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Harsh truths facing Europe’s gaming industry
As Rome prepares to host SiGMA Central Europe, Europe’s gaming sector faces its biggest test. Can growth be sustained without compromising regulatory credibility? Italy’s €15 billion market is setting the standard for responsible growth in Europe’s gaming sector. The country’s recently introduced nine-year concession model, with licences priced at €7 million and a 3 percent net-revenue tax, signals a decisive turn toward structured oversight. Operators must now navigate the tension between ambition and governance, a challenge that will define the next decade.
For those watching the sector, Rome is far from a random choice. Game Lounge CEO Richard Dennys puts it bluntly “if you want access to the right regulators and policymakers, this is where you need to be”. Heathcliff Farrugia, SiGMA’s COO and former Malta regulator, notes that the European Parliament President, Roberta Metsola, will open the summit. “Twelve years ago, everyone was doing whatever they wanted,” Farrugia notes. “It was the Wild West. Bit by bit, regulations started coming in. Now even the events must reflect a corporate image.”
The regulatory landscape across Europe has hardened in ways that will test every operator. The Digital Services Act enforces stricter age verification and limits “gambling-like” mechanics for minors, while the proposed Digital Fairness Act threatens to pull gaming into a broader net of digital consumer protections. These rules are not peripheral; they touch the very mechanisms that underpin online entertainment and consumer engagement. Supercell CEO Ilkka Paananen captures the tension succinctly: new rules could “cripple how many games fundamentally work.”
Legal black holes and enforcement
This is the paradox of European gaming regulation. Over-prescription, such as in Germany, has left channelization below 50 percent despite strict licensing. Operators comply, pay fines, and incur heavy compliance costs, yet the black market thrives. Farrugia warns that if every new game requires prior approval, innovation stalls and the licensed market becomes brittle. Dennys frames the problem from the affiliate perspective: the tightrope lies between ensuring a safe, responsible experience for players and competing against offshore platforms that appear frictionless. The consequence is poorly balanced regulation that drives both innovation and players underground. Dennys points out “All that friction in the regulated system pushes players to the wrong side. They just go offshore, and suddenly they’re outside the protections we’re trying to provide.”
Even in regulated markets, structural gaps persist. Licensed operators face rigorous oversight, yet illegal operators often operate with impunity. Regulators have no jurisdiction over offshore entities, creating a two-tiered system. Farrugia observes that regulators can only act against members of their own “club,” leaving the unlicensed sector largely unchallenged. Enforcement, meanwhile, lags behind regulation. Dennys notes that much of the effort goes into writing laws and levying fines rather than educating users or anticipating circumvention. Players network, share workarounds, and exploit weaknesses faster than regulators can respond. In Germany, for instance, offshore crypto betting thrives despite stringent local rules. Regulation without comprehension is porous by design.
Advertising illustrates another tension. Some jurisdictions contemplate strict bans, yet curbing marketing for licensed operators often benefits unlicensed competitors. Dennys warns that when regulated operators are silenced while illegal platforms continue to advertise freely, the black market gains a structural advantage. Regulation must protect players without undermining the legitimate market. “Proper regulation isn’t about control – it’s about providing a fair, balanced environment where operators can operate safely and players are protected.” Farrugia notes.
SiGMA Rome represents more than another trade show; it is a potential platform for the industry to confront these realities. Farrugia stresses the importance of bridging the gap between regulators and operators. Effective summits require substantive dialogue, not spectacle. Italy offers the ideal setting: politically accessible, geographically central, and with authorities open to collaboration. Success in Rome could recalibrate expectations, demonstrating that summits can be spaces where policy, enforcement, and operational insight converge.
Trust and regulatory value
Heathcliff Farrugia points out that channelization will continue to define success, and the most profitable operators will be those who embrace regulated markets, even under higher tax burdens. Regulatory convergence on advertising and player protection is emerging, yet divergence persists in licensing fees, operational obligations, and enforcement intensity. Meanwhile, broader digital legislation from the AI Act to data governance mandates will increasingly intersect with gaming, pushing operators beyond traditional sector silos.
Operators who can credibly claim transparency, compliance, and player safety will gain brand capital that endures. Offshore operators may offer convenience and speed, but their model is increasingly fragile as enforcement catches up. In this sense, Rome is not a vanity exercise; it is a stress test for the industry’s ability to demonstrate responsibility at scale.
Farrugia sums it up: “People will always bet. Either we provide a properly regulated environment, or they will do it unregulated.” Regulation is not a constraint but a framework for sustainable growth. Dennys reinforces this, noting that influence alone, through cocktail parties or marketing gimmicks is insufficient. The industry must engage with regulators, embrace structured oversight, and shape policy through expertise rather than lobbying alone.
Italy’s new regulatory framework, combined with the broader European push for governance, marks an inflection point. The lessons extend beyond Rome. Brazil’s rapid online licensing illustrates how well-structured regulation encourages compliance and tax revenues, while Finland and the Netherlands provide contrasting case studies in channelization and affiliate engagement. Operators must learn to navigate these differences, balancing risk, reputation, and opportunity.
Ultimately, SiGMA Rome could become a signal event in Europe’s B2B calendar, not for its size or glamour, but for its capacity to champion regulatory engagement. For the industry, the choice is to embrace a corporate, responsible model or risk being defined by the unintended consequences of regulatory failure. Success in Rome will signal that growth and governance can coexist.
Without the right checks and governance, even the most dynamic sector cannot thrive sustainably.
📺 Richard Dennys and Heathcliff Farrugia recently discussed Europe’s gaming sector in a conversation you can watch here.
