The Margin Squeeze: How Smart Operators Use Offshoring To Fight the Tax Tidal Wave
The iGaming industry has spent the better part of a decade on an extraordinary growth trajectory, but new cost pressures are squeezing revenues. In this new era, only business leaders prepared to think creatively about their operations are poised to succeed.
For many years, post-pandemic digital adoption, new market openings across the Americas and the relentless expansion of mobile wagering created conditions that rewarded scale above all.
Operators grew headcount, expanded into new jurisdictions and invested heavily in content, technology and brand.
Revenue went up and although costs went up faster, while the top line was still climbing, nobody minded.
That era is over
In 2026, the conversations in boardrooms from Malta to New Jersey have shifted decisively from growth at all costs to margin preservation.
The facts clearly show why:
● UK Remote Gaming Duty will nearly double from 21% to 40% from April 2026. A new 25% remote betting duty follows in 2027.
● Following hikes in France, net tax income fell 50% year-on-year.
● Brazil is layering new taxes on a market that has barely finished licensing its first cohort of operators.
● In the US, New York’s 51% gross gambling revenue is seen by many of its fellow states as a template to copy.
The result is an industry-wide compression of operating margins — coming at exactly the moment when compliance costs are escalating, responsible gambling requirements are intensifying and investors are asking hard questions about sustainability.
The Three-Front War on Margins
To understand why operational efficiency has become the defining strategic priority, it helps to examine three simultaneous pressures operators are facing.
Taxation: The New Normal
Governments across regulated markets are waking up to the fact that online gambling generates substantial revenues and can bear heavier taxation than retail equivalents.
In every market, remote gaming has lower fixed costs, higher perceived harm and an operator base that cannot easily relocate its customer base. That makes it an attractive target for treasuries under fiscal pressure.
Betsson’s latest results illustrate the impact: Gross margins fell from 65.3% to 60.5%, driven primarily by higher gaming taxes across its European portfolio.
Evolution, the live casino giant, has explicitly signalled that 2026 margins will remain flat at best.
For operators that built their financial models around 2022 or 2023 tax assumptions, the arithmetic has changed fundamentally.
Regulatory Costs: Compliance as a Permanent Line Item
Beyond tax, the cost of simply holding a licence is rising. In the UK, the Gambling Commission has proposed fee increases of up to 30%.
Mandatory affordability checks, enhanced KYC and AML requirements, automated player risk scoring and centralised self-exclusion databases all require investment in people, systems and processes.
In the US, each new state brings its own licensing regime, its own compliance framework and its own operational overhead.
These are not one-off costs; they are structural additions to the operating base that compound year after year.
Wage Inflation: The Talent Premium
The third pressure is the least discussed, but the most persistent.
Across every major iGaming hub—London, Malta, Gibraltar, New Jersey, Stockholm—the competition for talent is greater than ever.
Skilled compliance officers, data analysts, CRM specialists, payments experts and customer service teams have pushed salary expectations to levels that would have been unrecognisable five years ago.
Even back-office functions now carry significant salary tags in major gaming jurisdictions.
Market conditions have also conspired to increase costs across the board. Take these two examples:
● Malta’s cost of living has also risen dramatically, eroding what was once its core advantage as a hub.
● The US market demands specialists in state-by-state regulation who command premium compensation.
Beyond Cost-Cutting: The Strategic Response
The instinctive response to margin pressure is to cut. Reduce marketing spend, freeze headcount and consolidate platforms.
Industry leaders like Entain have publicly indicated they will mitigate a portion of the UK tax impact by reducing marketing and promotions — acknowledging an estimated £100 million EBITDA hit in 2026 alone.
But cutting alone is a strategy with diminishing returns. Reduce marketing too aggressively and you cede market share to competitors or, worse, to the unregulated black market.
Cut compliance teams and you invite regulatory action. Freeze technology investment and you fall behind on product innovation.
The operators who are navigating this environment most effectively are approaching it differently by asking a more fundamental question: How can we do what we do, at the same quality, at a fundamentally different cost base?
Regularised Operational Solutions: The Quiet Revolution
There is one operational lever that delivers transformational cost savings without any reduction in capability, compliance standing, or service quality—and it is one that the industry’s most sophisticated operators have been deploying with increasing confidence: regulator-approved offshore and nearshore operational solutions.
The critical distinction here is “regulator-approved”.
The iGaming industry has a long and uncomfortable history with offshoring. For years, some operators quietly moved back-office functions to lower-cost jurisdictions without formal regulatory approval, operating in grey areas that created legal risk, reputational exposure.
