While the sports betting industry may seem like a win-win business to you, the numerous bookies that have failed in this market will not agree with you. Many gamblers believe that betting operators go bankrupt due to illegal actions, but this is not always the case. In many situations, these companies are forced to leave the market due to completely different reasons. And in today’s article, we will tell you about these circumstances.
The too small starting budget
Bookmakers often overestimate their capabilities and step into the market with too little budget. As a result, a few overly lucky players can exceed the bankroll reserved by a certain operator and destroy the entire company from a financial perspective. And situations like this happen more often than you might think. On top of that, a betting house can go bankrupt simply because it bites off more than it can chew by accepting too many sports bets.
Changes in governing laws
Betting companies must always comply with numerous legal regulations depending on their location. But since the gambling industry is one of the fastest-growing business areas, government agencies are constantly reviewing laws and changing them. In many cases, this results in operators no longer being able to function according to their initial business model. For example, a simple increase of the tax rate by 5% forced many bookmakers to abandon the Gibraltar license.
Owners face legal challenges
When sportsbook’s founders find themselves in the middle of a lawsuit, it almost never ends well for the company. Due to this turn of events, operators receive a devastating reputational blow, especially if the owner is sued for some kind of fraudulent activity. In the best-case scenario, a bookmaker could repeat the fate of BetOnSports.com and regain some of its customer base. But more often than not, after such events, sportsbooks rapidly lose customers and leave the betting market.
Fraudulent activities
Of course, the sports betting industry is a desirable target for scammers who are not going to comply with the law in the first place. As a rule, such operators use incoming bets to pay for all winnings instead of making payments from a reserved budget. It means that the owners can miscalculate their financial capacity and close the company without paying customers their winning bets. And even if it does not happen, these sportsbooks have an extremely short life cycle as they run into legal issues eventually.
