In his recent State of the Nation Address, the President announced a ban on all Philippine Offshore Gaming Operators (POGOs) “effective immediately”. The statement was met with thunderous applause and I admit that I initially thought it was all just regulatory theater, given that PAGCOR had only a few months prior debuted its new “Internet Gaming License.” The IGL framework was positioned as a replacement for the current POGO license and, as your average cynical Filipino pundit, I jumped to the (incorrect) conclusion that POGOs were not being banned, but rebranded.

It turns out that that is not the case, and PAGCOR’s earlier efforts to save the Chinese-led online gaming industry have in fact been overridden by this executive order. (link) On Thursday July 24th, Malacanang issued a follow-up statement, declaring that the POGO industry had 60 days to pack their bags and head home. Big yikes. (link)

As of 2023, there are about 22,000 foreign workers and 25,000 locals employed by the POGOs. (link) The industry generates about ₱166B in “economic benefit” for the country, which includes everything from direct taxes to indirect spending. That sounds like a lot of money, but the Dept of Finance says that it’s costing the country ₱265B (!) to host the POGO industry, so we’re actually at a net negative. Supposedly one of the consequences of having an online gambling industry is that it creates a chilling effect with other foreign investors, which was one of the reasons given for the high cost.

Let’s look at some of the possible impacts. For years now, the presence of well-paid POGO employees in our mixed-use districts has caused substantial inflation in rent and cost of goods. Living in BGC for over a decade, I saw this happen first-hand. By the time I left in 2022, nearly all of the other tenants on my floor were Chinese migrants, and keeping up with the rent increases was untenable on a “normal” salary. My first BGC apartment in 2012 was a ₱25,000/month 1-bedroom. Nowadays, a smaller studio unit in that same building is going for ₱45,000. Inflation is a bitch, and it’s magnified further by the presence of a transient high-income class that can hoover up all the supply.

Without the POGOs, will we see rent prices come down in popular districts? Theoretically, several thousand landlords across BGC, Makati, Resortsworld, and other areas would all lose their high-paying tenants simultaneously over the next 8 weeks. The last time we saw an exodus of this scale was during the opening months of COVID in 2020, so that provides a good comparative for rental prices we can expect in the coming months.

And then there’s USDT trading volume. The POGO presence is the single biggest driver of USDT volume in our P2P marketplaces. Even with Binance now out of the picture, Bybit, OKX, and Bitget all maintain their own thriving black markets for trading PHP for USDT and vice versa. Chainalysis last year estimated Philippine crypto inbound volumes to be around $80B, nearly 20% of which was gambling-related, and nearly all of the rest heading for one of those top centralized exchanges. If the POGO exodus is indeed imminent, there could be an initial surge in USDT buying as POGO businesses and employees alike convert their remaining pesos into stablecoins.

The biggest victims here are the 25,000 Pinoys who now find themselves just 60 days away from the welfare line. DOLE has been assigned the thankless job of relocating these workers, but it’s hard to imagine an equitable outcome here. With no transition period and no support program from the government, it’s unlikely that the remaining land-based casinos can absorb that much new manpower. More than any other consequence of this ban, this is probably the one we are least prepared for.

Here’s the killer: I think this ban will increase Chinese online-gambling business activity in this country as it will force the POGOs underground, where they can operate freely without all the compliance theater. PAGCOR had about 298 POGO entities under its supervision, but only 43 ever qualified for their new Internet Gaming Licenses; those 255 other unlicensed businesses didn’t all just evaporate into the ether. It’s far more likely that they just found new rocks to hide under. Importantly, they can continue to exploit a near-infinite supply of underemployed locals to run their operations … only now with even less government oversight than before.

Unless the government crackdown is hard enough and consistent enough to make these illegal POGOs extremely unprofitable, they will flourish underground. And what about those other impact areas we talked about above? Rental prices should still come down as fewer foreign workers would want to live in highly visible districts if they’re employed by an illegal operation. We’ll see volatility in the USDT black market over the next couple of months as sources and fund flows reconsolidate, but over time I think we’ll eventually see a gain in overall trading volume. With no traditional banking support left, these POGO/IGL businesses have nowhere to go but crypto. And those 25,000 locals? Assuming they are unable to find work on their own, their options are to either wait for DOLE to find them a legitimate job, or be informally employed in a criminal enterprise. I don’t think this is the industry change we were praying for, but in some ways, I guess it’s the one we deserve.