Panel Debates Black, White, Grey Gambling Markets

February 6, 2024
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Black markets are an “area of criminality”, with most marketplaces “inherently compromised by crime”, said an executive with a company that monitors illegal gambling.
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Black markets are an “area of criminality”, with most marketplaces “inherently compromised by crime”, said an executive with a company that monitors illegal gambling.

The legitimate industry often takes the blame for bad behaviour by unlicensed operators, and standard techniques by regulators to keep illegal operators out, such as website blocking, blacklisting and asset seizures do not work, said Ismail Vali, president of Yield Sec.

Vali’s quick-fire presentation was the backdrop for debate on Monday (February 5) at the World Regulatory Briefing (WRB), among two events that launched the ICE gambling conference.

The Colorado-based company tracks keyword searches and other indicators to get a handle on the illegal market.

Vali presented data suggesting that the worldwide illegal gambling market may be $5.1trn, and representing as much as 93 percent of the market in countries such as Romania.  

In Belgium, the illegal market is 73 percent, with more than 2,200 unlicensed operators targeting residents, he said.

In the Netherlands, the illegal market is 56 percent, with nearly 800 unlicensed operators, and in Germany, it is 52 percent, with 1,600 illegal operators targeting Germans, according to Yield Sec.

The full conference officially starts today, the last ever in London before it moves to Barcelona next year.

The WRB panel debated black, white and grey markets.

The issue has become timely with Entain being required to pull out of four “regulating” Latin American markets as part of a £600m settlement with British prosecutors over charges that it violated the Bribery Act in Turkey under previous management.

Entain has said it will also pull out of all unregulated markets, claiming it will accomplish that by the end of 2023.

The panel, however, disagreed on whether there still is such a thing as a grey market.

In some countries, such as Turkey, gambling is illegal, said James Scicluna of the Malta-based law firm WH Partners.

But there is such a thing as supranatural law or that which transcends national boundaries, he said.

Hungarian laws, for example, were inconsistent with European Union law for years, Scicluna said. An EU judgment forced Germany to start all over again on its online licensing programme.

To reach its estimates, Vali said Yield Sec exclusively looked at which companies hold licences in a particular market and which do not.

The only remedy he offered for governments looking to entice illegal operators to go legit would be to offer a form of amnesty that could include back tax payments, he said.

Hilary Stewart-Jones, a long-time gambling industry attorney who is advising Curaçao regulators, said regulatory gambling hubs such as Malta or the Isle of Man usually allow licensees to operate in markets in which the licensees have deemed gambling “not unlawful”.

Initial public offering prospectuses for gambling companies typically cite the risks of operating in such markets, she said.

Issues are clearer in the United States, where if you do not have a gambling licence in the state in which you operate, you are illegal, said Alex Costello, a vice president of government relations for the American Gaming Association (AGA).

The only “grey market” is the so-called skill games which gross $500bn a year and would be hard to tell from slot machines, she said.

Scicluna said that some jurisdictions entirely exclude whole product verticals.

“I think that’s asking for it,” he said.

He did not give examples, but Australia and France ban online casinos, and Germany currently has no legal online roulette, blackjack or baccarat.

The two attorneys suggested that the issue of white, black, grey markets may still be somewhat murky.

Stewart-Jones took a stand to which Scicluna said he agreed “100 percent”.

“No online company can put their hand on their heart and say they have totally white markets,” she said.

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