EEGReport Magazine: Experts believe that in the coming years Bitcoin will develop at about the same speed as not so long ago Internet did. Do you also adhere to this theory?
Tim Heath: If we look at the speed of disruptive technologies, such as the Internet (http protocol) and Email (smtp), it takes time for such advances to propagate throughout society, specifically the time between the early adopter group and the masses. However the movement from early adopter to regular user is most certainly more rapid than other such innovate / disruptive technologies we have seen in the past.
At the moment, Bitcoin is simply to complicated for the average user, but conceptually it’s an easy concept to understand (once explained). I think this is because users know how to use bittorrent, or how skype works from their everyday use cases, but most often don’t understand (nor want to) the underlying technology. Skype (and VOIP) is an amazing technology, but I really do wonder how many average consumers understand the technology and the rails & protocols it runs on. Skype have made a very simple user interface to point and click, to call or video to someone on the other side of the world, for free. Therefore, perhaps we should not view Bitcoin technology as the “ultimate” goal for adoption, but rather simply the “rails” on which a trusted transaction is made and the end user simply uses a nice user interface to click “send money to a friend from my contact list”.
Perhaps to this end, the end goal (or killer Bitcoin app), is that someone can buy $20 of Bitcoins from a friend and in the background, that amount is hedged immediately, to ensure there is no volatility in the Bitcoin price which may effect their whole experience. This money could then be sent to a merchant, gaming site or used as remittance to another country. The transaction would still take place over the blockchain, but in the end user’s eyes, they see the non-technical transaction (which one would say looks and feels like any paypal transaction), just that it happens over a decentralized network with no fees to “send the money” safely and securely.
EEGReport Magazine: Full anonymity of Bitcoin transactions – is it advantage of disadvantage?
Tim Heath: Bitcoin is Pseudonymous not anonymous.
Our primary KYC resolves around a player’s digital footprint, rather than traditional (and as some would agree, forgeable) utility bills. That said, players are happy to be KYCed in traditional ways due to o gaming license requirements. This is because we have found that player’s prefer that their Bitcoin gambling transactions are “not obvious” to family / friends. Therefore when depositing to a Bitcoin casino, there are no deposits from a joint bank accounts or credit card statement. Most importantly however, is that there is no gambling transactions on their bank statements which may harm future loan or mortgage applications (through traditional banks).
EEGReport Magazine: Absence of clear scheme for Bitcoin regulation and for its taxation disaffect – is it a key issue for investors?
Tim Heath: Regulation is needed is the onramp / offramp of fiat currency to Bitcoins and vice versa. This is where governments should have sensible regulations in place; that Bitcoin exchanges should know their customers and understand the sources or destinations of incoming or outgoing funds. In regard to taxation – this is a situation for the jurisdiction where the company is based, to know and pay their respective corporate taxes. Taxation is based on the annual reports filed in the relevant jurisdictions and have nothing to do with a Bitcoin transaction.
These issues don’t seem to be slowing down Venture capital investment into Bitcoin or blockchain related companies. In Q1 2015 there was a record breaking amount of venture capital invested in Bitcoin startups, over $229 million (a total of $676 million so far).
EEGReport Magazine: What are the benefits received by casino if shifting to Bitcoin payment system?
Tim Heath: Bitcoin is perfect money for the Internet:
- You can send or receive $0.01 or $10 million+ instantly anywhere in the world
- It is irreversible
- There is no chargebacks or fraud
- There are no payment processing costs
- There are no 3rd parties “holding the money”
- All transactions are peer 2 peer and auditable on the blockchain
- Escrow services exist in the blockchain code.
Therefore when a casino utilizes Bitcoin as a payment method / gaming unit, all deposits and withdrawals are instant. We are seeing a huge increase in localized options for conversion between fiat and Bitcoin and vice versa, which is rapidly growing Bitcoin’s accessibility. It’s also very clear and logical, then the faster withdrawals are processed by a casino, the greater confidence a player has (in the casino) and the faster they will re-deposit.
Of course any business would love to have 0% merchant processing fees and to completely remove fraud and Chargebacks from their profit / loss statements…
Tim Heath has been involved in the gaming industry for over 12 years, working predominately in the Poker segment as a land based operator, B2B software provider and online operator. Since 2013, his main focus has been on the Bitcoin gambling niche, with clear aim to innovate and disrupt existing norms and take casino and sportsbetting solutions to non traditional markets.
