Israeli Gambling Firms In 2019 – Challenges & Opportunities
2018 was a mixed year for online gambling. In regulated markets like the UK and Italy, companies faced the prospect of increased taxes and stricter laws. In the more lucrative Asian markets, local competition and government crackdown dimmed the prospects of suppliers like Israel’s Playtech.
But all that has been balanced by the historic US Supreme Court judgment that opened up a new $400 billion online sports betting market. What does all this mean for the contingent of Israeli gambling companies in 2019?
Israel & Online Gambling – The Strange Connection
Anybody who is familiar with the laws in Israel would find “Israeli gambling company” a bit of a contradiction. As a Jewish state, Israel has strict laws that prohibit casinos and other gambling establishments. Generations of Israelis have been forced to visit casinos in nearby Turkey, Egypt, and onboard gambling cruises.
But that has not prevented Israeli firms from taking advantage of the online gambling revolution. In fact, driven by their spirit for innovation and entrepreneurship, Israelis were the early movers in this nascent field way back in the 1990s. Three companies come to mind when talking about online gambling and Israel – Playtech, 888, and in some ways, Microgaming.
Both Playtech and Microgaming are involved in providing gambling software platforms for online slots, poker, and other games. Their clients include established names in the gambling business like Betfair, Bet365, Carmen, 32Red, William Hill, and more. 888 on the other hand is a full-fledged online gambling company with their own brand websites and services.
All three companies were founded by Jewish entrepreneurs. In the case of Playtech, it was Israeli entrepreneur Teddy Sagi who founded the company in 1999. 888 was created two years earlier by the Shaked and Ben-Yitzhak brothers. Microgaming, the earliest of the trio, also has a Jewish connection- one of its founders is South Africa based entrepreneur Martin Moshal.
Besides these companies, traditional betting firms like William Hill also owe the rise of their online gambling platforms to Israeli innovation. William Hill initially partnered with Playtech to get their online operations up and running in 2009, before parting ways and setting up their own branch in Tel Aviv in 2011.
Israel is a hotbed for innovation, especially in the tech arena. And online gambling has been harnessing this for several years now, in areas ranging from software development to marketing. None of these firms provide online gambling services to Israeli customers. Even their own employees in the country cannot legally use the services they create and maintain.
Israeli Gambling Firms Vs Foreign Firms
As this popular site will tell you, Israel does not have outright bans on online gambling. But it is highly restricted and companies run the risk of government crackdowns. This kind of regulatory ambiguity and restrictions have affected Israeli gambling firms. In fact, Playtech was registered in Estonia, while 888 was in the British Virgin Islands (later Gibraltar).
In comparison, firms like NetEnt enjoy certain advantages due to their location inside the EU. The Swedish company is based in Sweden and benefits from the more gambling-friendly laws in that country. And with recent changes in Sweden’s gambling framework, NetEnt looks poised to reap the rewards in their domestic market as well.
While NetEnt is similar to Playtech in providing online gambling software services to operators, Betway is a different beast altogether. Founded in 2006, they offer several gambling services through their own branded platforms. And with their core focus on sports betting, they stand to gain a lot from the recently opened US markets as well. The company is based in Malta and Guernsey.
Playtech’s Troubles in the East In 2019
Of all the Israeli gambling firms out there, Playtech has probably had the worst experience in the recent past. Its profits and valuation took a nosedive in early 2018, mainly due to losses in its East Asian markets. Increased competition in China, which accounts for nearly 40% of Playtech’s profits was a major cause, along with government crackdown on illegal gambling in nearby Malaysia.
The company also had huge expectations over its acquisition of Italian company Snaitech for 846 million Euros. But increased taxes on online gambling and slot machines by the Italian government put a huge dent in those aspirations. Playtech also faced issues with the tax authorities back home in Israel and had to strike an agreement to pay 28 million euros in additional taxes to avoid further penalties.
Heading West – How Playtech Plans To Bounce Back In 2019
All is not lost for the company though. It showed positive growth in revenues in regulated markets and has high hopes for expansion into the newly opened US market. New shareholders have arrived in the form of Spring Owl Asset Management, with a $100 million investment. And the old guard has been moved out, with controversial founder Teddy Sagi selling his remaining stake in the company.
What next for Playtech’s Teddy Sagi?
This development, combined with the arrival of Sportech’s Ian Penrose as a director, bodes well for the future of Playtech’s operations in the US. Penrose was roped in explicitly to tackle the US market. It really needs to reduce its dependence on gambling grey markets in the East to have any hope of a stable future. Looking west towards the US is a smart idea indeed.