The casino business is a lucrative choice—the only thing that outsiders see is money. People know that casinos have a small house edge, but that the house always wins. Such perspective brings people to believe that running an online casino business has little risk.
But are there hidden risks to investing in the online casino business? If so, what are they?
These risks are:
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Security Risks
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Bankruptcy Risks
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Software Risks
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Legal Risks
Today, we will discuss each of this risk and help you understand why these are your top priorities. Before you invest in an online casino business, use these points as reference for validation, and decide if the online casino business is a venture worth taking.
Security Risks
The casino industry is only about one thing—money. Where the money is, the thieves will follow. If you operate an online casino, players expect their data and financial information to be secure. A lot of people who invest in the casino business think that security is an easy aspect of the business to implement. The truth is that it isn’t. Despite all the technology at your disposal, the one key thing that an organization must never forget is to train their employees about security.
The thing with online security is that you can build firewalls and use the most advanced encryption method and yet fail. The failure is not because of a robotic or system issues, but rather because of human error.
Think of building a solid structure—a house or a building. It may be fortified and formidable, but if a person leaves the door open, the culprits can get inside. This is what usually happens in online security breaches. In large corporations, employees are trained never to view any suspicious email. Usually, hacks occur because an innocent employee clicks an email that has a virus embedded in it. Once this happens, the hacker can now plant a seed that will grow inside the system. This virus is now on the inside, and one day, it will open the doors for the hacker to get in and steal information.
Security is a risk that many casino operators take with a grain of salt. People who do not pay attention to this are usually the ones whose casino systems get infiltrated. By the time they realize what happened, it is too late.
Bankruptcy Risks
Money comes and goes in casinos: be it online or a brick-and-mortar gambling facility, there is a huge turnover of cash in any establishment.
The thing with a casino is that all game results are random. What many casino operators do not expect is that one person is always bound to win the jackpot. The number of players has little to do with this. Luck is luck, and you will never really know if someone is going to win. Despite having statistical models that can predict the odds or possibility of a person hitting the jackpot, these are nothing more than numbers on paper.
The risk of a platform running jackpot games is bankruptcy. You are legally obligated to pay the winner a prize. If you do not have the money set aside to pay for it, you are going out of business. To prevent this from happening, you have to stipulate in your Terms and Conditions that a prize that is so abnormally large must be broken down into instalment payments. This provision must be put in place, so you do not run out of money because a court of law stated that you pay.
The good thing about this strategy is that a player who have won millions can be paid on a monthly basis. With this set-up, your casino is earning money monthly, and then you can pay the monthly instalment to that lucky player from these earnings. You can never always claim that the game has malfunctioned. This excuse is not always going to fly, and casino watchdogs are on the prowl, looking for winners you do not want to pay.
Spare yourself the legal trouble. Put a condition in place where you can pay your jackpot winners on a monthly basis. With this approach, you can continue your operation and still keep your gaming community happy.
Software Risks
If you offer free casino games, then you are not in any risk. Demo slots for fun do not bring income for players. But if you operate an online casino for real cash, you have serious dependencies on your game providers.
What is this risk? If casino slots or games break down, players will not be happy. Once they have placed their bets, and there was a malfunction, you are liable to fix that problem and return those bets. If one of your games is down, players cannot access the game, and they might leave. The experience is going to be so bad that they may even consider moving to a new online casino.
The risk here is that your entire operation is dependent on your game developers. As an online casino, you have to aggregate games from software providers. This is the fastest way to put up your online business. This dependency can be addressed if you build your own gaming firm. Such was the approach taken by some casinos where they aggregated hundreds of games from software providers, and yet they built their own team to create exclusive games.
Not only did this mitigate the risk of games going on down time, but it also allowed them to brand their casinos as one that has exclusive game selections.
Legal Risks
Every country or sovereign state has laws around the gambling industry. You are at risk if you operate in a country where you are banned. Governments can sue you, come after you, and even call to your jurisdiction to pay heavy fines or shut you down.
You need an army of legal experts who can help you set-up your business. While it is easy to set up the software, compliance to the law is another thing.
To prevent yourself from getting the heat, make sure you do your due diligence about the following:
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Get a license from an established and credible body
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Secure your documents from the government of your incorporation
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Get a group of lawyers to discuss which countries you can operate in
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Set-up a team in charge of compliance with international anti-money laundering laws
As you can see, all of these four points are loopholes where your organization can be charged of fraud or illegal business practices. As an investor, you may not have expertise on all these four aspects. You need to ensure that you have a team knowledgeable enough about what the law is, and how to comply with them.
Conclusion
Launching an online gambling business, or investing in one, is a promising endeavor. After all, an online casino does not need as much money as putting up a physical one. But like any business, there are risks. If you know what these risks are, you can take action and mitigate them. All businesses have risks, but you can significantly reduce these risks from happening if you set-up processes to put them at bay.
