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An amendment to France's budget will allow the government to legislate a regulatory framework for online casinos. To the delight of long-standing incumbents, France will become the last EU member state to implement legislation for online casino activities. However, the motives of Prime Minister Michel Barnier have been questioned as France's regional land-based casinos were left unaware of the government's plans to bring online casinos into play. Furthermore, upholding a business tax rate of over 50%. How viable and attractive will the French online casino market be to foreign and domestic operators? As French gambling looks to seize on this unique moment. iGamingDelhi is brought to you by Optimove, the number one marketing and CRM solutions for the global iGaming market. I'm Ted Memwe and joining me today is SBC's French market correspondent, Jake Pollard. Jake, how are you doing? I'm very good, Ted. And I'm very happy to... be on the line with you. Thanks for inviting me. Yes. And well, congrats on breaking this news story and bringing it to our gaming audiences' minds. And if we can just begin by recapping the latest developments and what has led to France finally being able to legislate a future framework for online casinos. Okay. So, I mean, this week's news is, as you've mentioned, a major development for France and its online gaming industry. As has been mentioned a number of times, the country is the last major Western European market to not have regulated online casino. And the prospect of it happening is therefore a major change and a positive one for most stakeholders. I say most obviously with some forethought as to what we're going to be discussing later on in this episode. But in short, really, if you could summarize it very quickly from the government's point of view, the key consideration is money. You know, Michel Barnier, the new Prime Minister, has looked under the bonnet, which is something the UK listeners might be familiar with, an expression they'll be familiar with, and has found that the state needs to reduce its debt levels, raise revenues considerably in order to be able to boost investment, economic growth, and make French people feel like they have higher purchasing power and so on and so forth. So those really are the major motivations behind this latest move. Um, I think maybe one, one of the key issues would be the suddenness with which it's happened. Um, but again, you know, necessity, um, you know, the need to move quickly is probably the reason behind that. Okay. So Jake, that's very unromantic. I mean, just the tax and money, but let's kind of recap and please remind audiences why France has. to take kind of upheld a fragmented marketplace in terms of iGaming. Okay, fine. I'll try and include a bit of French for a moment so that, no, I'm kidding. No, the reason online casino is still not regulated at this point in time anyway, really dates back to 2010 when France regulated its online sports betting and online poker sectors. Basically at the time, the land-based casinos feared that regulating online casino would mean that they would be unable to compete. against the pure online players of the day. So whether that's, you know, at the time, what was it, party casino, poker stars, and all those types of casinos, online, pure online players. So in short, this has led to the development of really a major, major illegal, unregulated online casino market in France over the past 14 years. And on the one hand, you've had online sports betting, which has really driven. the sector really over that time and has done pretty well really, especially considering the high taxes in the country. But this has also led, as I said, to a substantial unregulated online casino market. And during that time, while this unregulated market has developed, stakeholders of all shapes and sizes really have been calling for the regulation of online casino, although of course with different formats according to their strategic aims and to what would help them. either call another market or give them some kind of competitive advantage. Yeah. So one thing I mean, like reading back on all your kind of correspondence with SBC is that, you know, 2024 has been kind of a make or break in year for French gambling. And what's kind of leading this seismic transformation for French gambling? I mean, it really is a mixture of, there's a few key components in those. So just with regards to the online gambling industry, really one of the big changes in France, even though it's a very, really tiny section of the kind of online gaming sector, during 2023 and into 2024, France regulated what they call Journum, which is basically NFT, Web3, NFT, crypto-backed, fantasy gaming products. And that was a major issue because what was happening is you had on the one hand, you had the land-based casinos who were lobbying for one form of online casino regulation. You also had the online operators such as BetClick and Winamax via their trade body Afshale also lobbying for a totally open market. None of those were successful last year, but this general law called the so-called SoRare law after the name of the fantasy betting company. basically was pushed through by the government. So there was one issue as it kind of put into contrast, you know, why are these companies being given, you know, according to some stakeholders, preferential treatment, while other sectors which weigh much more heavily on the economy were not. Then over the last, you know, over the past year, it's been a major, it's been making the news, but really since 2019, it's privatization of France as the group. the company, which is maybe Europe's largest lottery, I think, or number two in Europe. So you know, big player by any standard. Dari is the largest. So you know, big player by any standard has been basically building up its M&A chest, being aggressive on the corporate front, on the M&A and corporate strategic front. And really that has come to fruition, if you like, over the last 18 months. So we've had the acquisition of Zetarov. 