Vahe Baloulian Interview – (EEGReport Magazine – Issue 1 – October 2015 – January 2016)
EEGReport Magazine: Since Armenia, a Transcaucasian state is included in definitions of Eastern Europe or histories of Eastern Europe, we would like to know more about the developments of the online gambling in the country and neighbouring countries. What is in your opinion the way these countries need to consider issuing online gambling licenses for foreign operators?(if you could answer per country it would be great).
Vahe Baloulian:Although our largest development and service center is located in Yerevan, the capital of Armenia, BetConstruct is not involved in a licensable activities in Armenia or neighboring countries. However, we do have partners who operate in Armenia. As an operator in Armenia, you have to register a local company and get licensed by the government. It is quite an expensive exercise. Casino and poker license is different from the betting license. Armenia is one of the so-called grey markets where some foreign companies, even publicly traded ones, illegally operate without obtaining a license. Online gaming is quite popular with sports betting prevalence as it is legal to operate betting shops in the capital, while land-based casinos, with one exception, are relegated to four resort areas.
EEGReport Magazine: As we know, you are from the USA and your first contact with the igaming world happened back in 1999. How much has the igaming industry evolved in the recent 15 years around the world, but especially have you seen significant growth in Eastern and Central Europe recently?
Vahe Baloulian:– The iGaming industry during the last 15-20 years has changed dramatically in positive and negative sense. It is more regulated, which is beneficial if regulation is focused on guaranteeing safe and fair environment for the players. If regulation is simply about creating a new revenue source for the governments, the players are rarely protected.
The entrepreneurial spirit of the early years, the can-do attitude of the pioneers is replaced with corporate politics of public companies.
As to Eastern and Central Europe, it is now experiencing the growth with the benefit of knowing what has been done right and wrong by those who lead the way. Those who are capable of learning from the mistakes and achievements of others will be a lot more successful than those who think they know everything and don’t need the lessons of the past.
EEGReport Magazine: How big is the impact of having gaming software providers being present in Eastern Europe? Do operators feel “at home” by knowing they are entering markets where certain igaming software providers have offices?
Vahe Baloulian:– Suppliers should be responsive and reachable regardless of them having an office in the operator’s market. Of course, having your supplier nearby gives you comfort but it is not a recipe for success. When picking suppliers, aside from the quality of their technology and services, it would be very important for me to know if they, regardless of the physical presence in the area, are willing to understand my market, speak my language, know what my customers want, visit me to learn how they can help me reach and go beyond my goals and invite me to their offices to meet their people and see how they operate. If I was an operator, this is how I would want a supplier to make me feel at home.
EEGReport Magazine: Do you see an opportunity for young software developers, which are at a rather high number in Eastern Europe, to start new companies and maybe innovate the already known platforms?
Vahe Baloulian:– BetConstruct has two development centers in Eastern Europe – in Armenia and Ukraine, where we work with many young developers. Also, our Game Store gives young independent developers an opportunity to see their games in action, distributed through our platform. Young software developers, especially from the up and coming regions such Eastern Europe, have an enormous role to play in the development of iGaming. They will succeed and drive us all forward as long as they figure out how to learn, without blindly following, from those who came before them and how to believe in their own ability to create better things while avoiding the trap of arrogance.
EEGReport Magazine: In your opinion, which are the most popular ways of online gambling in the Eastern and Central European region? Casino, sportbetting, online poker or maybe bingo?
Vahe Baloulian:– While Eastern and Central Europe is not a monotonous region where players have the same interests, sportsbetting and casino remain the most popular. However, the online sector is much smaller than the land-based one and represents a huge opportunity in every vertical.
EEGReport Magazine: We have seen an increased activity in the Russian region that may indicate moving towards a regulated market. Do you think that this is something to likely happen in the next 2 years?
Vahe Baloulian:– Russia is struggling and the government is looking for new revenue sources, however insignificant. As recent media reports suggest, the return of legislated online poker in Russia could be eminent. The proceeds will be used to fund the Russian National Chess team and other sports. At one point poker was considered a sport in Russia, so if this u-turn is successful, I hope and expect the other forms of online gaming to get Mr.Putin’s nod as well.
EEGReport Magazine: Which are the countries operators should look forward to welcome foreign companies to get licensed in online gambling?
Vahe Baloulian:– The prediction game is never been one of my favorites, especially when it comes to such unpredictable and illogical entities as governments are. For example, it never made sense to me that the Eastern European countries, which are so well positioned geographically and politically, didn’t go the route of Malta, when it came to online gaming. They missed such a great opportunity to create jobs and become a hub of new technologies.
