Under Valuing the Cost of the Gambling Black Market

Last week I had the chance to go through the Betting and Gaming Council ’s research into the black market. [1] Broadly I found it to be an insightful piece of work on a topic that has long needed a proper assessment to establish the scope and impact illegal gambling is having on UK consumers.

As thorough and useful as I found this study in confirming a lot of what I’ve long suspected, I feel the paper has one glaring omission. An omission that short-sells the damage being caused by the black market in a profound way. The study approaches the quantification of “costs” of the black market purely in terms of lost tax revenue.

The approach itself is understandable. The study has been commissioned by an industry trade association with the clear hope of speaking to policymakers. And policymakers are going to best understand a pounds and pence, or in this case tens of millions of pounds, loss in tax revenues. However, reduced tax revenues fails to appropriately account for the cost to UK society caused by unregulated operators.

We only need to look at the other findings in this report to start to see the bigger picture.

Selling to Addiction

Firstly, let’s look at pg 34 of the report, which evidences a trend amongst players who engage with the black market, showing that demographically they skew strongly toward the heaviest users of gambling:

This is a finding that affirms what many in the sector have believed for a long time. As the report details, black market websites are heavily promoted on affiliate websites targeting gambling addicts by setting-up pages intended to rank for terms relating to bypassing problem gambling protection tools that licensed operators are required to provide.

The nature of addiction ensures that even when a person has previously committed to stopping, relapse is common. When a vulnerable player has restricted themselves from the licensed market, and they relapse, it is to be expected that they will end up playing with a black market operator. And the black market advertises in such a way as to ensure they capture this vulnerable audience.

So the fact we see heavy usage patterns in black market engagement is a clear sign-post that vulnerable players are disproportionately ending up playing with the black market, and that the black market is clearly exploiting these vulnerabilities via diminished, or non-existent, protection policies.

Won’t Somebody Please Think of the Children?

Next, let’s consider pg 36 of the report, which shows that younger players are disproportionately represented in black market uptake:

This aligns perfectly with what we know about the black market. The licensed market cannot accept crypto currencies. The black market heavily promotes crypto currency facilities. Crypto currencies see far higher levels of engagement from younger people. [2]

Alongside this, and very notably, the BGC study has explicitly excluded the possibility of any participant responding that they are under the legal age to be allowed to gamble. Given that black market gambling operators are heavily promoted as ‘no KYC’ options, it is highly likely that a far higher level of underage players are engaging with these services than is seen in the regulated market.

So we know that there is a higher than average engagement with the black market for young players. And we can make a reasonable guess that underage players are also at higher risk from the black market.

Accelerating Harms

Alongside the data that the BGC report discusses, it is important to keep in mind that black market gambling operators are not simply offering consumers the same product as the licensed market. This is NOT a like for like comparison. The BGC report addresses the black market as if tax is the substantive differentiator between a licensed and unlicensed operator. If illegal operators were simply offering the same product, but not paying tax, that would be the case and this would be a problem for the government to deal with. But they’re not.

And it goes beyond not meeting regulatory standards as well. UKGC licensed gambling operators are required to meet robust standards in terms of identifying and protecting vulnerable players. We have seen significant fines being issued by the regulator against licensees for failures to meet these standards. No, the black market does not adhere to these standards. It ruthlessly exploits vulnerability. But that is still not where the differences end.

As discussed in an article I recently authored for CasinoReviews.com [3] a substantial proportion of the black market deploys fake versions of licensed games. The developers of these games market these games as ensuring that players will “win less often without noticing know the difference”. So not only are these illegal operators avoiding tax. Not only are they failing to protect vulnerable players. But they are cheating and defrauding players en masse.

The Hidden Cost

Coming back to the costs of the black market, whilst the BGC report makes some very valid points about the lost tax revenue that is a consequence of the black market, it misses a greater cost.

I don’t want to wax lyrical about the personal cost of a destroyed life. There are those with lived experience that can speak to this in a far more authentic fashion. But the blunt truth is that the black market is targeting two of the most vulnerable subsets of consumers - those that have already experienced gambling harms, and young people – and is exposing them to a product explicitly intended to accelerate those harms. British society then has to pay for the consequences of this dangerous, criminal and immoral commercial activity.

If you asked me to make a guess, the costs of cleaning up the black market’s mess are likely to vastly outstrip the lost tax revenue.