450 million, Premier Lotteries Ireland, I think for 350 million. And of course, most recently, Unibet parent company, Kindred Group, for 2.6 billion euros. So that mixture of regulatory changes and very strong M&A activity by its leading company, FDJ, by France's leading gambling company, FDJ, have really... kind of driven the transformations in the market over the past, you know, 18 months, but really it's been, it's been even longer, really, if you look at it through the underlying trends, um, that have been active in the market over the last three to four years, really. So as online casino comes into the horizon for French gambling, who are kind of the cast of figures in how that market will, will be arranged and how do you kind of see them? know, what are the narratives for these companies and where do they want to pitch the market at? If you could start with FDJ. Yeah, sure, sure. I mean, you know, FDJ, there is no denying, nothing really happens without FDJs, you know, explicit or not so explicit, say so, if I may say. You know, they are buying, you know, as we said, Europe's largest lottery, the biggest gambling group in France, a major economic driver for the government as well in terms of tax revenues. I can't remember the exact figures, but it's not far off. Four or five billion euros they generate in revenues for the government. So Adj will be there. And obviously now with Kindred, they have really all the tools at their disposal to really go after market share. Secondly, of course, the government is a major player. And one of the key changes, I guess, with Barnier's government compared to the previous one is that Barnier has moved very quickly. They've looked, obviously they need to raise revenues, but they've looked at the situation. He knows it obviously from his time as EU Commissioner for Internal Market and Services. So he has some familiarity with the sector and they've decided to move quickly. That is a notable change without a doubt. ANJ, the Autorité Nationale des Jeux, the regulator, is also going to be a major stakeholder in terms of how it regulates. the format in which it chooses to regulate and how it drives this policy forward. Overall, I would say most stakeholders seem to have a good relation with ANJ from what I have seen and I would expect a good level of regulation from ANJ. Then of course you have the online operators, Afshal. So Afshal is their trade body. So we're talking BetClick, Winamax. Kindred now, even though a bit of a different situation now, they're part of FDJ, but PMU, Netbet and all those companies are in there. And notably this format that has been put forward by the government, by the French government, is really what they have always been asking for. So open competition from day one, no need to be tethered to a land-based casino, as has been the case in Switzerland, I think in Belgium, and of course in some US states. So there's that. In addition, and finally, last but certainly not least, you have Gassinot France, who are the trade body for the 200 land-based casinos, or for most of them anyway, in the country. So we're talking Barrières, Joie Groupe, Partouche, so those are the biggest ones, so to speak. And they will be lobbying and really pushing for some kind of different format of regulation. than the one that has just been announced this week, because they are saying that they completely left at a disadvantage if it goes forward. And also they say that they will lose something like 30% of market share and revenues in the process, which could lead to something like 15,000 jobs being lost. The important thing just to... On that front, it's really, it's especially for the smaller resorts. So the big ones like in Deauville, Monaco and elsewhere, are not going to have a problem surviving, you know, they will carry on, but it's all the small ones dotted around the country's thermal spa towns, which really, you know, only are really truly active during what the summer high season, but that revenue generates a lot of income for their communities and for their local authorities. So. that will be a, no, there's going to be a lot of heavy discussions over the next few months between them and the government. Well, I don't want to tell off, but one of the things, one of your observations is just how kind of stakeholder centric French legislation is for any market. I mean, can you kind of explain that as in that's how France processes laws compared to other Western markets? Yeah, sure. I mean, really, I mean, I guess, I guess the