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An Asian Racing Federation report on illegal betting has found that more than 60 percent of websites were either unlicensed or “under-regulated”, with 62 percent of the “under-regulated” located in Curaçao, Malta or the Philippines.
The report released last week concluded the majority of betting sites surveyed by the federation were “effectively illegal”.
The largest category in the survey of 534 websites in 61 jurisdictions was unlicensed and unregulated, that is, what is often called the “black market”. That was 43 percent of websites surveyed.
Although only 39 percent of websites surveyed were licensed and legal, about 19 percent were “licensed but under-regulated”, that is, operators who have a licence from certain jurisdictions. These were defined in the report as “under-regulated” because they also take bets from players outside those jurisdictions.
About 31 percent of those in that category were licensed in Curaçao, 18 percent in Malta and 13 percent in the Philippines, the report said.
Illegal betting is a threat to racing and general sports integrity, and is often linked to organised crime, the federation said.
Its Council on Anti-Illegal Betting and Related Financial Crime, which sponsored the report, is designed to counter the risks to racing and sports in general.
Despite the fact that illegitimate websites outnumber licensed, about 76 percent of the 40bn visits to betting websites tracked by the federation between 2019 and 2021 were to licensed and regulated websites, because those include the biggest brand names.
But the unlicensed and unregulated portion of the market is difficult to measure because of the use of mirror websites, the dark web and services are only found on apps, which thwart website-tracking tools, the report said.
Renegade operations may be five times the size that the federation was able to discern, it said.
Unlicensed and unregulated websites also grew faster than both licensed categories, by 64 percent to 36 percent growth in terms of traffic in a year, the report said.
The report also warns of risks associated with “white-label” companies, which allow sublicensees to operate in a country without the same level of oversight as the main licensee.
“In the UK, an otherwise strong regulatory environment, this loophole is exploited by operators to promote betting in jurisdictions where it is illegal, particularly Asia,” the report said.
Last week, two white-label companies that managed more than 400 websites for clients were assessed £700,000 in penalties by the UK’s Gambling Commission for failures in anti-money laundering and responsible gambling policies.
Cryptocurrencies are often used by black-market operators, according to the study.
Cryptocurrencies were accepted on 24 percent of websites examined, with 63 percent of that cohort deemed unlicensed and unregulated, the federation said.
About 42 percent of websites have “mirror websites used to evade regulatory attention”, that is, if one URL is blocked by authorities, players can be quickly moved to the next.
Unlicensed and unregulated betting is growing faster than licensed operators because they have advantages in price, product and promotion, according to the survey.
They have smaller overheads because they are typically based in “offshore tax havens” and do not pay problem gambling or racing levies, and they avoid charitable donations, so they can offer better odds and a wider range of products, the report said.
Illegal operators can often respond to market changes quicker than licensed operators and they offer alternative markets in otherwise obscure sports, such as table tennis or badminton from countries such as Belarus, Nicaragua and Tajikistan, according to the report.
The growth of unlicensed or licensed but under-regulated websites means “greater levels of problem gambling, more under-age betting, more money-laundering through betting markets, and less regulated betting with the taxation it generates”, the report said.
It also cites “hybridisation of betting markets”, that is, “increasing convergence of illegal and licensed betting operators in jurisdictions where both are operating illegally, but the licensed betting operators claim legality based on a licence held elsewhere”.
“This grey area leaves customers unsure of which online betting websites are legal and which are illegal,” the report said.
“This uncertainty has been worsened by the growth of offshore betting licence issuers that deliberately provide a semblance of legality to online betting operators which are ‘licensed but under-regulated’, and hence are illegal at the point of sale in jurisdictions where they do not hold a licence.”
This means players often cannot tell the difference between licensed and unlicensed operators, according to the federation.
The Swedish Gambling Authority has tackled this confusion by requiring all licensees to offer deposits, withdrawals and winnings in Swedish currency, customer service lines must use a Swedish number and all payment processors must be registered in Sweden, according to the report.
The federation’s report looked at the 262 most popular betting websites between 2019 and 2021, each with more than 1m monthly visits, along with a sample of 93 random websites, plus 179 suspected of being unlicensed and unregulated.
The Asian Racing Federation includes 27 national racing authorities across Asia, Africa, the Mideast and Oceania.
