Arden Says Philippines Online Gambling Contractions Reflect Stronger Regulation

The Philippines’ online gambling market may be shrinking, but that does not necessarily mean the sector is weakening, according to a new position paper from specialist gaming law firm Arden Consult. The paper argues that the contraction is a necessary consequence of tighter regulation and a deliberate move toward a safer legal market.

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Regulation Trades Volume For Safety

Arden’s paper, titled Smart Regulation: One Year On, comes after PAGCOR released its 1H26 financials last week. These numbers reflected a drop in total revenue by 26.6% to Php43.3 billion ($705 million) during the first six months of 2026, compared to the total number of licensed Gaming System Administrators under the new scheme of the regulator that reduced from over 70 in August 2025 to 60 in July 2026.

The company explained that although the aforementioned statistics seem to be quite pessimistic, this is not the whole truth. According to the company, PAGCOR has consciously sacrificed volumes for a secure environment, and the main thing at the moment is to preserve the attractiveness of the industry.

Arden said the reform process has unfolded in 2 stages. First, PAGCOR cut the fees charged on e-gaming licenses down from more than 50% of the gross gaming revenue in 2024 to 30% at present times or 25% for the online gambling platforms of the integrated resorts. As pointed out by Arden, this decision contributed to the increase in the online gambling gross gaming revenue that grew from Php58.2 billion in 2023 to Php114.8 billion within the first half of 2025.

PAGCOR Tightens The Framework

Once the market had been brought inside the regulatory perimeter, Arden said PAGCOR moved to change the standard operators had to meet. The regulator then introduced a new framework, tightened advertising and player-verification rules, required accreditation across the entire B2B supply chain, and added a Minimum Guaranteed Fee intended to remove unprofitable operators or those holding unused licenses for other reasons.

The firm said the sequence was logical, describing it as first making the legal market viable and then making participation more demanding. It added that not every change was planned, pointing in particular to the Bangko Sentral ng Pilipinas’ order for supervised financial institutions to remove in-app gambling links from e-wallets.

Even so, Arden said PAGCOR has made strong progress in ensuring that a license to serve the Philippines gaming industry carries real meaning. The challenge, it said, is to keep reform moving without making the regulated market less attractive than the illegal one.

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Channelization Remains The Key Measure

Arden said the more important measure is channelization, rather than revenue alone. In the paper’s view, gambling demand does not disappear when rules tighten; instead, the key issue is whether that demand flows through licensed, supervised, and taxed platforms or through illegal sites that are outside state control.

According to the firm, channelization refers to the proportion of gambling conducted on licensed platforms. If strict gambling regulation measures will only drive gamblers from one platform to another, where there are no age restrictions, no mechanisms for self-exclusion, and no local dispute resolution procedure, then the state has actually decreased the legitimate market.

Arden said that, given the continued size of the illegal market, the best way to draw players onto legal platforms is to make those lawful options more attractive.

Risks And The Road Ahead

The paper said the second half of 2026 may still look messy in headline figures. It pointed to the Minimum Guaranteed Fee beginning to work as a selection mechanism, B2B decommissioning becoming real, and further licenses potentially being surrendered or consolidated. Some suppliers, Arden said, will either complete accreditation, restructure through accredited partners, or leave the chain, and some of that will appear as contraction.

The firm said the better indicators will be less dramatic, such as whether legal channelization keeps improving, whether action against illegal operators and payment channels becomes faster, whether surviving licensees invest more in technology and controls, and whether reputable domestic and international operators continue putting capital and people into the market.

Arden said its base case is stabilization first, followed by slower but better-quality growth if the framework is allowed to settle. It warned that over-correction could reverse channelization if the licensed product becomes materially less usable than the illegal one, while weak enforcement would leave compliant companies carrying the cost of regulation as illegal competitors retain the commercial advantage.

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Source: Inside Asian Gaming