Creating the licensed, level playing field: Remove black-market threats to protect players and revenues across the responsible industry
Jack Symons, CEO, Gamban/ Member of the Supervisory Board, Yield Sec
The maturing, responsible marketplace
As markets internationally mature and embrace the need for a responsible framework around today’s remote betting and gaming industry, we should ask ourselves why such measures are required.
Online gambling has existed since the inception of the internet and over time we have seen increasing concern and consequence arising from products which it is now widely accepted must be offered, marketed and consumed responsibly.
Across the years since the first of its kind legislation to specifically target online betting and gaming – the once much-copied but now maligned UK Gambling Act, 2005 – society’s increased awareness and alarm concerning remote gambling has created a focus in law and operations across two key areas: player protection and tax yield.
Nearly all countries implementing online gaming controls, and a legal marketplace, have, however, suffered tax yield well below what they projected before creating the licensed market. In short, not all the business that exists online will migrate to legal, compliant and taxed online business after the legislative change.
Equally, nearly all countries implementing legal market controls have encountered rising rates of gambling harm and negative social consequences, the causes for many of which remain outside the licensed market itself.
Whilst there is much talk about the “licensed level playing field”, it is hard to see how any marketplace is effectively levelled to the benefit of the taxpayer, government, regulator, operator, player or citizen in need of harm prevention if it tolerates the presence of the illicit black market across betting, gaming and gambling.
We can only protect players in a marketplace, if we, first, control and protect the marketplace itself.
Recognising the marketplace: 3 stages of regulatory evolution
Just as regulation evolved to protect consumers and control the online gaming industry, the black market has adapted to take advantage of the shift to increasing licensing and regulation, in the absence of effective consumer education concerning what is and is not a licensed, regulated and tax-paying betting and gaming operator.
Presently, the world is split into 3 stages of regulatory evolution:
-1) Pre-Regulated Market:
No specific laws exist in the market concerning online betting and gaming, chiefly concerning licensing, taxation and regulation. As such, there is no black or white market for online betting and gaming in such a territory – the market is permissible, both legally and practically, but all entrants acknowledge some potential legal risk concerning their future ability to enter the market if they choose to offer services in this pre-regulatory state.
2) Regulating Market:
In the process of drafting and enabling legislation and taxation: to varying extents, these markets may be labelled "grey" if they have little to no policing or enforcement ability.
Germany, for example, is in this state presently, having announced a path to a protected market with licensing and taxation planned for 2021.
A territory at this point of regulation can, sometimes visibly, sow the seeds of black market expansion as legal and compliance conversations before legal enactment push certain operators to make decisions over whether or not to “go rogue” and remain in a market, illicitly, without gaining a license and becoming compliant to taxation and player protection rules.
3) Regulated Market:
A market featuring licensing and taxation, with policing and enforcement, typically only against the licensed operators.
The UK would be a prime example, and even in this most mature of licensed, taxed and regulated online gaming markets, the present government have made very clear they are about to embark on a fundamental change to today’s business. Changes like these are opportunities for the black market and often form the foundations for their reason to remain, illicitly, in a marketplace – changes to “the business” as consumers understand it, so across products and bonusing in particular, lead to demand for the gambling consumers have become used to, and which continue to be offered by an uncompliant black market.
Across this evolution, operators have progressed from open market status to increasingly regulated and restricted conditions across individual territories, as the once global business continues to fragment into very specific, locally-licensed operations on a by-country or state basis. Not all the business that was online shifts with the regulatory change, however, to become legal, compliant and taxed for the benefit of each local market. Some business remains online, adapts to changed marketing conditions and continues to service a country or state, illicitly, by becoming a black market operator.
The issue with the status of this black market, historically and today, is that few, if any, consumers, actively identify the sites and apps of these operators as illicit, illegal or irresponsible.
Due to the nature of finding them and accessing their services. They look, feel and operate like any other online betting and gaming provider, and consumers locate them via identical means: search engines, social media influencers, online ads, referrals, PR mentions, etc. At no point did any consumer need to go to the bad part of town to find some betting and gaming – it was, and is, readily available via their smartphone handset and a Google search.
