The high risk industry is very competitive and highly regulated. Are you adequately prepared to start an online gambling business?
It is important to emphasize that gambling businesses are subject to regulation and oversight.
Starting an online gaming business requires careful consideration of legal requirements, regulatory compliance, financial costs, and potential challenges.
Take the example of Betway, the sponsor of West Ham, they faced a penalty of £400,000 due to violation of CAP’s rules and Licence Conditions and Codes of Practice set by the Gambling Commission. Non compliance of regulations and violations can be an expensive setback for your business.
If you are wondering how to start a gambling business, what are the requirements, and where to begin, read on. In this 7-step guide, we will cover various aspects to launch an online gambling and casino business.
What is a gambling business?
A gambling business is an enterprise that offers various types of gambling activities in exchange for the opportunity to win money or prizes. It involves hosting games of chance either through online platforms or in physical establishments.
A recent published study by The American Gaming Association (AGA) provides a detailed analysis of the significant annual influence that the casino gaming industry has on the U.S. economy.
The study reveals that the U.S. commercial and tribal gaming industry contributes a staggering $328.6 billion to the nation’s economy. The industry generates a substantial amount of tax revenue, amounting to $52.7 billion, which is distributed among federal, state, and local governments.
The industry encompasses a range of sectors, including casinos, e-gaming, sports betting, and other forms of gambling:
Online gambling – Online gambling platforms are accessible through websites or mobile applications and offer a range of activities, including online casinos, sports betting, poker rooms, bingo, lottery, and other games of chance.
Casinos – These include physical establishments which provide a wide array of gambling options such as slot machines, table games (e.g., blackjack, poker, roulette), and sports betting.
Online poker rooms – Are dedicated platforms that enable players to compete against each other in online poker games for real money or virtual currency.
Lotteries – Are conducted by organizations that involve purchasing tickets for a chance to win prizes through random number drawings or other predetermined methods.
Bookmakers – Are those businesses that accept and manage bets on various sporting events, races, or other outcomes.
Bingo halls – Are venues that host games where players mark off numbers on cards to match a predetermined pattern and win prizes.
Pari-mutuel Wagering – Are businesses that facilitate betting on horse racing, dog racing, or other competitive events where bets are pooled together.
It is important to acknowledge that the industry is susceptible to criminal exploitation and money laundering. Therefore, ensure you choose a secure and reliable payment provider that offers fraud protection and chargeback reporting.
How much does it cost to start an online gambling company?
The cost of starting an online gambling company can differ based on factors like the size of the business, regulations, technology, licenses, marketing, and more. Here are some approximate costs involved when starting an online gambling company:
Licensing costs and annual fees
Licensing fees for an online gaming business can vary depending on the jurisdiction you choose to operate in and the type of activities.
Here’s a list of gambling license options and preferred offshore jurisdictions for online gambling licenses:
Find out about more about starting an online gambling business – how to get a license, why it is important, how much it costs, and when you need one.
To manage online gambling and casino businesses, a software platform is essential. The success of your business depends on the functionality, reliability, and design of the software platform.
It should have an attractive and high-quality design to establish credibility with new visitors. You can either buy software or develop your own, but the latter takes more time and money.
There are three main types of software required for an online gambling platform:
This software manages platform resources, user accounts, and overall site operations. Popular options include Playtech, ProgressPlay, EveryMatrix, GiG Platform, SoftSwiss, and Cryptologic
This includes various slots, games, and lotteries that players can access. It’s best to buy games in bulk from providers like Evolution Gaming, Playson, NetEnt, Microgaming, and BetSoft.
Payment processing solutions
These providers facilitate transactions between players and the online gambling and casino operators. Payment processing services usually have setup fees, transaction fees, and ongoing expenses. The costs can vary based on the chosen payment processors and the number of payment options available.
It’s important to offer a variety of payment options to cater to user preferences. Some of the popular providers include PayFasto, PayPal, Stripe, Venmo, or Square.
Keep in mind that big payment providers do not support high risk industries. They have higher fees, restricted policies, and can terminate accounts and without warning can withhold funds.
Read more about why choosing a big payment provider may not be ideal for high risk businesses and how a dedicated gambling merchant account can be the solution.
