Illegal Online Betting Rampant, Warns Racing Federation

July 21, 2022
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The Asian Racing Federation is warning that growth in illegal online betting is much faster than growth in legal markets, with poor regulation, new technology and the pandemic posing threats to racing integrity.

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The Asian Racing Federation (ARF) is warning that growth in illegal online betting is much faster than growth in legal markets, with poor regulation, new technology and the pandemic posing threats to racing integrity.

James Porteous, head of research for the ARF Council and a Hong Kong Jockey Club (HKJC) research manager, told a webinar on Wednesday (July 20) that the illegal market now makes up almost two thirds of the full market, and is “growing faster”.

“Simply put, illegal betting is massive and growing more quickly than the legal market, and this remains a key threat to the integrity of racing and to other sports,” he said.

Citing the ARF Council’s The State of Illegal Betting Report published in May, Porteous said the ARF now has “hard numbers” to back up “claims that we have seen in the past” about the burgeoning online betting market, and particularly illegal activity among unlicensed and under-regulated operators worldwide.

He said sports stakeholders still have “little understanding” of the ramifications of such dramatic growth in betting volume in Asia and elsewhere.

But this is also being exacerbated by the ability of regulated and unregulated operators alike to adopt new technology to make their products “more attractive”.

He said the proliferation of cryptocurrency payment options — available on one quarter of all betting websites and two thirds of all unlicensed websites — have only increased compliance risk for regulated operators, given that crypto is often used to evade local law enforcement.

Porteous saved his strongest language for three key licensing jurisdictions that figured prominently in what the report defines as “under-regulated” betting operators.

Of 534 high-volume, unlicensed or randomly selected websites from more than 60 jurisdictions used in the analysis, 61 percent were illegal, while 19 percent were licensed but under-regulated.

Porteous said Curaçao, Malta and the Philippines were the licensing authorities for 62 percent of the under-regulated sites.

“The entire purpose of the so-called Philippines Offshore Gaming Operators licence, or POGO, is to lend a veneer of respectability to operators” who target predominantly illegal markets across Asia, he said.

“Virtually every jurisdiction in Asia in online gambling is typically unlawful, illegal or heavily restricted to a limited number of operators in each jurisdiction.”

Curaçao’s profile is worse because it appears to exercise “zero oversight”, he added, although the authorities there have promised to implement long-delayed reforms by the end of this year amid fiscal pressure from the government of the Netherlands.

Even Malta, which aspires to a higher standard of regulation, has been damaged by reports of Italian organised crime using its licensees to launder money, he said.

New technology and the dispersal of business to business (B2B) services have also fuelled strong growth in betting operations controlled by individuals with few traditional industry fundamentals.

“It’s easier than ever to become an illegal bookmaker and set up an online betting website,” Porteous said.

Three quarters of all websites rely on third-party B2B software, he said, notably including white-label products and sports-betting data feeds, which are “essentially fuelling growth … in illegal betting”.

In addition, 42 percent of all betting sites use mirror websites to avoid detection, thereby ensuring “redundancy and business continuity”.

Mirror websites promote widescale engagement with illegal markets, “underlining our key contention that licensed but under-regulated operators are facilitating illegal betting on a vast scale”, Porteous said.

He said the coronavirus pandemic boosted the growth differential between illegal and legal operations, with the former enjoying 64 percent growth against 36 percent growth for the regulated market.

Taken together, the online betting ecosystem poses real risks to industry integrity given that ARF jurisdictions feature prominently in under-regulated and illegal operations.

Porteous also noted that casino games and esports also appear on betting websites in a majority of cases.

The ARF and the HKJC are traditional enemies of Asia’s unruly online gaming environment, with the HKJC regularly warning of widespread damage, including lost tax revenue and socioeconomic and law-and-order fallout.

However, the HKJC has continued to thrive in the pandemic era, with its latest racing season delivering record betting volume and records in other metrics despite strict attendance restrictions.

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