Does Increased Regulation Drive Gamblers to the Black Market?

black marketWhen most of us think about the sports betting, casino and gambling industry, it’s common to think of the bright flashing lights of Las Vegas casinos, the thrill of watching your chosen sports event unfold within a betting shop and other associations. Alternatively, you may think of the huge number of online gambling sites that exist today, such as Bet365 or Betfair. However, what many of us don’t think of is the gambling black market.

That’s primarily due to the fact that gambling is legal throughout the United Kingdom, so why would there ever need to be a black market for it? If we were still living in the 1800s, then perhaps it would be quite a different story. But nobody really thinks of punters disguising themselves and slipping out under the cover of night to meet with an illegal bookie for a couple of sports bets. But it still happens to this day! Perhaps not in such covert an operation as described, but believe it or not, the UK still has its own black market gambling scene.

But how big is this? Clearly, it doesn’t really stand out so much anymore, even though it remains in operation. Stories of illegal betting crop up on a fairly frequent enough basis, and even investigations have been set up to look into this by brands like Coral and Ladbrokes owner GVC. So, how is it that this is in action today? And is it because of the regulated UK market that this has become an alternative for many bettors?

How The Black Market Gambling Scene Has Changed

money in shape of graphPrior to the licensing of off-track betting shops in the 1960’s, when most forms of gambling were really considered as an illegal activity, the only real means of people participating in such was via the black market. This would require someone to setup a gambling establishment within their own establishment or take sports bets from people by meeting with them privately. Illegal gambling was even quite heavily policed at one point, with people going to jail for their indiscretions. However, once different areas of the gambling world were made legal and became more accepted in the UK, the black market naturally took a bit more of a dive in participation levels.

However, it has remained in operation alongside standard regulated platforms. Some people have been cited as wanting to bet this way due to better odds. Plus, the black market often offers betting on different options when compared with the regulated market. Naturally, the appeal is there for many people.

Yet, many people wouldn’t believe that a black market for gambling still exists today. Especially considering that there are so many legal betting possibilities in the country now. However, a report published by accountancy firm PWC, which was commissioned by GVC Holdings, suggests that there is an active and “thriving” black market for gambling in the UK. This, the report states, is worth £1.4 billion annually.

It’s actually thought that around 200,000 bettors have placed bets with an unlicensed operator, be that deliberately or without prior knowledge. This figure equates to about 2% of the overall gambling customer base in the UK. These figures, which were compiled between the 2018-19 period, provided quite the worrying set of statistics, revealing that a lot more needs to be done to tackle this black market.

Actually, as it happens, a report only came to light a few years ago relating to a 74-year-old man who was operating a black market gambling den from his lounge. This saw him take around £2,000-a-day from accepting horse racing bets illegally. James Alston handled about £90,000 in illegal bets and loans over a seven-month period, basing himself out of his flat in Preston, Lancashire. Within his living room, he had three televisions tuned to different channels, a bet settler machine and a ledger which was kept on his favourite armchair. Once he was caught, he was sentenced to an 18-month prison term, while 45-year-old son was given 12 months for his money loaning and bookmaking activities. According to reports, up to 20 punters would visit Alston’s home, and in one four-month period, he racked up £3,824.55 in profit from 782 bets placed.

Does Regulation Push Gamblers to the Black Market?

rules and regulationsAs it happens, much speculation has risen over what is pushing people to use black market options. However, one of the biggest theories is that the regulated market is causing it. Operators of gambling possibilities have to face masses of regulations in a bid to be considered legitimate operations. Because some of them aren’t able to meet certain criteria for obtaining this legal status, they have more of a desire to turn to the black market world instead.

Of course, there is little doubt that a legal, well-regulated gambling industry is one of the keys o dulling out of the impact of the black market. Yet, it is a very fine line that needs to be expertly balanced, as by pushing things too far, the customer experience could be affected. And when players aren’t satisfied with what they’re being offered legally, the chance to place bets on something that satisfies their needs makes much more of an impression.

Stringent Processes

Anyone who has visited an online sportsbook or casino or bingo site will know of the processes that they put players through to ensure that they are who they say they are. The increase in this due diligence, ensuring that the platforms know their customers and so on, is what is currently being driven home significantly. This is done in a bid to halt any fraudulent activity, although there’s only so much that can be pushed in this area.

With identity checks, card checks, restrictions placed on FOBTs in land-based betting shops and so on, some players may feel that they’re getting a very short end of the stick, just for wanting to place wagers on their favourite sporting events. An unlicensed or black market platform may not request such information from players. Therefore, it would likely stand out as a great alternative to access. And when it comes to the operators of such setups, they’re not affected by the 21% tax levy that is imposed by the Gambling Commission.

