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Why Black Market Betting is on the rise and could be the next boom industry

Whilst British racing eagerly awaits the outcome of the government's gambling review, the rise of black market betting will not help overcome issues like low prize money, reduced funding, and small field sizes.

Black market bookmakers are unregulated websites which provide punters with unrestricted gambling alongside bonuses, free bets, and perks. Many of these sites offer ‘personal managers’ who encourage customers to stake big in return for bigger bonuses and free bets and even allow deposits through a credit card. The issue is that these sites are targeting those with a gambling problem and encouraging prolific punting.

Web search showing how easy it is to find and access these unregulated sites

An investigation by Racing Post from August 2021 found that multiple websites were directly contacting customers who had signed up for the industry's self-exclusion scheme GamStop.

These unregulated operators were sourcing their information from former VIP managers of licensed bookmakers and online gaming sites to compile a list of ‘targets’, as doing so was “commercially lucrative”. The job of a VIP manager is to gain and retain high-value customers for gaming operators, thus giving them access to customer lists and statistics.

But it’s not just their method of contact where they overstepped the mark, either. The Competition & Markets Authority and Advertising Standards Authority oversee licensed bookmakers’ terms and conditions, insisting they clearly state information such as wagering requirements for any bonuses. Black market firms, however, push offers without revealing the full picture until the offer has been initiated. This often requires funds to be rolled over or wagered multiple times before a withdrawal is permitted. As many of these firms are based offshore, it is often impossible to withdraw winnings, with no means to escalate disputes through the legal system either.

Gambling Commission rules state that customers should expect to “withdraw money without unreasonable delay or restriction,” as restrictions on withdrawals are banned. One unlicensed website analysed in the investigation last year stated they wouldn’t allow a customer to even request a withdrawal unless they'd deposited within the last 30 days. Licensed bookmakers cannot include such a clause within their Terms and Conditions.

Whilst an issue exists in pushing bonuses to punters who are deemed to have a 'problem', anyone who uses these sites risks losing money and being caught out by the T's & C's.

So just how popular are these sites? A PwC report commissioned by the Betting and Gaming Council (BGC) claims that the number of punters who have been driven to these unsafe sites has more than doubled in just two years.

According to the PwC report, 2.2% of UK online gamblers used unlicensed sites in 2019. By 2020, this had grown to 4.5%, with the total amount staked doubling to an estimated £2.8 billion.

To put this into perspective, almost half a million people used unlicensed operators in 2020, with the number set to rise if following this trend.

The number of unlicensed operators found to be transacting with British customers jumped from 59 in 2018-19 to 99 in 2020-21, a 68% increase.

Graph showing the increase in visits to unlicensed sites per sector from 2018-19 to 2020

Whilst many welcome the government review in Britain, there are fears that introducing restrictions on legal betting will only prompt consumers to use black market operators more.

The restrictions and checks mentioned have been highlighted as 'intrusive', with ordinary punters being pushed towards the black market as a result.

The government has already poured cold water on this idea. Several MPs in parliament have echoed the views of the former Chief Executive of the Gambling Commission Neil McArthur, saying the impact of the black market “may be being exaggerated”.

Gerald Jones MP took this further when questioned about punters being driven to the black market, saying: “My response is simple, I do not believe it”.

However, evidence from other countries suggests it is a threat that should be taken seriously.

Norway, France, Spain, Denmark and Italy all saw spikes in black market use after bringing in gambling regulations. Norway introduced stake limits, affordability checks, and advertising bans, but this only drove people away from regulated gambling and into the hands of black market bookies. Now, 66% of all money staked in Norway is through unregulated sites. It's a similar story in France too, where online casino gambling was banned, but it now finds that 57% of stakes are placed through black market bookies.

An explosion in unregulated betting could not only force the collapse of the gambling sector, but create further issues for Britain's economy. Over 119,000 jobs in the UK are found in the betting industry, which contributes a massive £7.7bn to the economy, and generates £4.5bn in tax. Should this crumble, the country could find itself in a financially precarious position.

Pie chart highlighting the gambling contribution per sector in Norway

Despite the views of many in parliament, the BGC and new Chief Executive Michael Dugher are very much on board with the gambling review. They have, however, urged ministers to ensure any changes are carefully thought out, else we risk sending lots of bettors underground.

Dugher has made it very apparent that the threat of the black market is growing and outlined the idea of a quick fix as “naïve.” He said: “This new report by PwC is an impressive and comprehensive piece of work which demonstrates how the unsafe, unregulated black market is a growing threat to British punters. It is important to stress that the big increase in the black market is not an argument against more changes to the regulated industry, but an argument that we need to get them right.”

The outcome of the gambling review will have a tremendous impact on the state of betting in the UK, and also on what action the BGC takes next. If the government gets it wrong, then inevitably, black market betting will continue to grow. Betting shops will close, hundreds of thousands of jobs will be lost, and even less money will circulate back into the racing industry, which is already struggling financially.

While social media makes policing such a sector very difficult in the modern day with everything happening online, a clear plan must be put in place to prevent this situation from deteriorating. The government MUST deal with it accordingly…

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