A market with huge potential, stifled by regulations. Get to know the Netherlands

The Netherlands is known as one of the most liberal countries in the world. This is hard to argue against, given that the nation legalized soft drugs like marijuana years ago. Moreover, the Netherlands was the first country in the world to legalize same-sex marriage in 2001. Euthanasia and abortion? Also pioneers, with some of the most liberal laws globally in both cases.

In addition, the country has a relatively open immigration and asylum policy and had liberal gambling laws. Gambling in the Netherlands was treated differently from other spheres of life. Until 2021, it was indeed a free-for-all regarding the Internet, but then a law came into effect that changed everything. Its goal was to regulate the market, support regulated business, and supposedly protect players from gambling addiction.

Of course, we do not endorse the wild west of local gambling laws. Gambling must be regulated, but it should be done sensibly and wisely. Unfortunately, this is not the case in the Netherlands, as we will explain later in this article.

The Dutch License – You pay, You’re regulated, and you get nothing in return

Let’s start with some facts. From 2024, online betting and gambling games in the Netherlands are fully regulated under the 2021 Online Gambling Act. This act transformed an industry that previously operated under a state monopoly into one that allows private local and foreign operators to provide online betting and casino games to Dutch citizens. The market was theoretically opened up.

To obtain a license, one must meet several requirements similar to gambling laws in most European countries:

1. Licensing
2. Player safety rules and tools
3. Anti-money laundering compliance
4. Data protection compliance
5. Demonstration of fair gaming practices

Let’s expand on the fifth point. Gambling operators are required to have their games and gaming systems regularly audited by independent testing agencies to demonstrate fair gaming practices. These audits include verifying the randomness of number generators (RNGs) to ensure they provide truly random and impartial results. Such measures involve examining game algorithms and payout percentages.

The most interesting aspect is the adherence to advertising and marketing regulations. According to the Remote Gambling Act, which came into effect on July 1, 2023, operators cannot create advertising and marketing materials that adhere to unethical standards. This means that ads cannot target vulnerable individuals, especially the young, nor can they misrepresent the chances of winning.

In summary, we have a scenario where a licensed operator must conduct audits through independent testing agencies, adhere to advertising and marketing regulations, and constantly limit their players—all within the framework of a license that must be paid for. Meanwhile, illegal operators do not pay for licenses or taxes and do not protect players.

A License That Doesn’t Help but Becomes a Burden for the Operator

The process of obtaining and maintaining a gambling license in the Netherlands involves several costs. First, there is a non-refundable application fee of EUR 48,000, regardless of the application’s outcome. If granted, the licensee must pay an annual renewal fee based on the operator’s gross gaming revenue (GGR). This fee currently stands at 1.95%, covering costs incurred by the Kansspelautoriteit (KSA) in regulating the market.

This represents a substantial annual cost for an operator wishing to maintain a license.

Additionally, operators must also cover financial obligations related to compliance with regulations, such as regular audits, implementing responsible gaming measures, data protection protocols, and anti-money laundering systems. Moreover, ongoing costs necessitate investments in technology and personnel to ensure regulatory compliance.

These costs, largely overlooked by Kansspelautoriteit (KSA) and the Dutch government, represent a significant error and injustice. Once again, the regulated business bears the costs to remain honest, while illegal operators do not. Perhaps such costs should be deducted from the license fee?

How Big is the Gray Area in the Netherlands?

Estimating the exact size is challenging, as explained by Frank Op de Woerd, CEO of CasinoNieuws.nl and OnlineCasinoGround.nl: – There is no gray market (anymore) in the Netherlands. You have the white market with licensed providers and the black market with parties without a license from the Kansspelautoriteit. Reports in this area vary. The black market share is often estimated at 15% to 8%. This puts the regulated market in the Netherlands well above the stated objective of 80% channelization. The problem remains that these figures are always based on self-reporting; people themselves have to indicate whether they gamble illegally in surveys. That research method is anything but reliable, although I don’t immediately know how we can get a more accurate figure without a gross violation of privacy.

Looking at the signals I receive, I suspect the illegal market is more significant than assumed. I get monthly figures for the number of FTDs that certain illegal networks are doing in the Netherlands, which involves hundreds of FTDs. Moreover, I get several emails every week from other networks asking if we want to cooperate with them because the Netherlands is one of their most important markets. I don’t, but it does give food for thought.