key issue in France is I guess the one difference, the one major difference between France and other European markets is really the casino, the land-based casinos. I don't know of any other European country that has as many land-based casinos in its country, within its borders. I mean, you look at Italy, there's just a few, if I'm not mistaken. You look at Switzerland, there's not many. So France has this particular situation. And also one of the mandated aims of any legislation when it comes to gambling is what they call to find out to keep a balance between all the different subsectors. So whether it's horse racing, casino, lottery, and so on. Um, and so, so that always has to be taken into account when looking at regulatory changes in the country. Um, as I mentioned, you know, the, the land-based casinos really are up in arms because from their point of view, they're talking about a loss of 500 million euros in tax revenues, um, which When you compare it to what the government has forecast in terms of tax revenues from online casino regulation, they've forecast a billion euros. So the land-based casinos are saying, already half of that is gonna be lost by us. So it'll be like kind of take, you know, Robin Peter put to pay Paul nearly kind of thing. Plus also if there are job losses, you know, you're talking major social costs, as well as, you know, literally the viability of some of those very small communes, which really are. not 100% but in large part financially supported by the casinos in their communes, in their districts. So yeah, all those things come into play and stakeholders are massive, whether it's horse racing, which generates close to 800 million euros a year for the stakeholders, you've got Francis Desjeuves and all of them have their interests. The one issue and it's similar in the UK. is no one moans if taxes are raised on gambling companies. And, you know, the recent news from a couple of weeks ago that France was going to increase taxes just to subsidize the social security system is part of that. And those will be added on to the proposed taxes on online casinos once they are regulated or if they are regulated. the kind of the realities that are kind of present in the market. And the government is going to seek to apply a 27% tax charge on online casino GG. Oh, that kind of takes it to real kind of business income tax rate of plus 50%. How do you think that kind of shapes up the market's dynamics and then the market's appeal? Yeah, I mean, of course, you know, France is known for its high taxes. And I mean, all the contacts have had the same reaction as, oh, my God, is at the level of taxation. That's going to be. going to be applied to the to the products. Clearly, it's not ideal. But having said that, you know, high taxes are a fact of life for gambling. I mean, you know, we've seen in, you know, as you know, in Holland, I think they're going to raise it in the next couple of years to close to 38%. I think, I mean, the UK there's, there's a likelihood that it might happen in the UK as well. I mean, you can see it in New York, New York has what 51%? of GDR tax and operators are still present there. And so, you know, the thing is, is yeah, taxes are going to be high. I think in total, when you add the 27.8% tax, GDR tax on online casinos, plus the social security measures, it totals around 56% of GDR tax. So it is substantial. But I guess, you know, that's a system they use. And I guess their arguments would be, you know, well, it's a big market. It's, you know, just nearly 65 cent-million residents. It has a strong history in casino. And operators will be coming forward, I believe, to get licenses because, yeah, because, you know, the market is there and you can still generate profits and margins even off those numbers. Previously covering the French market and yes, you know, with online casino restrictions, I mean, this has definitely been a factor that's impeded the competitive makeup to grow. So how do you think that will change post-I casino legislation? You expect more market entrants or does it really kind of change the makeup of French gambling as it stands now? I mean, yeah. It's that's a, that's a really good question. I mean, you know, to start with, obviously, casino is much more profit generating than online sports betting. The margins are stronger. The, you know, it's not so reliant on that issue and also doesn't rely on sports results so much, which can be upsetting for the, for the operators sometimes. But, you know, it's, personally, I think there will be an influx of companies coming through because, you know, I mean, We can look at Brazil, for example, as a market that's about to launch regulated iGaming. There's what, nearly 95 or 100 companies that have either applied or obtained their licenses. So I think companies will look at the market and just do their sums. know, we think, you know, this, this is a major opportunity in the sense of a major market opening up, which, you know, nowadays is certainly a rarity, certainly in Europe. So yeah, and again, like I said, you know, online casino is, generates more margins and profits for operators. So it will be in that regard, I guess, a bit more attractive for brands. But also, you know, we don't know what's going to happen, you know, that many things can change