Costs of Regulatory Compliance
Many offshore gamblers – mainly involved in online gambling – lack the awareness of gambling regulations in the jurisdiction. They choose business sites based on advertisements by local regions and ease of use, and do not consider the regulations that need to be complied with.
This could lead to several difficulties, from denial of licensing applications to closure of online businesses by gaming authorities. Moreover, costs and charges for investigation and processing must be borne by operators,
To avoid costs and fines incurred due to non compliance and to minimize the cost of doing business, operators launching gambling businesses must ensure they comply with regulations.
It’s crucial to seek advice from industry experts like legal advisors and consultants to get more precise and detailed cost estimates that align with your specific business plan and jurisdiction.
How to get a gambling license for your business?
In order to acquire a gambling license for your business, there are certain procedures and requirements that must be followed. Here is a brief outline to help you get started:
Understand specific regulations and requirements
Begin by thoroughly researching the jurisdiction(s) where you plan to operate your online gambling business. It is crucial to understand the specific regulations and licensing requirements of each jurisdiction.
Prepare documents required for incorporation
Gather all the required documentation for the licensing process. This may include proof of company incorporation, a comprehensive business plan, financial statements, background checks of key personnel, and more. Some jurisdictions may require you to demonstrate a certain level of financial stability or provide proof of adequate funds to support your gambling business.
Submit application to licensing authority
Submit your license application to the relevant licensing authority, along with all the necessary documents and fees. The application process may involve a thorough review, background checks, and an evaluation of your business plan and compliance measures.
Register your business based on legal requirements
Register your company and incorporate it according to the legal requirements of the chosen jurisdiction. This will involve providing necessary documentation and paying the required fees.
Implement measures for compliance with regulations
Ensure that your business operations fully comply with the regulations set by the licensing authority. This includes implementing responsible gambling measures, data protection protocols, and anti-money laundering procedures.
Fulfill ongoing obligations based on regulatory changes
Once you have obtained the gambling license, it is important to fulfill ongoing obligations, such as regular reporting, payment of fees, and compliance with any regulatory changes.
It is important to note that to navigate the licensing process more effectively, it is advisable to work with a professional consultant or legal expert who has experience in the online gambling industry.
Types of gambling licenses
There are two types of licenses for online gambling – international (offshore) and internal.
International licenses are also known as offshore licenses and are for projects that want to reach a larger market.
Internal licenses are specific to one country and allow online gambling and casinos to operate legally within that country.
Some countries with internally regulated gambling markets include the United Kingdom, Spain, Belgium, Bulgaria, Romania, Estonia, Portugal, Mexico, and others. It is common for national regulators to require both the casino and the gambling software provider to hold the appropriate internal license.
If you are searching for online gambling licensing options, here is a list of preferred, international gambling jurisdictions that have gambling license options.
How to start your gambling business in 7 easy steps
Remember, starting an online gambling business requires careful planning, adherence to legal regulations, and a commitment to ensuring a secure and fair gaming experience for your users. Make sure to regularly assess and improve your operations based on customer feedback and emerging trends.
To get you started, here are seven steps to consider when launching your online gambling business:
1. Conduct Research and Analyze Demand
Conduct thorough market research to understand the online gambling industry, your target audience, and competitors. Also analyze the demand for your product and generate projections when planning.
Before starting your business conduct research about online gambling regulations applicable to your type of business activity.
2. Define your business concept & create a business plan
Starting an online gambling business requires a well-thought-out plan that includes goals, execution terms, and a detailed budget for each step.
The first thing to consider is the region of operation, as each market requires a unique approach and regulatory compliance. The budget can vary depending on the jurisdiction you choose.
Consider these main aspects when creating an online gambling business plan include:
- Create an estimate for both long-term and short-term budgets
- Identify the appropriate license type and model based on your business activity
- Develop a comprehensive business plan for potential investors
- Establish a timeline for project execution
- Develop an online gambling marketing plan
- Determine the necessary software and content requirements
- Calculate projected returns and identify the break-even point
3. Hire a team to run your online gambling business
For a successful online gambling and casino business, it’s important to have a competent and qualified team. Here are different professions that you would need to make it work:
Software development team – They create a variety of games for the gambling and casino businesses, including slots, card games, and virtual sports. You can hire established online gambling software providers to save time and money.
