High risk versus high value: What markets are worth expanding into?

We live in dynamic times. Global warming, the advancement of Artificial Intelligence, and reusable rockets that would allow us to colonize the Solar System. After all this futuristic talk, though, I wish to reel your attention back to the ordinary and quotidian.

Today, I’d like to talk about high-risk and high-reward markets, leaning into my own experience as someone who has reviewed thousands of complaints and casino terms and conditions, and share, as it were, my two pence on what these markets are, why companies enter them despite the implied risks, and when they succeed.

Defining the high-risk market opportunity

To tentatively outline what a high-risk market is, I need to put forward the core principles that define such a market in the first place. This is a market that is rooted in regulatory uncertainty – the application of certain measures and how they would be enforced, for example.

This could be anything – from a complete ban on online gambling in the Philippines to regulatory pitfalls that make it harder for regulated businesses to compete against a surging black marketdue to seemingly dogged resistance to external input into the regulation of the market (Germany, I am looking at you).

There are other hindrances along the way, of course. A high tax rate, as seen in sports betting in New York or, most recently, Illinois, could also define these markets as "high-risk."

But is the risk all justified?

I believe so.

Just because a market is more uncertain for a business, this doesn’t mean that it doesn’t offer immediate value or that it can’t offer such value in the future. Germany is currently bogged down in rules that affect suppliers and operators, which I frankly believe are detrimental.

Yet, for the companies that weather the storm, the payoff could be significant. They would have muddled through the uncertainty of regulation and found a way to remain resilient in terms of business, yet compliant so that they can scale.

Measures such as an overreaching gambling tax are not immediately addressed, I will admit, and they lead to reducing the competitiveness of the regulated market, but in my opinion, such measures are hard to sustain against the pile of mounting evidence that they undermine the existing regulatory framework rather than empower it.

The grey underbelly of high-risk markets

A high-risk market could also be an unregulated market. Now, I know what you must all be thinking – " Let’s not talk offshore, as it’s a sensitive topic."

I understand this, but many of today’s markets were offshore or "black markets." Ontario did not regulate online gambling until 2022, if I recall correctly, and the province had a very lenient approach to offshore markets.

Only recently have we heard about the Alcohol and Gaming Commission of Ontario asking media outlets not to promote certain brands.

The Netherlands was also operating as a sort of grey area, although the Kansspelautoriteit, the local regulator, took swift measures. In the run-up to the market’s re-regulation, the Netherlands made it abundantly clear that those operators that have been running business locally during the years of absent regulation could be described as "rogue operators."

Many companies chose to withdraw and began to embark on a re-entry trajectory, which elicited scrutiny from the regulator. Most had to comply with a cooling-off period and wait before they could apply for a legitimate Dutch license and had to demonstrate that they had ceased all unregulated operations locally first.

In Japan, until recently, there has been no enforcement action against online gambling, but the country’s decision to introduce Integrated Resorts (IR) and possibly scale to the three originally proposed integrated resorts has led to a change in the government’s strategy.

Famous people, media personalities, sports figures, and ordinary citizens have been arrested over their participation in overseas online gambling platforms and held personally responsible. Until that moment of enforcement, some would have argued that Japan constitutes one of those high-risk, high-reward opportunities.

Regulated, but uncertainties persist

Another aspect of the high-risk, high-reward conversation ought to also focus on markets that are regulated, populous, and offer the potential for strong long-term net gains. No two regions exemplify this better than Latin America and Africa.

Even though consumer spending on gambling per capita may be lower than in other places in the world, the sheer volume of potential players more than makes up for this. The risk, though, lies in the fledgling regulation, which will pose challenges.

In Brazil, for example, the government has already said that, should it find consumer safeguards inadequate, it would roll out the legalization, although skeptics think that this is just saber-rattling at a time when the government is trying to plug a fiscal deficit.

To me, the real risk doesn’t lie in Brazil waking up on the wrong side of the bed one day, but rather in what kind of regulation might follow next.

The country is now at a crossroads: it can either build on existing global standards, as suggested by trade associations (who, granted, have a vested interest in a profitable market), or try to reinvent the wheel with bespoke rules and frameworks.

That second route rarely ends well. It often leads to years of trial and error, during which regulators scramble to understand why their uniquely tailored measures don’t work—and in the meantime, the market suffers.

Then, there’s Africa. While Latin America benefits from increasingly cohesive regulatory systems, Africa is still a patchwork. Only a few countries—South Africa, Kenya, and perhaps Nigeria—have strong national-level gambling regulations. The rest are either poorly regulated, inconsistent, or lack any meaningful oversight, which can open the door to both opportunity and chaos.

Conclusion: Betting on uncertainty could pay off

High-risk markets present their own unique set of challenges. Yet, what matters here is to understand that the idea of "high-risk reward" is fundamentally changed. There has been a paradigm shift. Today’s efforts in high-risk markets cannot be focused on trying to capitalize on rapid player acquisition, oblivious to the potential consequences.

Regulators are on their feet, nimbly hammering frameworks that will catch up to you sooner or later. Yet, taking a chance on a market early on is a smart strategy that could bring high rewards for those prescient enough to read the signs correctly. It need not be an overly adventurous undertaking. Build your local partnerships, keep your ear to the ground, and perhaps visit the local industry exhibitions to get a feeling of what the local market has to offer.

Entering a high-risk market is a gamble, but if you have your priorities straight, it can pay off.

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