Not to mention the constant anxiety of an audit or a press investigation that could unravel the arrangement.
That approach was always fragile. In an era of heightened regulatory scrutiny, ESG reporting requirements and investor demand for transparency, it has become untenable.
Publicly listed operators cannot reference undisclosed offshore arrangements in their earnings statements. They cannot explain away a compliance failure in an unaccredited offshore facility and they certainly cannot present grey-market cost savings to institutional investors as a sustainable margin improvement.
The alternative changes the equation entirely: a fully accredited, regulator-approved operational solution.
When an operator moves functions to an accredited offshore partner, that arrangement can be openly disclosed. It can be referenced in earnings calls and it can be presented to analysts and investors as a deliberate, sustainable strategic decision, rather than a cost the business is trying to hide.
The Numbers That Matter
The savings from a properly structured, regulator-approved solution are substantial.
For US-based operators, the cost differential on skilled back-office roles can approach 80%. For UK operators, savings typically run around 65%. Across continental Europe and Malta, the figure sits at approximately 60%.
These are not savings achieved by employing less qualified people. They reflect the economic realities of operating in jurisdictions with lower costs of living, deep talent pools of industry-experienced professionals and regulatory frameworks specifically designed to support the gaming sector.
What kind of benefits are we talking about?
Well, a mid-size operator running 100 back-office roles from the UK or Malta — covering customer service, compliance, CRM, payments and fraud, business intelligence, and quality assurance — could be spending in the region of £3-5 million annually on those functions.
A regulator-approved solution could reduce that to £1.2-2 million for equivalent capability.
That is £2-3 million returned directly to the bottom line, every year, without any degradation in the quality of work, any reduction in regulatory compliance or any risk to the operator’s licence.
For a business absorbing a Remote Gaming Duty increase from 21% to 40%, those savings are not a marginal improvement. They are the difference between a shrinking margin and a recovering one.
Beyond Customer Service: The Full Operational Spectrum
A common misconception about offshore operational solutions is that they are limited to customer service — answering phones, responding to live chat, handling basic queries.
That may have been true a decade ago, but today the most effective solutions encompass the full operational spectrum:
● Business intelligence and analytics
● Compliance and AML operations
● CRM and lifecycle marketing
● Payments processing and fraud prevention
● Sports trading and resulting
● Quality assurance and testing
● Finance and accounting
● HR administration
● Workforce management.
The talent pools in accredited offshore jurisdictions now include professionals who have built their careers inside major gaming operators.
These are not generic BPO agents being trained from scratch, they are industry veterans who understand the difference between a KYC escalation and a SOW trigger and who know what a suspicious betting pattern looks like before it hits the alerts dashboard.
If you’re an operator concerned about internal service quality, this depth of available talent is the answer.
The question is no longer whether qualified people exist in accredited offshore markets. The question is whether you are accessing them through a regulated, compliant structure or leaving margin on the table by not doing so.
Follow the Sun: Resilience On Demand
There is a secondary benefit to modern outsourcing that operators increasingly value: resilience.
By establishing accredited operations in a different time zone, operators gain genuine 24-hour coverage without the premium costs of overnight shifts in expensive jurisdictions.
Customer service, compliance monitoring and operational support can follow the sun — with core European or US teams handling their business hours and the offshore team providing seamless coverage during off-peak periods.
In a world where regulatory expectations around response times, player intervention and AML monitoring are increasingly that they run on a 24/7 basis, this is not a luxury. It is an operational necessity that an accredited offshore solution delivers as a natural consequence of its structure.
The Operators Who Will Thrive
The iGaming industry in 2026 is not in crisis. Consumer demand remains robust—UK online gross gambling yield is rising, the US market continues to expand and Latin America is opening up.
What has changed is the operating environment. Tax, regulation, and cost inflation have collectively compressed the margin between revenue and profit, and that compression is structural, not cyclical.
The operators who thrive will not be those who simply cut their way to profitability.
It will be those who rebuild their operational cost base around regulator-approved, transparent, and sustainable solutions—and who do so with the confidence that comes from full compliance, full disclosure, and full operational control.
The margin squeeze is real, but for operators prepared to think differently about how and where their operations are structured, it is also an opportunity to emerge leaner, more resilient and better positioned for the next decade of growth.
Conexus Enterprise offers a regulator-approved operational solution delivering transformational cost savings to licensed gaming operators worldwide. To explore how your business could benefit, contact The Conexus Group.