Philippines Gaming Sector at a Crossroads as President Marcos Bans POGO Licences

Following substantial regulatory shifts, the Philippines’ gaming industry now faces what experts call a “critical period” in its bid to remain a hub for major operators. Keith McDonnell, Director at KMI Group with extensive experience in the Asian market, explained that President Marcos’s decision to ban Philippine Offshore Gaming Operators (POGOs) has resonated widely among the public and politicians alike, even earning a standing ovation during his State of the Nation address in July.

McDonnell shared that former President Rodrigo Duterte’s liberal issuance of POGO licences had led to pervasive illegal activities, including money laundering, trafficking, and scams, which tainted the industry. According to McDonnell, Marcos viewed these liberal practices as problematic and welcomed the chance to address them. “It created a lot of problems for Marcos and offered political capital should he address them,” he explained.

Since the July announcement, operators have been actively seeking clarification on the ban's scope, with some suspecting that it may not fully materialize. However, McDonnell believes the government’s intentions are clear, stating, “I do believe that by the end of the year, all internet gaming licences (IGLs), including PAGCOR-issued POGOs, will be banned.” He emphasized that Marcos’s credibility would be compromised if no concrete action follows his public declaration.

Despite the impending restrictions, McDonnell suggests that the Philippines will not lose all tier-one gaming operators. “There’s been many lawyers involved, and they’ve brought senators to some BPO customer service centres in the Philippines,” he said. With 95% of workers in these centres being Filipino, senators have shown some support for these facilities, provided they meet certain conditions.

McDonnell predicts that operators with Special Class BPO accreditation, or partnerships with accredited outsourcing businesses, will be able to continue providing customer service for gaming operations. However, they must meet stringent requirements: they cannot handle bet transactions, which must occur in a reputable, tier-one jurisdiction, and they must employ a workforce composed of 90-95% local Filipino staff. He noted that given the circumstances that led to the POGO ban, obtaining new BPO accreditation will involve thorough vetting, with only “good actors” likely to succeed.

Amid the POGO ban, McDonnell warned that the underground market could expand if the government doesn’t monitor the situation closely. “Action on existing POGO licensed operators has already started to happen. I’ve seen paperwork on this,” he disclosed. Although a formal Executive Order clarifying permissible activities is anticipated in November, current license holders have already been instructed to report regularly to ensure compliance with the December shutdown deadline. In response, some operators are reallocating specific functions to other locations to mitigate business risk.

McDonnell noted that many companies are hopeful they can retain skilled Filipino staff through Special Class BPO accreditation or partnerships with accredited firms. Meanwhile, PIGO (Philippine Inland Gaming Operator) licences, which allow operators to serve the domestic market, are unaffected by the POGO ban. He suggested that the number of PIGO applications could rise as operators seek to tap into the Philippines’ experienced labor pool for new purposes.

Reflecting on the factors that led to the ban, McDonnell stressed that “the actions of a few bad actors have stained the reputation of the whole industry.” He observed, “We are in an industry where you can do things right 99% of the time, but it takes just 1% to leave a stain and it takes a while to get over it.”

Considering the potential for regulatory changes in other Asian markets, McDonnell mentioned, “I was on a panel in Lisbon this year and in Macau a few years ago, and on both occasions the subject of new markets opening up was prevalent — yet nothing has really moved.” He speculated that the Philippines’ regulatory changes might prompt other countries to establish frameworks for gaming operators.

McDonnell cautioned against excessive regulation and high taxes, which make it challenging for regulated businesses to compete with offshore operators. “We’re seeing it in the US, UK, and other regulated markets now. There is no way regulated businesses can compete with offshore businesses on betting prices, bonuses, or general marketing and Opex if they have to pay 40 to 50% in taxes.”

For decades, the Philippines has been a favorable location for the gaming industry. As the country addresses illicit activities within its gaming sector, McDonnell expressed hope that the new measures would still allow reputable businesses to thrive while providing employment for thousands of skilled Filipinos.

By fLEXI tEAM