The Philippines’ online gambling industry currently finds itself in a state of significant contraction, but a smaller market is not necessarily a worse one, argues a new position paper from specialist gaming law firm Arden Consult.
The paper, titled “Smart Regulation: One Year On,” follows the release by PAGCOR last week of its 1H26 financials, which showed a 26.6% decline in total revenues to Php43.3 billion (US$705 million) in the first six months of 2026, as well as a decline in the number of licensed Gaming System Administrators (GSAs) under PAGCOR’s new regulatory framework from over 70 in August 25 to 60 as of July 2026.
While those headline numbers paint a negative picture, Arden’s paper argues that this is somewhat misleading, with PAGCOR having deliberately traded some volume for a safer market. It also notes that the focus now must be on finding the right balance between effective industry regulation and ensuring operating conditions remain attractive enough to bring, suppliers, operators and the playing public into the regulated market.
As noted by Arden, reforming the Philippines’ regulated online gaming market has been a two-step process that began in 2024 when PAGCOR began slashing the license fees it charges electronic gaming licenses from more than 50% of GGR to just 30% today, or 25% for the online platforms of integrated resorts. That decision helped GGR from the online sector surge from Php58.2 billion (US$950 million) in 2023 to Php114.8 billion (US$1.88 billion) in the first six months of 2025 alone.
Once they were in, step two saw PAGCOR “change the question.”
“The aim was no longer simply to bring operators inside, but to decide what standard they should meet once there,” Arden’s position paper recounts. It is with this in mind that the regulator introduced its new framework, tightened advertising and player-verification rules, demanded accreditation across the entire B2B supply chain and introduced a Minimum Guaranteed Fee aimed at weeding out unprofitable operators or those clinging onto an unused license for other purposes.
According to Arden, “The sequence made sense: first make the legal market viable; then make participation more demanding.”
While not all changes were planned – particularly the decision by the Bangko Sentral ng Pilipinas to order supervised financial institutions to remove in-app gambling links from e-wallets – Arden argues that PAGCOR has made strong progress in its goal of ensuring a license to serve the Philippines gaming industry is meaningful.
The challenge now, however, is to continue this important regulatory reform without negating the attractiveness of the regulated market PAGCOR helped create. In this regard, the recent decline in gaming revenues generated by the electronic gaming industry is not the only key criteria.
“The more important measure is channelization,” explains Arden in its position paper. “The term is simpler than it sounds: demand for gambling does not disappear when rules tighten, so the real question is which channel that demand flows through – platforms that are licensed, supervised and taxed by the State, or illegal sites that are none of those things.
“Channelization is simply the share of gambling that takes place on licensed platforms. If tougher rules merely move players from a supervised site to an offshore one with no age checks, self-exclusion, local dispute process or Philippine accountability, the State has made the legal market smaller without making gambling safer.”
According to Arden, this means the pathway forward must recognize the fact that, with the Philippines still home to a substantial illegal market, the best way to pull players onto legal platforms is to ensure that those legal options are the more attractive.
“The second half of 2026 may still look untidy in the headline numbers,” Arden wrote. “The Minimum Guaranteed Fee will begin to work as a selection mechanism. B2B decommissioning will become real. More licenses may be surrendered or consolidated. Suppliers will either complete accreditation, restructure through accredited partners or leave the chain. Some of this will be reported as contraction.
“The better indicators are less dramatic: 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 and suppliers continue to put capital and people into the market.
“On revenue, the one-off shock from e-wallet delinking and the first round of player-verification changes should become less important with time. Arden’s [recently released] operator-level series showed the market bottoming after the August 2025 shock and beginning to recover by year-end.
“[Arden’s] base case is stabilization first, then slower but better-quality growth if the framework is allowed to settle.
“The risk is over-correction. If the licensed product becomes materially less usable than the illegal one, channelization can reverse. If enforcement does not keep pace, compliant companies bear the cost of regulation while illegal competitors keep the commercial advantage.
“The next regulatory challenge is calibration: hold the higher bar without raising it beyond what a viable legal market can carry.”
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