National economies: What role does sports betting play?

The ethical implications of introducing a legalised betting framework can be considered ‘controversial’, said Alexandra Kalchuk at BetInvest. She explained that there is a balance to be achieved for countries that wish to benefit from the economy boost betting can bring while acknowledging and containing some of the problems or reputational issues that come with the decision.

In recent years, more and more countries are beginning to open their doors to a regulated betting industry, reflecting the changing attitudes towards the sector among countries that previously prohibited betting activity.

One recent example is the Ukrainian market, which has given the green light for operators to begin offering their services after more than 11 years of complete prohibition. 

But why the shift? BetInvest believes that the basis of it lies in the economic benefits on both local and national level that betting can bring. As it stands, we are of the opinion that the world still faces a long and difficult journey to a global acceptance of the entertainment industry. However, there is no doubt in the benefit of betting on the country’s economy: its effect over the financial processes in the region are thoroughly reviewed in this article.

Betting’s benefits for related industries

The betting industry has in no means avoided the watchful gaze of economists researching the effects of inter-industry cannibalisation, the process by which a new product or business absorbs part of the market share of an existing product or business.

Recent research carried out by Virve Marionneau and Janne Nikkinen has shown that the impact of introducing a legalised betting framework is largely dependent on cultural and economic factors within the country. What this means is that there is no guaranteed method of predicting the influence that betting establishments will have on local economies.

The research identified a number of trends, both positive and negative. Considering the positives, it noted that betting can provide a substantial boost to businesses that specialise in entertainment, restaurants, retail, construction, FIRE (finance, insurance, and real estate), hotel services, TCPU (transportation, communication, and public utilities), and unspecified small local businesses. 

This, in turn, can help support both local and national employment levels in addition to wider economic acceleration in a given region thanks to the so-called agglomeration effect.

Businesses in similar or related niches tend to be located close to one another in clusters, which facilitates the product and leads to increased customer attraction. Such “clusters” are called agglomerations, and they are a contributing factor to the growth of cities.

At the same time, the money spent by players in the betting sector will continue to circulate in the region, stimulating its overall economic development. This multiplier effect leads to the creation of a plethora of new jobs, together with a boost to tourism and increased budget revenues. 

The contribution of online betting to local economies

Having considered the benefits that land-based venues can bring, the approach when introducing an online gambling framework must be completely different due to the fact that online betting interacts with a country’s economy with far less intensity.

Considering the US market post-2018, states have gained the authority to independently decide how to deal with betting businesses, thus bringing the market out of the shadows and into the spotlight. 

Prior to the repeal of PASPA, government statistics reported that $150 billion was being spent annually on betting, with just 3% of that spent in legal betting facilities. With an absence of local betting shops and sportsbooks, American players had to look for alternative forms of entertainment, which they found in online betting. Lifting the prohibition meant admitting that there is no way to stop people from enjoying the thrill of betting as an entertainment measure.

The results of repealing the ban were visible by the end of 2018, when the now-legal betting businesses provided the country with $430 million in taxes, having also contributed around $3.4 billion per year to the US economy. 

The USA’s example offers a valuable lesson for the whole world: governments must create the right conditions to prevent money from escaping overseas and on to the black markets by introducing their own regulations instead of turning away from a perspective industry.

Online betting had a major role in the repel of the US ban: it, as it seems, has gravitated so much money that the government had to start searching for ways to rotate the money flow to achieve national benefit. Despite having an arguably less intense relationship with the country’s economy than land-based facilities, online business still has an impact on the country’s well-being in terms of its financial prosperity.

BetInvest hopes to see a day when all governments come to recognise the role of betting businesses in developing local (and global) economies. Until then, we will continue to educate people on how betting can significantly improve lives of millions of citizens by simply being allowed to function with no reasonless restrictions. 

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