Illegal gambling markets: a real or fake threat

Within different industries operating on a global scale, there are always bad actors. While some companies choose the legal path to run their business, others, often looking to earn lots of money quickly, do not go through the trouble of legalizing their business and operate within the grey sector. And this rule applies to the gambling sector as well.

The regulated gambling industry around the globe is valued at hundreds of billions annually. Besides land-based gambling, over the last two decades, the online gambling, or iGaming sector, has grown and continues to grow exponentially. Along with online casinos offering classic games such as roulette, slots and table games, growth was observed in the live games segment, with many operators identifying the potential and the immersiveness of such titles.

Besides iGaming, online and mobile betting activities have also surged in the last decade. To further fuel this growth, there are plenty of betting markets available for sporting events outside of the traditional bet on which team would win or lose a specific game. Such sports betting markets, for example, include whether a player from a football game would get booked, who would be the first player to score a goal and many more.

While there are plenty of sports betting and online casino operators offering legal services, there are always others operating without the necessary license that are a part of the so-called black market. Still, it's important to mention that the availability of legal land-based or online gambling options depends on the regulation in the country or jurisdiction where the players are.

What are the benefits of legal gambling?

Countries around the globe offer different gambling options. In some jurisdictions, there are only gambling games such as lotteries, keno and bingo. Other countries offer land-based gambling only, while some develop strong markets that offer all types of gambling options including land-based casinos, lotteries, online gambling, as well as retail and mobile sports wagering.

A regulated gambling market brings many benefits for the public that can enjoy the activity via licensed operators, offering their services in line with the regulatory framework that is established. Such markets help bring invaluable tax revenue which can be used by local and nationwide structures. Depending on the jurisdiction and existing laws that regulate gambling, the tax revenue derived from the activity can support school education programs, local charity organizations and other public activities. In many countries, a percentage of the tax revenue from gambling is dedicated toward research into gambling harm and funding treatment for gambling addiction.

Besides raising tax revenue, licensed gambling operators protect the consumers by adhering to regulations that are mandatory under their licenses. For example, licensed gambling operators adhere to know-your-customer (KYC) and anti-money laundering (AML) regulations that safeguard the gambling industry. AML and KYC are regulations that usually go along with counter terrorism financing (CTF) rules that have a global reach and ultimately seek to protect the public, as well as the industry.

Additionally, many countries have additional regulations that seek to protect gamblers from harm or addiction. In some cases, jurisdictions can enforce mandatory time limits for gambling sessions, weekly or monthly deposit limits, caps for wagers for slots and other restrictions that seek to protect the customers from gambling harm.

What's more, the regulated gambling market brings unique engagement opportunities for sports fans via deals with gambling operators. Football, soccer, basketball and hockey, among other professional sports leagues, have forged sponsorship deals with gambling operators. Those collaborations help by funding the professional leagues while bringing unique engagement options for the fans of the sport. On the other hand, bookmakers benefit from tapping into new audiences and promoting their services.

Dangers of the black market

But what are the dangers of the black market? Usually, black market operators can hold a license from a foreign jurisdiction. Although that sounds fine, having a license from a single country doesn't necessarily mean that the operator can offer its services globally.

Moreover, some jurisdictions, such as the Netherlands, have strict rules for the online gambling market and operators that do not hold a license are in fact not permitted to offer their services. In case of breaches, regulators can legally impose a sanction against an operator that offers its services without the necessary license.

Some gambling operators hold a single license but operate within multiple jurisdictions, making them illegal if a license is required from those jurisdictions. On the other hand, others may operate entirely within the black market. Such bad actors may refuse to pay their customers big wins such as jackpots. This may be the result of a number of reasons from wanting to restrict money lost to payouts to not having enough liquidity to cover a big win.

Besides the threat of gamblers not receiving big payouts, there are more dangers to the black market or illegal operators. Such operators do not adhere to KYC, AML or other regulations, or at least are not obligated to do so. This means that those operators may be subject to money laundering or other financial crimes. At the same time, this poses threat to the money or even personal data of the consumers that use such operators. This is because there are no specific rules that black market operators need to follow when it comes to data privacy, leaving the door open for the abuse of personal information.

The impact of gambling regulations on the market

Undoubtedly using a licensed and regulated operator is the best option for online gamblers. If any issues occur such as unfair practices, refusal of payouts or unjustified suspension of their account, users can always seek a way out of the situation through legal means such as a lawsuit or in some cases even a class action lawsuit, that allows plaintiffs with similar complaints to join the legal action.

Currently, many unlicensed or black market operators exist but the main obstacle between them and the customers are the gambling regulators. The European market is famous for its robust regulations and efforts that seek to protect customers from such companies. Online gambling is widely spread on the Old Continent and regulators in different countries monitor the markets to ensure licensees comply with the legal framework.

Complex regulations safeguard the integrity and fairness of gambling in Germany, Italy, as well as the Netherlands and the UK, among other key European jurisdictions. In fact, unlicensed operators often face regulatory sanctions from the regulators. On the other hand, licensed operators that breach the rules can also be subject to fines, warnings or in some cases even face license suspension or revocation.

Still, multiple industry stakeholders have warned that tough regulation and enhanced restrictions within the licensed gambling market can push customers to illegal providers. In fact, earlier this month, the Betting and Gaming Council (BGC) in the UK, posted the results of a study, warning that increased restrictions may push punters to the black market. In its report, the BGC revealed that some 79% of the interviewed gamblers admitted that strict gambling rules "would result in people moving to unregulated websites."

Besides Europe, the US also represents a major regulated gambling market. Although there are several states that offer iGaming activities, more than 30 currently offer wagering on sports in some form. Those regulated gambling activities help by creating a stream of tax revenue that states use to help fund scholarship programs or other public initiatives. At the same time, the licensed market provides a legal way for gamblers to enjoy the activity. In recent years, the spread of sports betting in the US helped channel punters to legal outlets while decreasing the share of the black market.

There is no sure bet when it comes to any gambling activity. This applies regardless of whether the gambler plays online or at a retail betting venue. However, if a bet can be classified as "safer" that bet surely needs to be placed with an operator that is licensed within the jurisdiction where the gambler is located. By using licensed operators, gamblers are better protected. Regulated operators also safeguard consumers from gambling harm by not allowing self-excluded individuals to gamble.

Image credit: Pixabay.com