in terms of whether it's the lobbying, whether it's some of the conditions the government introduces, they might be more flexible or amenable to some of the demands from the land-based casinos. So will there be some kind of, I don't know, it can be either some kind of revenue split with them, do online operators need to be tethered in any way to a land-based establishment? So there are... various conditions and terms that might come in that we have to be ready to look at and take into account, I guess. So Jake, great reporting on France. And how do you see the short-term developments panning out and who are you keeping your eye out to see whether this legislation progress is? Yes. I mean, the next steps really in terms of legislation are... They will be debated in parliament over the next three months, over Q4. And really, in theory, if everything, so to speak, if things go according to the government's plans, they will pass this by Christmas time, basically. And so all the terms, conditions, framework, systems will be outlined in the government's legislative text. you know, to get organized, to put all that in motion, to put all the systems together, to get all the regulatory surveillance slash monitoring systems together would be about another six months. So most optimistic scenario, we could be talking online, regulating online casino by the middle of next year. But if not, you're talking really. Really, I mean, we're talking early 2026, really, if not after that, if it's not happening. So within the next six to 12 months, it should be happening. I mean, the important, another just kind of detail is that, you know, this is an amendment to what they call the projet de finance, which is their budget. So and the government has introduced it. It's not been introduced by MPs. Do you see what I mean? So the I guess there is support from high up in the government for this. Even if it might seem to some observers or some of those observers have said that it seems that it's been rushed in terms of, you know, in terms of lack of consideration for land-based casinos and so on and so forth. But, you know, in theory, it does come from the government itself. So it should carry weight. And because it's part of the bigger budget law, you know, there are more possibilities. It's highly likely that it should pass. So, yes, that's the kind of near future for it. Yeah, you kind of answered my final question. Why should all stakeholders look at that? But I'm going to ask you like a personal question here. You know, from your report is taken, your report is, you know, what kind of caveat you really want to send to audiences to know about the French market and why it would essentially be different to any market that... that we've seen in Europe. Sure. I mean, yeah, look, France is, France is, you know, I think, I think listeners will know that France is, has its own peculiarities in terms of the way the government does business, the way companies do business as well. You know, there are certain, they may have different approaches to what we might be used to in the UK kind of thing. Um, I think, um, I personally speaking, I think stakeholders are optimistic now are truly optimistic because before. You know, I reported on the Jade project from the land-based casinos last year. I reported extensively on that. And even though there was hope there, there was never government backing for it. And there were one or two MPs who came out in favor of it. But the government never really backed it. So from that point of view, most stakeholders seem to be quite optimistic. Obviously there are some caveats in terms of lobbying that's going to be going on in the next few months, but really it's... You know, it's like I said, it's the last major European, Western European market to be doing this. And that alone is, you know, from a business perspective is very interesting. I think also, you know, the fact that, yeah, I mean, the fact that it's been so long is a truly, it's momentous change, you could call it. It's a big change in... in the system. But as the ANG president, Isabel Falca-Piota once mentioned, she said, you know, it's always the danger between balancing something that presents more risks of problem gambling and addiction with regulating it, getting it taxed, getting revenues from it. And it's always about trying to find that balance and the balance between all the verticals in the country, which is, you know, the official aim of the government, which is the state and mandated aim of the government. So those are the things to take into consideration. Um, you know, some people are looking to sell up and, and cash in. Some people will be looking to do partnerships. Some people will be, um, you know, looking for investment. Um, so yeah, you know, exciting times, I guess, in a way, you know, it's going to be very active, um, you know, you can never predict the future. So let's not be overconfident, but, um, you know, it does look, it does look promising. Yeah. I mean, it did certainly one of the, you know, few positives of European gaming in this year. So, Jen, Jake, thanks a lot for that very in-depth drill down on the French market. And as always, you'll be reporting on this for SBC. So thanks so much. It's a pleasure. I'm sure we're going to have you soon, back on board soon.