In his latest article, Tom Waterhouse of Waterhouse VC delves into the delicate balance between gambling regulation and taxation. He draws parallels between this balance and the story of Goldilocks and the three bears, emphasizing that if regulations and taxes are either too severe or too lax, it can deter participation in the regulated gambling industry.
Waterhouse stresses the importance of finding a middle ground that safeguards consumers, prevents criminal activities, and fosters a fair and competitive market. He highlights the Laffer Curve, a model illustrating the relationship between tax rates and government revenue, to argue that an optimal tax rate exists for maximizing revenue. Both high and low tax rates can have negative consequences, leading consumers to seek illegal betting operators and causing a significant loss in government revenue.
Waterhouse points out that increased taxes can create barriers to entry for smaller operators in the gambling industry, favoring larger companies with bigger market shares. This limits consumer choice and hinders competition and innovation among operators. The impact of taxation on operational costs, marketing, and net profit margins is thoroughly analyzed, showing the complexities and challenges faced by operators in a highly regulated market.
Furthermore, Waterhouse addresses the concept of ‘grey markets’ in the betting industry, where regulatory frameworks are unclear or ambiguous. He predicts a shift towards clearer regulations, with businesses that can adapt to such changes and thrive under pressure being better positioned for success.
In conclusion, Waterhouse emphasizes the need for a balanced approach to gambling regulation and taxation, with a focus on supporting businesses that can thrive under these pressures. Waterhouse VC’s investment approach, which focuses on B2B infrastructure in the wagering industry, reflects this philosophy. The article offers valuable insights for wholesale investors interested in the gambling sector, and invites them to follow Waterhouse VC’s updates on Twitter and their website for industry news and trends.