Finally, I question how to measure channelization. You can measure by number of players or by GGR. I think many big players, the VIPS, go to the illegal circuit or already play there because the service whales are offered at legal casinos pales in comparison to the opportunities illegal online gambling sites have. If you were to look at the turnover ratio between the legal and illicit circuits, the black market may well be much larger than expected.

Other experts also shared their thoughts on this topic:

Eric Konings (Director of NOGA | Netherlands Online Gambling Association): – According to the official figures, the channelization has dropped from 93% to 90%, but is still well above the policy objective of 80%. However, reliable figures on how big the illegal market is are missing, and we are increasingly worried it might be a lot bigger than 10%. Furthermore, we are concerned it will grow fast in light of newly announced measures such as the tax increase and the deposit limits, if not executed well.

Mike de Graaff (Director at BetComply): – No one has accurate data on this. Because unlicensed operators don’t share any data. So you’re left to web traffic, revenue estimates etc. My guess it’s around 80% but will go down to 60%.

Raising Taxes – The Final Nail in the Coffin for the Regulated Market in the Netherlands?

Regarding taxation, the primary fee imposed on iGaming operators in the Netherlands is the gaming tax, which stands at 30.5% of GGR as of January 1, 2024. However, this rate might not last long, as the right-wing government formed by a coalition of four parties – PVV, VVD, NSC, and BBB – believes the legal business is doing too well, warranting a drastic tax increase.

The coalition plan involves raising taxes to 37.8% of GGR. Why such a change? When in doubt, follow the money. By increasing the tax, the Treasury will receive an additional EUR 202 million annually from gaming taxes. This is, of course, done under the guise of player protection, which is absurd.

Henry Meijdam, chairman of VAN Kansspelen, commented: – This is the opposite of the social security that people say they support for citizens – including, I assume, completely legal, bona fide SME entrepreneurs. Nor does it have anything to do with good or at least proper governance. However, it is completely socially irresponsible, because this inevitably leads to major problems and costs regarding safety and care.

Henry Meijdam

He added: – Apparently people were not aware of this, probably due to the multitude of topics and the time pressure. But this point in the intentions really needs to be repaired, otherwise the baby will be thrown out with the bathwater and criminals will smell opportunities in the illegal gambling circuit.

Such a drastic tax increase, just three years after the introduction of the gambling law, and only a year after banning most forms of gambling advertising, will only strengthen illegal businesses. It will empower criminals who know this is the perfect moment to attract players. Illegal operators will have no trouble increasing their market share in the Netherlands, as they have been doing effectively for a long time.

In April this year, Nils Andén, CEO of Kindred Group, recognized the scale of the multifaceted problem in an interview with NEXT.io: – The sentiment around our industry in Netherlands is definitely not positive. It’s a tough one. For me, it’s really about engaging in discussions with policymakers in the Netherlands to reiterate what was the main ambition of the gambling reform.

Basically, the two main things are around channelisation – ensuring that as much of the market or the gambling that happens in Netherlands happens within the licensed market. And similarly, ensuring a high level of customer protection.

If it would be the case that one particular product will be banned from the market, we know from other markets what that means. That those players that enjoy those kinds of games will go to the offshore market and the black market, and channelisation will go down.

Nils Andén, CEO Kindred Group

As iGaming Express, we also asked several experts on the Dutch market what they thought about a potential tax increase:

Eric Konings (Director of NOGA | Netherlands Online Gambling Association): – This significant increase puts further pressure on the channelization, which according to regulator figures had started to slip already. This shouldn’t come as a surprise, given the accumulation of policy measures implemented after the market opened Oct 1, 2021.

Mike de Graaff (Director at BetComply): – It’s a wrong move and estimated additional tax revenue of 200M per year is way off. The tax rate was already amongst the highest in the world before the raise. We actually expect the total tax revenue to decrease quite a bit, as this intended tax rate will result in lower RTP, maybe even closures of licensed offerings, and with that more players are moving to illegal offerings.

Frank Op de Woerd, CEO of CasinoNieuws.nl and OnlineCasinoGround.nl, elaborated further in our interview: – The increase is disastrous for the land-based sector. It is already in dire straits because of the COVID years and earlier tax increases and will be largely wiped out with this increase. The fact that the maximum hourly loss and maximum coin-in were set years ago ensures they can’t pass the increase on to consumers.