Gambling Website Designers – They specialize in designing online gambling and casino platforms. User experience for players is important and critical for repeat business.
Financial team – They handle all internal and external financial matters. It is important to hire financial experts to ensure there is compliance with reporting requirements and other regulations.
Technical staff – This team ensures your website runs smoothly 24/7. They can manage and handle technical issues that may arise, including payment processing concerns with payment gateways.
Marketing and advertising professionals –They are responsible for promoting the business online and use various tools from SEO optimization, email marketing, social media, to affiliate marketing programs.
Marketing specialists also plan the bonuses for players and generate ideas to improve conversion rates and player retention. This ultimately impacts the business’s efficiency and profitability.
Customer service and support team – This team consists of customer support agents who provide a full range of services to users. Acting as a bridge between the players and the platform, they can enhance the gaming experience and offer support.
4. Network with investors to fund your project
In the world of online gambling, securing financing can be one of the toughest aspects of building a business. Risk, which refers to uncertainty and the possibility of experiencing losses due to market factors, can make potential investors hesitant to get involved.
Therefore, it is up to the business owner to create an exciting and appealing business concept to attract attention and overcome these fears.
There are many reasons why investors are wary. While some view the high risk industry as unethical, there are certain countries that have excessively high rates, no exemptions, and restrictive policies.
Another reason for rejection is the data security of users on the platform.
Business owners need to be aware about the concerns of investors and be prepared with relevant information.
Addressing the risks and concerns of investors can offer confidence, increasing the chances of securing funding.
5. Register your business and apply for online gambling licenses and permits
To legally operate in the online gambling industry, it is crucial to identify the jurisdictions where you wish to provide services and obtain the necessary licenses and permits. It is imperative to comply with all legal requirements and regulations in those jurisdictions to ensure that you follow all the rules and regulations.
Applying for a license can be a lengthy process, and some licenses may take several months to acquire. Therefore, it is essential to start the process early and prepare all the required documents. For example, when obtaining a gaming license, approval of the application by the Malta Gaming Authority can take up to 16 weeks.
Moreover, it is important to note that even though your business is conducted online, many licenses require establishing an office in the region of your licensing authority.
6. Choose the right gambling payment gateway
To ensure secure and efficient processing of payments for your users, it is advisable to establish partnerships with reliable payment service providers. When researching and selecting payment providers, some of the aspects to keep in mind include:
Ensure the payment solution ensures security and safety of customers’ personal information. They must have enhanced security measures in place. By prioritizing top security, the chances of clients requesting chargebacks, which could result in losses for gambling merchants, are reduced.
Choose payment processors that charge reasonable transaction fees to avoid discouraging customers from using the platform.
Find providers that have sophisticated navigation features that can offer a user-friendly payment process.
Ensure the payment processing is seamless so that customers can access their winnings promptly.
It is also important to know if the provider is compatible with different devices, browsers, and platforms that clients may use.
7. Build your gaming community and engage your users
In a highly competitive market, it is imperative for online gambling and casino operators to continuously improve customer engagement. To retain the next generation of players, they must offer exceptional user experience, provide customer service, and build a community.
Personalize user experience with tailored localization
Given the global nature of the iGaming or online gambling industry, it is essential for operators to cater to the diverse needs of users worldwide. Personalizing the user experience with tailored localization significantly impacts player retention and conversion rates.
Users appreciate being able to communicate and receive instructions in their native language, making it one of the most effective ways to attract and retain online gamblers. Additionally, incorporating multilingual iGaming content not only enhances your brand’s profile but also improves SEO performance, ultimately attracting a larger player base.
Build a strong community around your brand
The success of an iGaming brand heavily relies on the establishment of a dedicated community. This community becomes an invaluable asset as it actively participates in and supports your platform, thereby delivering exceptional online gambling experiences.
To foster a sense of identification with your brand, it is crucial to provide excellent customer service, offer multiple communication channels, and create an online social media community or forum. Building and nurturing a community requires continuous effort, but the rewards are invaluable, particularly in the digital era.