With a regulatory framework dating back to 1998, Bulgaria is one of the most mature and established gambling markets in Europe – but recent regulatory changes place the jurisdiction on shaky ground.

On May 18 this year, the government has introduced a strict set of new regulatory measuress for the gaming industry, including a near-total ban on advertising. Almost overnight, licensed operators in Bulgaria were banned from broadcasting advertisements on radio, television and newspapers, as well as on online media websites.

Billboards were still permitted, but only if they were at least 300 meters from schools, universities, playgrounds and other protected areas, with at least 10% of the advertising space devoted to a warning about the dangers of gambling. Advertising on buildings offering gambling services was also strictly controlled, with no more than 50 square meters, or 20% of the total facade, allowed to display advertising.

Beyond the crackdown on advertising, deputies also voted to register certain social groups on the national self-exclusion register, notably people benefiting from state aid, thus prohibiting beneficiaries of social assistance to play.

For land-based operators, a particularly strange clause in the law stipulated that gambling establishments were no longer permitted in towns with fewer than 10,000 inhabitants. Operators who did not comply with this rule – or located within 300 meters of a protected area such as a school or student accommodation – had three years to close.

Diversification is the only option for local brands

According to Mark Chakravarti, investment director at local operator Sportingwin, the advertising ban has led to a sharp drop in revenues for operators dealing with Bulgaria.

“Global research shows that when these bans are put in place, including limiting TV adverts, there is a 20% drop in revenue over the next two months,” he told iGB. “I think the situation is very similar in the Bulgarian market.”

Since the ban was introduced in May, for example, major market players like Sesame, 8888 and Winbet have all seen a double-digit drop in traffic to their websites, which equates to a similar drop in revenue . For Entain’s bwin, authorized in Bulgaria since 2016, traffic decreased by up to 17%.

When it comes to weathering the storm, operators like Sportingwin, with regional know-how and expertise, have proven more resilient than their international counterparts, facing declining revenues at a digit rather than two digits after the introduction of the new law.

Who is next to leave Bulgaria?

In contrast, major players like Betway and Betfair have chosen to withdraw from the market in recent years as the regulatory climate has made it more difficult to operate. Chakravarti believes Bwin could be next.

Speaking on a Eastern Europe Gaming Summit During a panel on November 22, 2023, President of the Bulgarian Gambling Association Angel Iribozov described the regulatory changes in Bulgaria as a “perfect storm for operators” and “disastrous” for the market. And the storm already appears to be having a chilling effect on gaming companies operating in the region.

“As a small, locally branded operator, we have a better understanding of the local market, we have better expertise, so we are able to change and adapt,” he said. “But we see that large foreign, international operators do not know local markets, do not have the expertise in geomarkets,” he notes.

Recent clarifications from the Bulgarian regulator, the National Revenue Agency (NRA), have opened up new possibilities for online advertising. These limit the ban to online media companies that have editorial control over advertisements, meaning many social media sites could be exempt from these rules.

However, this minor concession is unlikely to bring much relief as long as the TV ban – which Chakravarti says is most damaging to operators – remains strictly enforced.

“About 5% of customers generate 95% of the revenue,” he explains. “And few of them go through social media. »

Nonetheless, Sportingwin is currently hedging its bets by exploring three new jurisdictions: the United Kingdom, Romania and Brazil. Having reached what she believes is a ceiling in an increasingly difficult Bulgarian market, diversification seems to be the only option.

Increased barriers for market entrants

For a long time, the regulated Bulgarian market has been seen as an attractive option for gambling companies, largely thanks to its low corporate tax, EU membership and relatively low barriers to entry.

Currently, there are 15 licensed operators active in the market, including major local players like Efbet, Winbet and Palmsbet, as well as international brands like Bet365 and bwin and new market entrants like Sportingwin and Betmarket.

According to Yield Sec, which tracks online gaming activity in regulated markets, the impact of the advertising ban was felt in the market well before it came into force.

It estimates that illegal operators accounted for around 87% of GNP in Bulgaria in 2023, making around €3.8 billion in revenue, compared to €562 million in revenue from the regulated market. During the first half of 2024, before the new regulations came into force, the illegal market share reached 91%, according to Yield Sec estimates.

But even though attempts have been made to crack down on the black market by blocking payments to unlicensed businesses, the obstacles for new licensees are also growing.

At the end of last year, the government increased the license price for new entrants to the online sports betting market – from 100,000 BGN (€51,000) to 400,000 BGN (€204,000).

From May, the amount of paid-up capital (investor contributions) required for a license also increased from BGN 500,000 (€255,000) to BGN 750,000 (€383,000).

Politicians don’t want to hear industry concerns

This, coupled with the ever-changing regulatory landscape, creates a “challenging” environment for newcomers, Chakravarti says. Even more worrying, there appears to be little opportunity for dialogue with politicians or the regulator.

“From my knowledge of Bulgaria, many regulatory controls are constantly changing and politicians are moving the goalposts, which becomes very difficult for operators,” he explained.

In a particularly worrying sign for the sector, the advertising ban and accompanying regulations were passed unanimously last May, as Bulgaria’s parliamentary parties put aside their differences to present a united front against sector.

With this top-down approach and ever-changing regulations, Bulgarian operators seem to have only two options: adapt or look elsewhere. As the coming months unfold and old permits expire, we will certainly know which of these routes they will take.