Frank Op de Woerd

Online, an increase can be passed on to the gamblers, but that means a major downsizing of the offerings. Online casinos will start lowering the RTP of slot machines and offering worse odds on sports. That directly makes the illegal offerings more attractive, and so such an increase causes dekanalization.

It looks like they did the calculation on the back of a beer coaster without thinking it through very carefully. The increase shows a short-term vision with no regard for the long-term consequences.

***

According to our information, if the ruling coalition’s plan to increase taxes is implemented, several major operators will withdraw from the Dutch market. This will not only be due to the steep tax hike but also because of other shortcomings from the regulator. These include the introduction of deposit limits, restrictive advertising regulations, and ignoring many problems, including the growing market share of illegal operators. Although it’s hard to say how large the gray area is in the Netherlands, it is substantial, as we discussed earlier.

Criticism from the Entire Industry

After the proposed tax hike was announced, the Dutch Internet Gambling Association (NOGA) expressed its concern about these plans. Former NOGA director Peter-Paul de Goeij believes that the proposals will have a detrimental impact on distribution channels to Dutch legal operators. De Goeij also believes that the additional tax revenue will come at the cost of social harm to players: – The proposed increase in the tax rate by no less than 7.3% threatens the viability of the legal Dutch gambling market. This is extremely risky, as the awareness that illegal sites do not pay taxes and are not required to exercise caution under Dutch laws and regulations is already brazenly luring Dutch consumers.

Van Kansspelen, another Dutch gambling association, also expressed its surprise at the proposals. Van Kansspelen agrees with NOGA that these plans might have a harmful impact, directing players towards offshore operators.

Henry Meijdam, chairman of Van Kansspelen, stated: – It is completely socially irresponsible, because this inevitably leads to major problems and costs in terms of safety and care.

Research and Facts

The aforementioned Dutch Online Gambling Association (NOGA) conducted a study showing that the number of players particularly vulnerable to gambling addiction decreased only slightly in 2024 compared to 2023, by just three percentage points.

A survey by Ipsos revealed that in 2024, 39% of respondents who gamble might have a gambling problem. The conclusions were drawn based on the respondents lying about deposit amounts or feeling the urge to place more bets.

More interesting were the responses to subsequent questions, especially the question of whether a player would switch to an illegal operator if their current legal operator was suspended. A whopping 47% of players at risk stated they would switch to an illegal operator!

Moreover, 48% of respondents in the risk group said they would switch operators if required to provide proof of income. Meanwhile, 41% said they would change providers if they exceeded deposit limits with a legal operator. This means that almost half of at-risk players would immediately turn to the gray market.

This indicates that further restrictions (including stake and deposit limits) and tax increases directly push particularly vulnerable players into the arms of illegal operators. These players would be left to fend for themselves, likely leading to tragedy and forcing the government to spend significantly more on treating such individuals.

For the record, a total of 2806 Dutch people aged 18 and older participated in the above study. They were asked questions on topics such as awareness of the gambling market, gambling advertising, and gambling addiction.

Importantly, the study shows that last year, one in six Dutch people (16%) engaged in online gambling. This increases the number of players for the second consecutive year, by 13% and 11% respectively in 2023 and 2022. As in previous years, young adults aged 18-34 make up a larger share of players (29%). This clearly indicates that the Dutch regulator should focus on wisely regulating online gambling, which continues to grow.

Bans, Limits, Tax Increases – A Godsend for Illegal Operators

Considering the above study, Kansspelautoriteit (KSA) announced significant changes to Responsible Gaming regulations, introducing new deposit limits for players based on age groups. Protecting young players, particularly vulnerable ones, is absolutely right, but are the tools (in this case, additional limits) well-chosen? Here, doubts arise.

KSA explains that these limits aim to curb excessive gambling behavior, especially among younger and potentially more vulnerable players. Players wishing to exceed these deposit limits must undergo a financial check to ensure they can afford higher amounts. If deemed incapable of meeting these financial thresholds, further deposits will be blocked for the remainder of the month.

Eric Konings commented: – It’s in the best interest of everyone to protect players as good as possible. Under the Remote Gambling Act, players are responsible for setting their own limits. Operators, on the other hand, are responsible for fulfilling their active duty of care. The government now aims to tighten the framework for playing limits ahead of the evaluation of the Gambling Act later this year. NOGA understands the necessity to improve the active duty of care. NOGA stresses that playing limits are one of the tools used by operators to fulfil their duty of care and stimulate responsible gambling behaviour amongst their customers. Any changes in the framework for playing limits need to be evidence-based. Furthermore, limits need to be adjustable based on risk and behaviour.