Vahe Baloulian is an award-winning industry veteran with over 16 years of experience in the online gaming sphere.
Prior to joining BetConstruct as its Chief Executive Officer, Vahe has worked as a Director of Gaming and Industry Relations for 888, COO of LVFH, Managing Partner of eEgaming Partners and executive consultant to BetConstruct.
The Rise of Daily Fantasy Sports in Europe – Can Daily Fantasy Sports Overshadow Sports Betting? – (EEGReport Magazine – Issue 1 – October 2015 – January 2016)
Daily Fantasy Sports (DFS) is a relatively new phenomenon. Sometimes labelled as ”the next big thing” after the arrival of poker 10 years ago, this trendy iGaming product is taking North America by storm and slowly knocking on Europe’s doors.
The way it works is simple: sports lovers select a team of real-world athletes like football stars Lionel Messi and Wayne Rooney, who then score fantasy points during their real football matches, according to set scoring rules. Fantasy sports games are more diversified and require a higher level of skill than the more established and wide-spread sports betting. Participants do not place a wager on the outcome of different matches or play against bookmakers. Instead, they put money on their own team and compete against other fantasy teams’ owners with the hope of winning their money (similar to the poker websites’ business model).
In countries like the USA, Canada, and, to a lesser extent, the UK, fantasy sports has been a cultural activity for decades, but has become extremely popular in the last few years with the transformation of a season-long fantasy format into a more dynamic and high-frequency daily model. We are talking about a multi-billion business here: this year alone (2015) ‒ according to the Fantasy Sports Trade Association ‒ 56.8 million people are playing fantasy sports in the USA and Canada, with each of them spending on average $465 (€413) per year. Two operators, FanDuel and DraftKings, have mastered the industry, allowing them to control the vast majority of the daily fantasy sports action. Yet, we should not forget that sports betting is illegal throughout most of the United States.
In many countries, the regulation of gaming is based on whether the predominance for the outcome of the game lies in skill or chance. Presently, in most US states, fantasy sports (including DFS) is generally considered a game of skill and therefore not legally considered as gambling (where there is an element of both luck and, obviously, chance). At a US federal level, fantasy sports is defined and exempted by the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The Act included an explicit provision noting that the law would not apply to fantasy sports games.
Europe is a late adopter of technological innovations, so the DFS landscape looks a bit different there. ”Talking about the legal issues of DFS in Europe is not easy,” says Valery Bollier, CEO of OulalaGames, the company that stands behind fantasy football game Oulala. ”Each country has a different vision of what iGaming/moneytainment is, as well as what a skill and luck game is. Some countries are not aware of DFS yet, and their legislator have therefore no opinion on that subject for the moment. Therefore we have to take different approaches to target different markets.”
Most countries allowing fantasy sports have already included fantasy sports in their traditional iGaming licences. The most obvious example is the UK, the leading EU market for fantasy sports, where DFS falls in the same category as sports betting and horse racing. Therefore, operators need to acquire an operating ”pool betting” licence from the Gambling Commission to target UK customers.
Legally speaking, Hungary is facing a very similar situation. ”As I understand, you have to pay a fee of €300,000 – €400,000 to obtain a gambling licence, so I believe that any DFS game would be considered as gambling because of that,” explains Tamás Varga, who has helped to create the official, season-long fantasy game of the Hungarian top-tier league Nemzeti Bajnokság.
Hungary is just one among many European countries where DFS has not really taken off, and most sports lovers are not well acquainted with the concept. ”Daily fantasy games are not in the public mind,” explains Varga.
Romania and Bulgaria represent another two emerging markets. In Romania, fantasy sports is not yet expressly regulated. ”In my view, fantasy sports are covered by the new gambling legislation,” says Cristian Tuca, a gaming law specialist. The law defines DFS as ”other gambling activities”, and if the characteristics of the game meet all the required conditions then it is to be considered a type of gambling activity (the deposit and the prize are set in real money).
Tuca, who does not know of any big gambling operator which have started offering fantasy sports in his country, points out an interesting legal fact: ”Players that are gambling on platforms of unlicensed operators (in Romania) are committing a misdemeanour and may be sanctioned with a fine of up to RON10,000 (approx. €2,300). However, this aspect should not be applicable to fantasy sports, as the law provides that the fine is applicable to those participants that play online games, while fantasy games would fall under ”other gambling activities”.
