The legal online gambling industry coexists with a significant black market that is resistant to efforts to curb its growth. The black market lacks consumer protection measures, fair play guarantees, and regulatory oversight. It operates outside the law, evades licensing obligations, and pays no taxes. However, as governments and financial institutions crack down on illegal gambling, legal operators face the risk of being affected. This pressure to address the issue is rising, particularly in Europe, where access to financial services may be limited. Illegal gambling is a major concern, and efforts to combat it are crucial for legal compliance.
The black market in gambling is often referred to as an “iceberg market,” as its size rivals that of the legal sector. The boundaries of illegal gambling can be blurry, ranging from criminal operations to activities of legal operators in unregulated jurisdictions. The lack of clarity makes it challenging to tackle the issue consistently. The European black market, in particular, poses a significant problem, with revenue estimates varying between $4 billion and $24 billion. The distinction between the black and grey markets is debatable, but there is a growing consensus that the scope for debate is diminishing.
The financial sector plays a crucial role in combating illegal gambling. European banks face the challenge of defining illegal gambling and dealing with the associated risks. The European Commission has raised the threat level of money laundering and terrorist financing for online gambling. These risks are influenced by the illegal gambling market, which requires financial structures to sustain its operations. The potential refusal of banks to work with online gambling operators due to increased risk can have unintended consequences, supporting the growth of the black market. European tax rules may also impact the financing of the gambling sector.
Defining the black market is a complex task, but many argue that there is no grey area – it is either legal or illegal. Authorities in various jurisdictions have differing approaches and definitions, complicating the issue further. The size of the black market is challenging to determine accurately, but estimates suggest it is substantial. The American black market for online gambling is particularly sizable, with illegal stakes reaching hundreds of billions of dollars. In Europe, estimates of total revenue range from $4 billion to $24 billion.
To combat illegal gambling effectively, new tools and strategies are needed. Regulatory and law enforcement efforts have faced limited success in reducing the size of the black market. Technological solutions, such as the regulatory intelligence platform YieldSec, offer insight into the operations of the illegal market. With a better understanding of the black market, regulators can develop targeted measures to address illicit activities. It is essential for the industry to stay within legal frameworks and fight against unlawful operators.
Efforts to combat illegal gambling vary across jurisdictions. In the US, the American Gaming Association is leading efforts at the federal level, engaging with law enforcement agencies and policymakers. Existing laws targeting organised crime can be utilized to crack down on unlawful operators. In Europe, coordination is more challenging due to national sovereignty over gambling regulation. Regulators can penalize illegal gambling by incorporating suitability requirements for license applications, making participation in the black or grey market grounds for rejection. Australia has gone a step further, prosecuting individual executives involved in unlicensed activities.
As the fight against illegal gambling intensifies, operators in the grey market may face increasing challenges. The direction in Europe is towards stricter regulation, potentially leading to a more definitive split between legal and illegal operators. The grey area is likely to become increasingly squeezed, forcing operators to choose their path. Overall, it is crucial for the industry to continue working towards legal compliance and combating illegal gambling.