Although the new deposit limits will take effect in October, other aspects of Responsible Gaming regulations are already in place. One such rule requires casino operators to intervene within an hour of detecting harmful gaming behavior. Moreover, continuous monitoring is required, ensuring operators vigilantly track gaming activities 24/7.

These regulatory changes will necessitate casino operators to upgrade their monitoring systems and establish more robust intervention protocols. The requirement for round-the-clock monitoring and swift intervention demands significant investments in technology and training. Casino operators will need to ensure their staff is adequately trained to recognize signs of problematic gambling and respond appropriately.

Mike De Graaff commented: – The fact that there’s a difference depending on the age range is correct. It is well documented that young adults should be more protected than others. I do think that with the new deposit limits, as well as the contact moments, the reality checks every 30 minutes, the 1-hour interventions and the tax rate, we’re making licensed gambling in the Netherlands super unattractive. As a player, I wouldn’t like it at all to be watched to that extent. Protection is great, this is becoming too much to remain an enjoyable experience. Players are after entertainment.

Frank Op de Woerd shared similar thoughts: – I do not doubt that young adults must be well protected from themselves, even better than adults. There is a clear difference between the two age groups; therefore, I do not find it remarkable. Because the limits can still be raised, people with more to spend remain able to do so.

At the same time, any hurdle raised, as now with personal interviews and sharing sensitive information about your income, for example, always favors the illegal alternative that never asks those kinds of questions. The line hasn’t been crossed yet, but the legislator is very close now with the imposition of conditions and measures that make the legal offer less and less attractive.

We also asked KSA (questions sent on 03.07.2024) about the reasoning behind such regulations when studies clearly show that limited players—especially young people in the risk group—will switch to illegal operators within minutes. Unfortunately, we did not receive responses to either this question or any other questions we sent.

How should this be interpreted? Apparently, KSA once again does not intend to consider the industry’s voice, let alone consult with it. Below are all the questions we sent to KSA:

1. How big does KSA think the gray zone is on the Dutch market? Have you tried to estimate it based on research commissioned from an external agency, or did you conduct such research yourself?
2. What does the KSA think about a possible tax increase to 37.8% of GGR? In the opinion of the KSA, will this not negatively affect licensed operators and positively affect illegal operators?
3. Is the KSA trying to detect violations of the Dutch Gambling Act by collecting evidence using a “mystery shopper”?
4. According to our information, if taxes are increased to 37.8% of GGR, several large legal operators will abandon the Dutch market. Does KSA also have such information or allow such a scenario?
5. How does the KSA justify the introduction of deposit limits regarding the age of players? Do you think that introducing such limits may result in players leaving for illegal operators?
6. In your opinion, do you do everything to communicate with legal operators?
7. What actions does KSA intend to take in the near future for legal operators? Does KSA intend to, for example, organize a meeting with legal operators on the fight against the gray zone?

Of course, if we receive responses, we will publish them immediately.

KSA Wasting energy on unnecessary matters?

Let’s go back to 2023, when KSA imposed fines totaling EUR 26 million on five operators for violating regulations by offering online gambling in the country without a license. The fines were imposed on N1 Interactive, Videoslots, BetPoint Group, Probe Investments, and Fairload Limited in December 2022, but they were not published until March 3 last year, after operators appealed to the court to delay publicizing the fines. The court dismissed the operators’ request, allowing KSA to publish the data.

N1 Interactive received the highest fine of EUR 12.6 million for a repeated offense, having first been fined in July 2021 for the same offense—operating without a license in the country.

Videoslots was fined EUR 9.9 million for improperly displaying the KSA logo on its website, despite lacking a license from the regulator to offer online gambling in the Netherlands. KSA stated that its branding is a way for players to verify if an operator holds a license.

Meanwhile, Betpoint Group was fined EUR 1.8 million for operating without the appropriate license in the Netherlands, Probe Investments received a EUR 1.1 million fine, and Fairload was fined EUR 900,000 for the same reasons.

KSA added that all fines take into account each operator’s turnover, in line with a new fine policy adopted in September 2021: – Offering online games of chance to players in the Netherlands is only permitted with a KSA license,” said the regulator. “Strict rules and regulations are in place to ensure a safe legal offering, where players are guaranteed fair play and protection against gambling addiction.

