Home News Is the Threat Posed by Illegal Gambling Markets Real or Exaggerated?

Is the Threat Posed by Illegal Gambling Markets Real or Exaggerated?

By Manny Wood.
Fact checked by Wilbur Thompson.

In various industries that operate on a global level, there will always be individuals or groups engaging in unethical practices. While some companies choose to conduct their business in compliance with the law, others seek to make quick profits by neglecting legal protocols and operating in the grey area. This trend is also evident in the gambling sector.

The worldwide regulated gambling industry is valued at hundreds of billions of dollars annually. Apart from land-based gambling establishments, the online gambling sector, also known as iGaming, has experienced significant growth over the past two decades and shows no signs of slowing down. In addition to traditional games like roulette, slot machines, and table games, there is a significant increase in the popularity of live games, as many operators recognize their potential for immersive and engaging gameplay.

Over the past ten years, online and mobile betting activities have experienced a surge in popularity. Beyond the conventional bets on which team will win or lose, many other wagering options are available for betters. These markets include options such as whether a player from a football game will receive a yellow card, which player will score the first goal, and many others.

There are several legal sports betting and online casino operators, but many other platforms operate without the required licenses and could be called a part of the so-called black market. However, it is worth noting that the availability of legal land-based or online gambling options varies depending on the jurisdiction or country in which the players are located.

Legal Gambling Advantages

Across the globe, countries offer a diverse range of gambling opportunities. Some jurisdictions feature only lottery-style games such as keno and bingo, others are limited to land-based casinos, and the third kind of jurisdictions can boast robust markets with online gambling, mobile sports betting, retail sportsbooks, and other features.

A regulated gambling market offers many benefits to the public, as they can enjoy licensed services that adhere to established regulatory frameworks. Such markets generate vital tax revenues that support local and national structures, with the exact allocation of funds varying by jurisdiction and local laws. For example, gambling tax revenues may be dedicated to school education programs, local charity organizations, or gambling harm research and treatment initiatives.

In addition to tax revenues, licensed operators safeguard consumers by adhering to mandatory regulations under their licenses, such as know-your-customer (KYC) and anti-money laundering (AML) measures that protect the industry and the public from criminal activity. Furthermore, many countries have additional regulations in place to prevent harm or addiction, such as mandatory time limits for gambling sessions, weekly or monthly deposit limits, and caps on wagers for slots.

A regulated gambling market also offers unique engagement opportunities for sports fans through sponsorship deals between professional leagues and gambling operators. These collaborations provide funding for the leagues while offering fans new and exciting ways to engage with their favourite sports. At the same time, bookmakers benefit from increased exposure and promotion of their services.

Black Market Hazards

What perils come with participating in the underground economy? Often, underground merchants possess a license from a foreign government. While this might appear acceptable, holding a permit from one nation does not necessarily permit the dealer to provide their services internationally.

Furthermore, particular jurisdictions, such as the Netherlands, enforce strict regulations for the online betting sector, and unlicensed merchants are prohibited from offering their services. In the event of a violation, regulators may legitimately impose a penalty against a dealer providing services without the requisite license.

Several betting dealers possess a single license but operate in various jurisdictions, making them unlawful if permits are necessary for those locations. Conversely, others may function entirely within the black market. Such unethical traders may decline to payout customers’ substantial winnings, such as jackpots. That could result from various factors, including a desire to restrict payouts and a lack of sufficient funds to cover substantial winnings.

Aside from the possibility of clients failing to receive substantial payouts, there are more hazards to the black market or illicit merchants. These traders do not adhere to Know Your Customer (KYC), Anti-Money Laundering (AML), or other regulations or are not required to do so. That implies that these traders may be susceptible to money laundering or other financial offences. Additionally, that describes a threat to the money and personal data of consumers who use such dealers. That is because black market traders are not required to comply with specific rules governing data privacy, allowing for the exploitation of personal information.

The Effect of Regulations on the Gambling Industry

It is clear that utilizing a licensed and regulated operator is the most advantageous option for online gamblers. If any problems arise, such as unfair practices or the withholding of payouts, users have the option to seek legal recourse such as filing a lawsuit or joining a class action lawsuit with others who have similar grievances.

There are currently many unlicensed or black market operators in existence, but the primary barrier between them and potential customers are the gambling regulators. In Europe, the market is renowned for its stringent regulations that aim to protect customers from such companies. Online gambling is widespread across the continent, and regulators in various countries monitor the markets to ensure that licensees comply with the legal framework.

Complex regulations safeguard the integrity and fairness of gambling in various key European jurisdictions, including Germany, Italy, the Netherlands, and the UK. Unlicensed operators frequently face regulatory sanctions from the regulators, while licensed operators that violate the rules can face fines, warnings, or even license suspension or revocation.

Nevertheless, multiple industry stakeholders have cautioned that strict regulation and increased restrictions within the licensed gambling market can push customers toward illegal providers. In the UK, for instance, the Betting and Gaming Council (BGC) recently published a report warning that greater restrictions may encourage gamblers to seek out black market alternatives. According to the report, 79% of gamblers surveyed admitted that strict gambling rules “would result in people moving to unregulated websites.”

The United States also represents a significant regulated gambling market, with over 30 states currently offering some form of sports betting. Regulated gambling activities generate tax revenue that states can use to fund scholarship programs or other public initiatives, and they provide a legal way for gamblers to enjoy the activity. In recent years, the expansion of sports betting in the US has helped channel punters to legal outlets while reducing the share of the black market.

When it comes to gambling, there is never a guaranteed outcome. This applies whether a gambler is playing online or at a physical betting venue. However, if a bet can be considered “safer,” it is wise to place it 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 help to safeguard consumers from gambling harm by preventing self-excluded individuals from gambling.