Romania’s neighbouring country, Bulgaria, has a slightly different set of rules. The Gambling Act expressly exempts from the definition of gambling ”games of sports or entertaining nature, which require the participants to manifest deftness, knowledge and skills and which are not predominately based on chance.” The main problem is that entry fees have to be entirely allocated among participants, which means that operators cannot take any commission. If they do, the game is regarded as gambling/game of luck.
In Germany, on the contrary, the law defines DFS as a game of skill. In its judgement of 16 October 2013, the Federal Administrative Court decided that a so-called Bundesliga manager game is not to be classified as a game of chance under the Inter-State Treaty on Gambling (GlüStV). This led to chances for media companies and sports associations to offer similar fantasy sports games without causing conflict with gaming law regulations. Indeed, one can find quite a few games, but the market potential is still huge. German people love sports, numbers, gaming and betting, so it is no wonder that the total betting market volume alone is held to be more than 7 billion Euros per annum.
Another potentially big market for DFS is Poland. Interestingly enough, DFS does not fall under gambling, but it is also not regulated separately. Legally speaking, it is just like any competition, such as the quiz where people receive prizes if they win. ”The companies that are offering DFS do not need to acquire any licence for it,” says betting insider Michal Kopec. According to Kopec, fantasy football competitions should be reported to the Ministry of Finance if the prize pool is more than around €500 and winners should pay 10% win tax.
It is obvious that DFS has not really picked up as yet in Europe. The main questions is: are DFS and traditional sports betting complementary products or is DFS a dangerous substitution product for sports betting? Without a doubt, DFS games provide richer (real-time second screen) experiences than what is being offered at the moment by well-established betting operators. However, a lot of effort will be required to evangelise people about this niche in the fantasy sports industry with DFS lovers putting hope in DraftKings, who – backed with millions to be spent on advertising – has been granted a licence to operate in the UK.
Jure Rejec is Content Writer for Oulala.com, Europe’s most advanced daily fantasy football game. Oulala offers its clients the chance to join different leagues, create and manage (in real time) their virtual teams with footballers from the top four European leagues. The leagues’ winners are awarded daily cash prizes.
Interview with Rasmus Sojmark SBC News (EEGReport Magazine – Issue 1 – October 2015 – January 2016)
EEGReport Magazine: Since the development of social gaming are moving at a rapid pace all around the world, what do you think the outcome of this development will be in Eastern and Central Europe? Do you think it’s going to surpass other gaming sectors in the region?
Rasmus Sojmark: Well the good thing about social gaming is that it is flexible enough to work around existing regulations and find a route to market that works. That isn’t the case with actual gaming which tends to operate within highly regulated boundaries or in the absence of regulation.
In countries where online gaming is illegal, social gaming can occupy the vacuum and desire of the public to indulge in gaming. Just look at its popularity in the US, especially the recent pexplosion in fantasy sports. These operations will then become ever more valuable when regulation does come in. By positioning yourself in these markets you will gain lots of future advantages from your data, but you need to work with local people to understand the culture, their needs and especially interest for participation in gambling related games. You will then stand a greater chance of success, but you still need to spend time and resources to fully localise your product and ensure there actually is market fit.
For those jurisdictions already with an established gambling industry, social gaming can still find its market and in some instances can be an effective acquisition and retention tool for real money gaming.
EEGReport Magazine: We have seen a lot of activity that involves your company in the region, especially in Ukraine and Bulgaria. What is your impression about these markets in terms of online gambling and of course in terms of social gaming?
Rasmus Sojmark: The online gaming market in Bulgaria has recently been regulated, and it is still in its early stages with only a few operators entering the market such as Betfair. We have seen that social gaming has a strong future here next to online gaming, and with growing interest we will keep evolving through our close partnership with local sports media powerhouse Sportal.bg.
The Ukraine market is pretty big compared to many other European markets. The Internet is well developed and been steadily growing every year with around 17 million users. Consumer research will also tell you that Ukrainians trust in local brands and are very loyal which means that new operators planning to enter the market might consider teaming up with bookmakers with local experience, knowledge and contacts within the market before entering. However, in Ukraine, the 2009 gaming laws still only prohibits the local lotteries to operate legally, which means that new entrants will have to be careful until the market will be fully regulated. Such discussions are already underway, and for now social gaming companies, such as Oddslife, are having a huge untapped market in front of them.
EEGReport Magazine: As we know you were born in Denmark and your first touch of the igaming world began in 2005. How much has the igaming industry evolved in the recent 10 years in Europe, but especially have you seen significant growth in Eastern and Central Europe or maybe the Scandinavian region recently?