René Jansen, then-chairman of KSA, added: – We are serious. Player safety is paramount. The fine hits where it hurts, in the wallet. With such amounts, we believe we can impose an appropriate penalty, considering the illegal income..

In theory, it seems that KSA is rightly and effectively fighting gray market operators without licenses. However, if we take a closer look at the Videoslots case, it becomes apparent that KSA, amidst many serious market problems, is unnecessarily seeking additional issues. What is this about? Before the fines were publicized, Videoslots reported at the end of February last year that it intended to appeal the decision, accusing the regulator of abusing mystery shopper rules.

Preparing to file the application in April 2022, Videoslots reported that the regulator’s logo was visible by mistake for a short time on its website and was quickly removed. Upon learning of the error, Videoslots stated that the regulator tried to register as a Dutch customer but failed due to existing measures. KSA then allegedly gained unauthorized access by posing as a German customer, allowing it to make a deposit and place a single bet of 20 cents.

Upon discovering that a Saudi official had illegally accessed its site, the operator reported implementing further measures to prevent similar incidents in the future. However, KSA stated that Videoslots violated the Dutch Gambling Act by allowing access and imposed a fine, which the operator denied and confirmed it would appeal.

– Videoslots does not target, but restricts the Netherlands, so Dutch gambling law does not apply to its services. No Dutch player could access our site during the disputed period, and no breach occurred. It’s absurd that KSA would fine us after gaining unauthorized access. It’s simply not possible to fully protect against unauthorized access, and KSA provides no guidelines on what measures are sufficient. Moreover, no proven harm occurred, and the interests of Dutch consumers were never compromised. KSA calculated the fine based on several estimates. There is no basis for this and a lack of proportionality. Videoslots takes its legal and regulatory obligations very seriously, but we challenge KSA’s actions and conclusions, which we believe are unlawful. We are confident of a positive outcome in this matter  – said Ulle Skottling, then Deputy CEO of Videoslots.

Ulle Skottling

We contacted Ulle Skottling for further comment, but he declined, stating he no longer works at Videoslots. In summary, we have a situation where KSA, using the mystery shopper concept, tries to prove operators are targeting the Dutch market while there are operators who indeed operate illegally in that market. As mentioned earlier, there are no precise data on the size of the gray market in the Netherlands, but it can be assumed that it has grown significantly in recent months, reaching several dozen percent.

Shouldn’t KSA focus on real issues affecting legal operators? In many cases, mystery shoppers aren’t needed because illegal operators advertise on gambling forums or through illegal affiliates, particularly online casinos whose ads are easily found on the Internet.

The Dutch Market Suffers and Needs Change

In conclusion, the image of the Dutch market does not look good. It’s not surprising that legal operators feel concerned and unfairly treated by KSA. After all, they bear all the licensing fees and technical costs required to comply with the regulator’s increasing restrictions. Meanwhile, illegal operators are growing stronger, not paying a single euro in taxes.

Eric Konings said: – We have a good dialogue with the regulator, and any ideas on what we think is important will always be shared with Kansspelautoriteit directly first. We do hear an increasing number of worrying stories about players moving to the illegal offering, mostly via Google, where no verification, age check or duty of care is in place. We have flagged these concerns before, and we will continue to do so.

It seems the Dutch regulator is making a logical error. It’s not wrong to make obtaining a license difficult, requiring operators to meet stringent conditions. However, it cannot be that once they have the license, they are treated worse than illegal operators.

Mike de Graaff commented: – Enable operators to be attractive in their offering, with removing restrictions and lowering tax rates. While at the same time have swift and heavy enforcement on licensing conditions. The message to operators should be ‘with a license in the Netherlands you can provide an attractive offering and compete, so you can be commercially viable, but don’t try and break our rules because enforcement will be swift and heavy.

Frank Op de Woerd shared a similar view: – The regulator should focus more on combating illegal operators. The existing rules and measures for regulated offerings are already enormously strict. Compliance with them is essential, but those legal parties must be protected from opportunistic illegal competition that doesn’t pay taxes and does not care about measures designed to protect consumers.

So, what can save the Dutch market? Primarily dialogue between KSA and legal operators, and respect for legal companies that contribute significant sums in taxes to the state budget. Companies that respect the law should be honored, and those who blatantly break the law and indirectly rob the state and endanger particularly vulnerable players should be condemned.