With a lack of such restrictions from the Commission, potentially these illegal black market companies can provide more appealing odds as well. Therefore, it seems like the black market is a route that has much more appealing circumstances for many people and operators.

Naturally, the report from the PWC isn’t suggesting for one minute that the Gambling Commission removes all restrictions and stringent processes. There is a need for them to be in place, of course. It’s essential that this information is brought to the forefront, though. Because the black market is quite the unintended consequence of the stringent gambling processes, it’s relevant that the Commission is aware of this.

Tough Response from the UKGC

gambling commission signThe findings of PWC were readily welcomed by the Betting and Gaming Council. It was agreed that it is important for regulatory changes to be brought into effect. However, it was also noted that these changes should not be so intense that they push players to the underground, illegal markets. The maintenance of player protection was said to be something that should be kept as a prime focus going forward.

However, the Gambling Commission was much less welcoming of the results from the PWC report. It made the suggestion that gambling firms should focus their energy on improving their own standards first before trying to tackle the black market issues. At the same time, the regulatory body did claim that it would take what was described as “swift action” with regard to dealing with unlicensed operations. Additionally, it said that it would work alongside other bodies in a bid to stamp this out as best it can.

What Can Be Done to Tackle the Issue?

hand cash dropping into itWith there being supposedly many people participating in black market gambling every year, what can be done so as to tempt them back to the legalised side of things? After all, it seems as though the more the regulated industry does to temper the flow of people choosing the illegal option, the more they seem to divert away from the legal betting possibilities.

The former CEO of GVC Holdings, Kenny Alexander made a point recently of saying:

“Beware the law of unintended consequences. As licensed operators become less attractive to punters, the size of the black market in the UK will only increase”.

It would seem likely that a large portion of the people turning to the black market are those who have opted to self-exclude from gambling companies. These people will likely have turned to options like betting through WhatsApp or illegal sites like Citibet based in Asia, in a bid to satisfy their betting needs. The latter of these is said to turn over around $50 billion every year. Unfortunately, this doesn’t seem to be a market that is likely to decrease in popularity any time soon, either.

The UK Government has zero control over the foreign-based gambling platforms that can be accessed. And there are many of these all over the world. While some of them may hold licences in countries like Costa Rica or Curacao for example, this does not make them legal for UK players to access. This, by default, makes them black market betting platforms, and they frequently provide members with boosted odds, exceptional bonuses and more to appeal to them.

Where To Go from Here

piles of cash on black backgroundIllegal gambling was a lot easier to detect and deal with in the days before online activity became possible. This is due to the fact that gambling had to occur within unlicensed premises or over the phone, and this was much easier to track. Today, sites can set up their services from any location and accept UK gamers with very little penalisation if this is discovered to be the case.

The route of banning gambling in high levels or altogether is not likely to serve much good. Countries like Australia, Singapore and South Korea have outrightly banned certain instances of gambling. Incidentally, these locations reside at the top of the list for black market gambling operations today.

Back in March of 2020, the Gambling Commission requested for help with tackling the online black market. Prior to the announcement by the Chancellor of the Exchequer, the Betting and Gaming Council (BGC) spoke of the increased size of this illegal gambling area within the country. It said that this had been a loss of revenue to the Exchequer. Furthermore, it said that there is a danger that children are accessing illegal websites where there aren’t any stringent age and identity checks in place.

Land-based betting shops were legalised back in the 1960s in a bid to deal with the country’s black market, and this worked in many cases. Obviously, today’s digital market, including online and mobile gambling, is not as easy to police. It’s not possible to raid a digital betting shop, and this is what makes it much easier for black market operators to get away with it.

And if the Gambling Commission decides to go ahead with additional regulations, such as the proposed mandatory stake limits of between £1 and £5 on slots, and the £100 monthly deposit cap, could this cause further disruption? The likelihood is that more people will find themselves turning to black market possibilities as a way to satiate their need for simpler gambling. This has led to calls for those particular additional regulations to be scrapped, and instead for two distinct bodies to be brought into effect instead of the sole UKGC. One of these should be put to use for licensing and compliance issues, while the other should handle customer protection.

Whether or not that will happen remains to be seen. However, the Gambling Act 2005 is set to be reviewed by the Government, and The Social Market Foundation document, which has been compiled by the former Labour Party deputy leader Tom Watson’s advisor Dr James Noyes, will hopefully set out some sort of blueprint.