One of the selling points of legalizing online betting is to minimize, if not eliminate, illegal wagers on the black market. But according to a story in Online Poker Report, there are signs in both Europe and the U.S. that the pendulum is starting to swing the wrong way.
U.K. momentum has moved towards protections that prevent people from gambling more money than they should.
“Beware the law of unintended consequences,” said GVC CEO Kenny Alexander. “As licensed operators become less attractive, the size of the black market will only increase.”
A new PWC study, backed by William Hill and GVC, warned the U.K. black market was already worth some £1.4 billion (US$1.8 billion) in annual stakes.
Bottom line, bettors are finding it harder to get their money down.
Regulated firms have shut hundreds of thousands of high-stake accounts in the past three years in an effort to protect those players from themselves. Thousands more accounts have been closed voluntarily via self-exclusion.
Many of those players stopped gambling altogether, but many did not. Instead, they may now be customers of another company unscrupulous enough to take their money.
The trade group Betting and Gaming Council says 200,000 U.K. gamblers used black-market sites in the last year. According to traffic data, black market sites drew 27 million visits from U.K. IP addresses last year. With a potential £2 cap on online slot stakes looming, the problem looks set to get worse before it gets better.
“It does seem like a fairly new thing,” says one professional football bettor, talking on the condition of anonymity. “We have a contact over WhatsApp that will take literally any limit on top football leagues at the Betfair market price. The money ends up in India somewhere rather than hitting the market.”
Bettors don’t have to prove their identity or source of funds to these unregulated operations.
There are potentially lessons here for the development of the legal U.S. betting market too, Online Poker Report said.
“Regulated bookmaking to date has added nothing to the professional bettor,” says Gadoon Kyrollos, better known online as Spanky. “Limits are low and being kicked out is always imminent.”
Under these conditions, the biggest players are happy to stay in the black market. This, in turn, creates the potential for corresponding integrity issues for the sports being bet on.
Meanwhile, news that the U.K. Gambling Commission (UKGC) could reduce the maximum allowable bets for online games to £2 (US$2.58) has plunged the stock value of many established gambling companies by hundreds of millions of pounds.
The decline has affected Ladbrokes Coral, 888, Flutter Entertainment, Playtech and William Hill, among other firms.
William Hill fell nearly 8 percent, while Ladbrokes Coral’s owner, GVC, and the gambling software firm Playtech were both down 7 percent.
William Hill also took one of the biggest hits during the last major overhaul of gambling rules when the government agreed to reduce fixed-odds betting terminals down to a maximum of £2 from £100.
The curbs amounted to a ban on the machines, which were criticized for enticing gambling addicts, because they are not economically feasible for high street bookmakers at that level of stake.
The initiative comes from the all-parliamentary group on gambling harm which has pushed the commission to take more serious measures against financial ruin and suicides linked to gambling addiction.
According to Law and Lawyer Journals, gambling has also come under stricter regulatory measures such as a credit card ban and stricter identity verification processes.
The Gambling Commission’s chief executive, Neil McArthur, told a cross-parliamentary group of MPs investigating the harm caused by betting that it would consider proposals to cut stakes over the next six months. He promised to review online stakes during an evidence session with the increasingly influential all-party parliamentary group on gambling harm.
A spokesperson for the Gambling Commission told the Guardian newspaper, “We said last October that we would be looking at online stake limits as part of our ongoing work to reduce the risks of gambling-related harm. This work is in addition to us focusing on VIP practices, advertising technology and game design. We will publish our assessment and next steps for online stakes and further protections later this year.”
The first time the commission suggested a review back in 2018, gambling company execs cautioned that such a broad move could lead to the loss of a huge economic contributor and effectively bankrupt many companies, taking people’s livelihoods with them.
However, the commission and McArthur intend to uphold their promise and review online stakes, despite the crashing stock value.
Not all is lost for the gambling industry. The introduction of tighter measures may benefit business in general, and by protecting players, companies will avoid costly penalties and potential damage to their reputations.
“Affiliates naturally fear regulation, but in the long term, it’s safer for players, especially on prolific real money games like slots, roulette and poker,” said Steve Bancroft, a veteran blackjack player and editor of GamblingUK.com. “Safer players reinforce the legitimate entertainment of gambling, when played sensibly and safely.”
There has been greater focus on issues such as the effect on children and vulnerable people of the volume of gambling advertising, the industry’s ties with football and the use of controversial VIP schemes to offer perks to losing players.
However, cracking down on the available betting limit for online games in particular can tank the value of operators, and lead to apocalyptic consequences for the industry.
The market shed nearly £1.2bn in November after the Guardian revealed MPs had recommended stringent curbs on online casino games worth more than £2 billion (US$2.6 billion) a year to the industry.
