Lessons from the Growth of Illegal Betting

Today Martin Purbrick, Chair of the IFHA Council on Anti-Illegal Betting & Related Crime tells us of Regulating the Gambling Ecosystem – the Lessons from the Growth of Illegal Betting.

The regulation of gambling at a national level has been undermined by multiple challenges that have developed in the past decade which has created a crisis of unbalanced legal gambling ecosystems.

Firstly, illegal betting, and other forms of gambling, has surged due to the expansion of mobile Internet-based commerce, and the widespread migration of consumers to those online services.

Secondly illegal betting operators have multiplied as they are not constrained by regulation, do not pay tax in jurisdictions where their customers are located, and are able to leverage the easy availability of sports and betting data provided by commercial data companies.

Some of which also provide integrity services to sports through the monitoring of the very offshore illegal betting operator to whom they sell data to.

Thirdly, illegal betting has been facilitated by the growing number of offshore “pseudo-licensing” jurisdictions that confer legal legitimacy that are otherwise considered illegal betting operators.

These factors have undermined the regulation of betting and gambling at a national level, with a crisis of regulation that ultimately raises questions regarding the role of national gambling regulators.

Regulators should accept that the existence of large-scale illegal betting markets that attract consumers outside of the national, regulated gambling system is permanent.

As Professor Stefano Caneppele points out “the gambling sector can, in most cases, be understood as a dual market, in which legal and illegal providers coexist and interact.”

Regulators are increasingly aware of the threat from growing illegal betting markets, but more is needed at national and international levels to ensure gambling regulators do not become redundant.

Regulators should focus on the illegal, as well as legal, market, and ‘bake in’ four key policys. Firstly, to ensure government policy-makers understand illegal betting markets so regulators and policy-makers are aligned on the scale and nature of the problem in question.

Secondly, gambling taxation systems must contribute to a healthy gambling ecosystem where consumers widely accept legal product pricing.

Thirdly, consumers must be protected by the highest responsible gambling measures from licensed operators and be educated about the absence of these protections in the illegal market.

And lastly, gambling regulation must align with the protection of integrity in racing and other sports.

In conclusion, Illegal betting is a multi-dimensional challenge for governments, regulators, racing and other sports and for wider civil society, and if action is not taken to combat illegal betting and to ensure healthy national legal gambling markets, then the problem will only grow.

The has been evident in Asia, where rampant online illegal betting has become a huge revenue stream for organised crime groups that then moved into online fraud as an additional business line.

Illegal betting is not a peripheral nuisance to otherwise well-regulated gambling markets, but is a systemic threat that exploits regulatory blind spots and policy contradictions, and enables international fragmentation to flourish.