24 December, 2024 | JAN FEB 2025

Defining the threat of the black market

We hear a lot about the black market and the threats it poses within gaming. But what exactly is it and how best do we deal with the threat? BetBlocker Founder and Trustee Duncan Garvie gives his take.

Over the last few months, there has been a lot of conversation about the “black market,” but what actually is it? The term is amorphous, encompassing a range of business types. It means different things to different people. So let’s discuss...

In its broadest sense, the black market is any gambling operator that accepts traffic from a country where either; a) the country has a national regulatory system that the operator is not licensed by or, b) the country has laws prohibiting online gambling. The black market does not include gambling operators accepting traffic from jurisdictions that have not set clearly defined rules/laws around their population’s engagement with online gambling. However, even with that clear definition there are layers to the black market. Principally I see three: 

i) Gambling operators who hold an ‘international’ licence that offers reasonably robust regulatory standards to protect consumers, but continue to flout national regulations or laws in some countries. An example of this would be Malta Gaming Authority (MGA)-licensed operators who persist in accepting traffic from Holland, Sweden, Germany etc, without holding the relevant licensed required by these countries.

The arguments the operators would make for doing this is that their actions are legal, as the MGA licence does not prohibit them from accepting traffic from these countries. At best, this is a shaky argument, given that the MGA licence includes woolly standards around respecting local licensing laws. But with Bill 55, the Maltese Government appears to be making a concerted effort to defend this position. Nevertheless, this is technically black-market activity, even if it is the mildest form.

It’s not enough for these operators to have every power over the customers

ii) Similar yet very divergent, another example would be gambling operators who hold an ‘international’ licence but one that offers little or no consumer protections. Think the likes of Curaçao, Kahnawake and Anjouan.

iii) Unlicensed operators. While, by technical definition, the operators that fall under my initial example (i) are “black market,” I approach these discussions from a consumer protection position and these operators don’t represent a huge threat to consumers. They may not be paying tax to the national government, or meeting all of the standards of the local licence in terms of consumer protection, but they are still subject to oversight. The true threat to consumers is encapsulated in cases ii) and iii).

Why are these operators such a threat to consumers? The lack of oversight that has been endemic within the Curaçao regulatory system over the last couple of decades, alongside other similarly weak regulatory regimes, has facilitated bad actors that target and exploit vulnerable players.  Having acted as a dispute manager for over a decade, and officially as an ADR (Alternative Dispute Resolutions) Official for as long as ADR has been deployed within this sector, I’ve managed thousands of cases. I’ve had a clear viewpoint to observe the way that these operators treat consumers. I’ve seen a Curaçao licensee that refused to act to restrict a player, watching the player lose a further €50,000 ($52,000), while begging on live chat for help. I’ve seen the hundreds of cases of players that simply never get paid when they win.

I’ve seen an operator that argues that they are a “safe and responsible gambling business that adheres to all regulatory requirements” after accepting hundreds of thousands in transactions without conducting even the most basic of KYC checks. Only to admit when challenged that there were no standards they had to meet. I’ve seen the plethora of operators that have specifically targeted players who are excluded via national self-exclusion schemes. I’ve also seen the proliferation of fake games.

It’s not enough that they simply don’t pay out if they don’t want to. They have to cheat their players, too. My recent research into this particular area suggests that fake games are shockingly widespread among weakly licensed black-market operators. This a poignant issue for me. While there are some market forces that will always support a black market – addiction will ensure people look to circumvent restrictions – heavy handed regulation detracting from healthy players having a positive experience within the licensed market creates an artificial market force that will drive consumers towards the black market. We must strive to avoid this as, when consumers chose the black market, one way or another they always lose.

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