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Read Full BioEntain reported positive numbers in its Q3 earnings call, and CEO Stella David wants regulators to focus on reducing the black market rather than increasing taxes to maintain its future growth.
The company reported revenue growth of 6% this quarter, fueled by a positive performance by BetMGM. Entain holds a 50% stake in the US betting and gaming company, with MGM Resorts.
In the UK, online revenue was also up 15%, with retail increasing a more modest 2%. The company highlighted the looming tax increase in the country as its main cause for concern and urged the Treasury and Chancellor once again not to increase rates.
Company Already Paying Tax Rate of 66%
In the company’s earnings call, the expected tax increase in the UK was one of the main topics of focus. Rob Wood, CFO and Deputy CEO, said the company already pays an effective tax rate of 66%.
Wood noted, “That means that for every pound that we make in the UK on a pre-tax basis, 66% of that goes to the UK government and that’s why we’re a top 20 taxpayer in the UK, but we’re obviously not one of the top 20 largest companies in the UK.”
The company’s leaders have been urging the UK Treasury not to put a further burden on the industry. However, Chancellor Rachel Reeves looks set to increase gambling taxes in her upcoming budget.
Reeves does not share the belief that Entain is one of the top taxpayers in the country and said that gambling companies “should pay their fair share of taxes, and we will make sure that happens.”
Tackle Black Market to Raise Tax Revenue, Says David
David argued that the best way for the country to get more money from gambling is to reduce the market share of the black market. She said, “If the objective is to raise more taxes, then the best opportunity is to reduce the amount of black market that exists in the UK today.
“Over 500 sites exist. They look very professional and they promise great rates, no prior protections, no guarantee you get paid out. From a customer point of view, they pose a real risk and for government, they pose a real risk of accelerating the bleeding away of tax revenues to people who pay no tax at all.”
She referenced the example of the Netherlands, which has increased taxes, and this week reported that unregulated gambling now generates more revenue than the regulated industry.
“It is very well proven that every time you increase tax, the black market increases in size, put extra regulation in place that limits opportunity for players. They tend to go to the black market as well. If you look at what’s happened in the Netherlands, which is very clearly documented, they put the tax rates up to over 30%. Now it is well known that over 50% of that market has gone to the black market,” said David.
Sportsbooks Superior to ‘Illegal’ Prediction Markets
David also said that the company is not considering prediction markets as an area for future growth. She stated, “We essentially believe that it is illegal, and with the regulators that we have to have a relationship with and be licensed through, we are not entering that market.”
She added, “I think looking at Sportsbook and the range of things that we offer, that’s what customers are really looking for. In a regulated market, Sportsbook offering is highly superior in my view to what prediction markets are currently offering.”
Prediction markets have been growing at an exponential rate in the US, expanding their range to rival sportsbooks. Platforms such as Kalshi now offer parlays and prop betting as well as match winner markets. However, the liquidity and odds available are not yet at the level provided by major sportsbooks.
In the UK, a similar product has long existed through Betfair, a regulated betting exchange, now owned by Flutter. David noted, “We’ve had things like Betfair in the UK, which is an exchange, so it’s not necessarily totally new, this concept.”
Bad Results Cause Damage in Brazil & Australia
One benefit of prediction markets is that operators’ revenues are not dependent on the results. Entain attributed an 11% drop in revenue in Brazil and 6% fall in Australia to bettor-friendly sports results.
David said an Australian rugby league match between the Canberra Raiders and Brisbane Broncos, in which eight of the 10 most popular try scorers touched down, was “very expensive not just for us but for the industry.”
Other countries performed better, with double-digit growth in revenue in Georgia, New Zealand, Spain, Canada, Austria, and Greece. Based on the results, the company maintained its expectation of 7% growth in revenue for the financial year.
The company will hope for a helping hand from regulators in clamping down on unregulated gambling sites, while limiting tax increases to meet its future targets.