Rasmus Sojmark: Scandinavia has always been a big online gaming region. Sweden is one of the hotbeds of development for the sector, aided by an extremely aggressive monopoly operator in the shape of Svenska Spel which really pushed the online market forward in the country.Denmark, similar to Sweden and Svenska Spel, has been dominated by Danske Spil for many years, but the latest market regulations has seen new entrants and more aggressive marketing from other than Danske Spil. The Danish market is considered by many as one of the strong examples of a well-regulated gaming market.
The last ten years has really been about the regulation of the online gaming industry across Europe. At first it seemed that an open market model was going to be the case, as demonstrated by the UK’s 2005 Gambling Act, in order to comply with European law.
However soon afterwards Italy introduced a closed, local licensing approach which was supported by the European lawmakers and most EU countries have now gone down that route. Even the UK has followed suit with their point of consumption licensing changes implemented last year.
EEGReport Magazine: How big is the impact of having gaming software providers being present in Eastern Europe and owning certain products and platforms to the developments igaming in the region?
Rasmus Sojmark: We have seen more focus on Eastern Europe in recent years from medium and large suppliers like Betconstruct, EveryMatrix and Betinvest (Favbet). Next to them we have some strong operators like Marathonbet and Pari Match that most likely will start white labelling if the markets in Eastern Europe would be regulated. Gtech is already supplying the lotteries with their platforms, but I am not sure about the interest from the likes of LVS, OpenBet and other big supplier names. All in all it does seem like the interest in the market is steadily growing.
EEGReport Magazine: Do you think that young software developers, which are at a rather high number in Eastern Europe, should start focusing on building startups and maybe innovate the already known platforms rather than start working for the already stable companies?
Rasmus Sojmark: That all depends on what they want to do with their lives. A lot of the innovation around the industry seems to come from start-ups these days, but there’s no denying that it’s hard work to get funding for an idea when there are so many out there. Fortunately there are a number of igaming specific incubators for start-ups these days as well as crowdfunding sites that also support gamign start-ups. Some of the bigger operators have started using the ‘Labs’ format to try and generate innovation from outside sources and start-ups get more of an opportunity around trade conferences as well.
Personally, I have had plenty of experience in this area by setting up a few gaming businesses myself. As fun and rewarding as this can be, as tough and hopeless it can all seem the following day. My advice would always be to go ahead with this if you have a good ideas, but you need to be clear about the challenges that lies ahead before you will reap the benefits and become successful. Planning and research are both important factors before you move forward with your idea / venture, and ideally find one or two persons that share your passion and start together with them. Especially, if you can find someone that have skills and capabilities that complement yours, so that you all together can fill the roles of strategy, sales, marketing, finance, and especially development and tech. Remember that it’s very easy to get blown away by an idea or two, but it’s crucial that you do not compromise the initial steps of building a strong foundation and support around your start up.
EEGReport Magazine: Which are the most popular social gaming activities in the Eastern and Central European region? Or is it so new that patterns are just starting to be recorded?
In your opinion, how big will the impact of Euro 2016 be for the development of social gaming in the European region?
Rasmus Sojmark: In my opinion any social gaming product will have to have a huge sports focus to get anything out of Euro 2016. There has traditionally been a drop off in online gaming during these summer football tournaments, although the sportsbooks obviously experience extreme growth during these competitions.
If a social gaming experience lends itself to football in general and the tournament in particular, combined with the right marketing strategy then it could be very successful. However there is a lot of gaming noise around these tournaments, so it is important to offer something different and not just expect the business to flood in.
Rasmus has more than ten years’ experience from the online gaming industry, and during this period he was part of the EveryMatrix.com founding team, founded social sports and gaming company Oddslife.com, and founded the Sports Betting Community (also known as SBC and SBCNews.co.uk).
He has won Best Sportsbook Innovation 2010, Sports Betting Rising Star 2011 and special commendation for White Label Partner of the Year 2011, all coveted EGR awards. In 2008 and 2009 he also collected the awards for Best Sports Betting Affiliate back-to-back and the Best Overall Affiliate with leading Odds Comparison site BetBrain.com, which is part of the EveryMatrix group of companies.
He is considered and industry expert in the online gaming and social gaming space, and with his company SBC he is part of organising the successful Betting on Football conferences (next one is 10 September at Emirates in London, www.SBCEvents.co.uk).
Rasmus hold an MSc in International Marketing with his studies being used for publishing academic articles on online sports betting by Aalborg University in 2006. Linkedin: https://uk.linkedin.com/in/rasmussojmark
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