Record Revenues for Hong Kong Jockey Club Despite Expanding Illegal Market

Hong Kong Jockey Club (HKJC) achieved record figures in betting and lottery revenues during the 12 months ending in June, reaching HK$331.7 billion. This represents a year-on-year increase of 3.6%, despite fierce competition from the illegal market and regulatory hurdles. According to the club's directive, financial performance remained robust and allowed for contributions of HK$39.3 billion to the community.

Overview: Growth Across All Verticals Despite Challenging Environment

The club emphasized that it operates in a "challenging and dynamic" environment, with intense competition from a rapidly expanding illegal betting market. The tax burden on betting also impacted operations: the club faced an annual special tax of HK$2.4 billion on football bets, as well as a tax model that taxes up to 75% of horse betting and 50% of the gross margin on football. Additionally, the government's decision to pause the granting of new licenses for regulated basketball betting contributed to HKJC's compliance, although it warned that this leaves room for the growth of the illegal market in that sport.

Key Results: Horse Racing, Football, and Lottery Revenues at Record Levels

By segment, growth was consistent:

• Horse Betting: 3.6% year-on-year increase, reaching HK$143.4 billion.
• The biggest boost came from the internationalization of betting pools ("commingling"), which included 26 countries and jurisdictions and accounted for HK$34.3 billion (+9% annually), representing 23.9% of the total horse racing bets.
• Revenue from this segment amounted to HK$19.9 billion.
• Football Betting: Identical increase of 3.6%, reaching HK$179 billion.
• HKJC acknowledged the government’s contribution by allowing new betting types, deemed "crucial" for competing with illegal operators.
• The FIFA World Cup made a significant contribution to the revenue boost.
• Mark Six Lottery: 4.2% year-on-year growth, totaling HK$9.4 billion in its 50th anniversary year.

The club paid a total of HK$29.3 billion in taxes and fees on betting, equivalent to 6.4% of the Inland Revenue Department's collection in the Hong Kong Special Administrative Region of China.

Technology, New Products, and Regulatory Challenges

HKJC’s management highlighted investments in technology and digital sports betting platforms. While the new platform was initially intended for the launch of basketball betting, the expansion of "prediction markets" led to a strategic shift towards the football segment. The club noted that its agility and strategic focus have been key to navigating the changing regulatory context.

In relation to the black market, management expressed:

"The high tax rate in Hong Kong is undermining the competitiveness of licensed betting products. The tax on horse racing reaches 75% and on football at 50% of the gross margin."

Moreover, they highlighted the contrast in offerings: the regulatory framework allows betting only on two sports — horse racing and football — compared to up to 60 disciplines available through illegal operators, including unlicensed basketball.

Regarding the decision to pause basketball licenses, the club expressed respect for the government measure, but warned: "Without a legal channel available, the illegal betting market in basketball will continue to expand, along with the associated social and legal harm."

Strategy: Cost Adjustments and Governance

To maintain competitiveness, HKJC reported actions aimed at reducing operating costs and maximizing efficiency. After its annual meeting held on September 2, Kenneth Fok Kai Kong was elected steward for a year, while Bernard Charnwut Chan, Anita Fung Yuen Mei, and Philip K W Lo were re-elected for three years.

Winfried Engelbrecht-Bresges, CEO of the club, summarized the exercise: "Despite operating in one of the most complex and changing environments, thanks to the successful and agile execution of our long-term strategies, we achieved extraordinary results both on and off the tracks."

Martin Liao, chairman of HKJC, highlighted: "The regulated and authorized sports betting service in football also yielded very gratifying results. Above all, despite the challenging context and the threat from the illegal market, the club maintained its strong support for the community and the charities that depend on us."

As part of strengthening its international structure, in June it was announced that Jon Knapman, former commercial director of the UK Tote Group, was appointed as the new head of the internationalization strategy of betting pools.

Illegal Market and Outlook

The club believes that as long as there are marked regulatory and fiscal disparities, the black market will continue to grow. Expanding the offerings and modernizing legal channels, along with technological investment, are focal points aimed at trying to balance competition. More regulatory updates can be expected in the coming season, in line with trends in the betting industry and the legal framework in Asia.