estimated 35-46 percent of consumed cigarettes into non-duty paid, illicit channels, creating a massive £7 billion annual black-market tax gap.

The state cannot easily compensate for this loss by raising alcohol duties either. Doing so risks immediate backlash from voters in a deeply-ingrained drinking culture, while drawing fierce opposition from regions heavily reliant on alcohol production.

Consequently, digital gaming has become the ultimate soft target. 

Regulators argue that these tax hikes are designed to curb harm. 

But in reality the state is simply utilising the sector as a mechanism to balance its books. 

To navigate this matrix safely, forward-thinking operators are already reassessing their technology, choosing established, trusted platforms, such as GiG’s; that offer agile tech stacks, automation, superior user experiences and robust player-protection infrastructure built on a risk-based approach that will drive player loyalty.

Return Of The Bootlegger

This aggressive strategy ignores a fundamental historical truth: Humans will always seek out entertainment and risk. 

Squeezing legitimate, licensed operators out of commercial viability does not stop gambling, it merely re-routes it. 

The Dutch gambling market had already had a similar fate. 

Following the tax hike from 30.5 percent to 34.2 percent on January 1, 2025, Holland’s regulatory  KSA conducted a formal impact assessment. They  admitted that the tax hike was a failure regarding government revenue because it caused the Gross Gaming Revenue (GGR) of the legal market to contract.  Consequently, gambling tax revenues have also decreased. 

The Chair of the KSA stated that a financially-driven measure like gambling tax is at odds with the policy objective of offering players more protection. 

During the 1920s, the United States attempted to eliminate alcohol consumption via the 18th Amendment. The result was not a sober nation, but the creation of an untaxed, violent, criminal empire run by bootleggers. Squeezing the market creates a vacuum that organised crime is always ready to fill.

By doubling the tax burden on licensed operators, governments make it financially impossible for legitimate businesses to compete on odds, bonuses, and incentives. Major operators have already warned that a 40 percent RGD forces an environment where over 60 percent of total revenues are swallowed by duties. 

This leaves companies with two choices, degrade the consumer product or exit the jurisdiction.

When legitimate options deteriorate and the products of the legal market are inferior to the black market, consumers naturally migrate to the illicit market. 

The modern digital bootlegger does not operate from a hidden basement, they exist via unlicensed crypto-casinos and unregulated offshore sites accessible with a simple click. 

And the bad market operates with zero tax overheads, zero compliance costs, and zero player safety nets. 

To prevent this migration, legal brands must remain laser-focused on immediate player interaction, utilizing real-time automation engines like LogicX to deliver instant, customized incentives that the offshore sector cannot replicate legally.

Survival Of The Technologically Robust

As this regulatory squeeze intensifies globally, the operating environment will become increasingly hostile. Marginal, poorly-optimised businesses, relying on legacy architectures, will find their margins entirely wiped out by the compliance and tax burden.

In this new era, only the highly robust and those built on modern, compliant and flexible technology frameworks will survive.

To withstand this dual pressure of high taxation and strict compliance, operators need highly intelligent and adaptable tech stacks. 

Platforms must utilise real-time data architectures, like DataX, to gain deep system visibility and reduce the internal cost of compliance. 

Survival requires the ability to instantly adapt front-end experiences, automate compliance workflows, and streamline operational costs without disrupting uptime. 

And turning strict regulation into a tangible commercial advantage is no longer a luxury. It is the baseline for corporate endurance.

Warning

The warning for governments is simple – do not break the legal market. 

Squeezing licensed operators to patch up national balance sheets is a proven historical failure. It destroys tax yields, dismantles consumer protection, and hands market control directly to bad actors.

Regulation should be used to deliver the honourable objectives, to enforce corporate responsibility, promote sustainable play, and build a stable, long-term industry. Turning a highly-regulated sector into a fiscal scapegoat will inevitably backfire.

In this regulatory and tax melee, only cowboys will thrive in a bad and clandestine market. The state, paradoxically, will be left with an empty treasury and an uncontrolled gambling problem. 

In this uncertain, increasingly complex new world of gambling, only technologically-advanced operators, anchored by secure, automated, and highly adaptable environments–like the GiG ecosystem–will have the resilience to survive the crisis.

Claudio Caruana is General Counsel at Gaming Innovation Group, where he leads the company’s legal, regulatory, and compliance functions across multiple international markets. With extensive experience in corporate governance, commercial law, and complex regulatory frameworks within the global iGaming industry, Claudio plays a key role in supporting GiG’s strategic growth, market expansion, and operational integrity. He is widely recognised for his pragmatic approach to compliance and his ability to navigate the evolving regulatory landscape of online gaming.