Searching online for a casino or sportsbook will deliver mixed results: some legal, licensed sites, in those countries and states that have enacted and passed legislation to allow online betting and gaming; and, many unlicensed, offshore sites, available online but without any reference to national or state laws, disrespectful of restrictions to specific products, and all, alarmingly, without any contribution to national/state taxation or facilitation of player protection measures.
If players are indifferent towards whether an operator is legal, licensed and regulated that is a by-product of the lack of education and public awareness, generally. The legalisation and licensing of online gaming is a public policy that has seen little to no public advertising and campaigning, as, for example, the wearing of safety belts in cars or cessation of smoking in public places did. The mass-market have little to no understanding of what is and is not a licensed site, nor why such a system even exists, and is potentially helpful, and certainly harm-reducing, for them.
The echo and shadow of the black market
The echo and shadow of the black market across betting and gaming has long existed but is more obvious, today, than at any time. The more that markets regulate, adapt and experiment with aspects of the business like bonusing, staking, activity and deposit caps, ID verification, KYC, AML, and further, the more the black market shadow comes to tempt players back to the echo of the old, pre-regulated market “they knew and loved” and can still get, offshore but online, from unlicensed, illicit operators.
No CRM and retention bonuses at licensed Swedish sites? No problem. Just hit Google and search for bonus bets or bonus casino and you will find dozens, if not hundreds, of options. None are licensed. None protect their players. None pay any taxes or adjust their operations, advertising and business as usual functions to become and remain compliant. But, that’s the point with the black market.
The more conditions placed upon the licensed, legal, regulated business, and the more we continue to play the strange game of blame, name, fine and shame with regulators only able to punish the licensed operators, but never the unlicensed, the more risks we leave available and present for players, of all types. We also fail to consolidate and safeguard an industry that, from its inception, needed controls and oversight which the licensed operators have accepted, adapted to and welcomed, and should not face unfair “competition” concerning since the black market sites they face do not participate for player attention and revenue on anything like the same playing field.
What this means: for taxation and player protection
Without adequate systems to monitor, police and enforce, the potential of a legalized, regulated marketplace is like the air in an untied balloon: it will simply bleed away, in this case towards unlicensed, unregulated operators who pay no tax and take no care of their customers, or the vulnerable, who should not be the customers of any operator.
What does tolerating the presence of the black market mean, in practical terms, across the two key areas for government and regulators?
The yield from taxation revenue upon betting and gaming will be depressed, frustrated and decreasingly predictable. Taxation yield upon legal, licensed betting and gaming will only be accrued from those sites who responsibly got in line, comply with conditions, gain licensing, pay taxes and operate according to rules and regulation, but who face daily unfair competition from black market sites. For every site that gains a license, there are conservatively two or more who remain offshore, continue to target a market, but pay no tax, protect no players and comply with no rules.
This duality of the marketplace, invisible to consumers due to the practical reality of finding operator results and brands online, is referred to by the term “channelization”: the percentage of the betting and gaming universe that moves from a pre-regulated market status to a licensed and overseen status once regulation begins. Channelization is easy to understand when held up to the taxation revenue realized from any regulated market – the lower the channelization percentage, the lower the taxation revenue realized from betting and gaming, period.
If the black market is not effectively removed, or excluded from discovery, consumers will continue to openly engage with it, in much the same way as they did before regulation, aside from black market operators not being able to market themselves across traditional forms of advertising, such as sponsorship of sports teams or upon television ads. Online, however, and across the media channels predominantly visited by today’s audiences, the black market exists tangibly and, in some cases, popularly, to the extent they can even drown out the awareness and relevance of licensed, tax-paying sites.
Much as the black market creates instability for licensed operators’ revenues, and consequent unpredictability of tax yield, black market operators that illicitly target regulated markets create issues for individuals and society, primarily among minors and those at risk of gambling-related harm. Internationally, we are clear in the view that betting and gaming comprises products that must be offered, operated and consumed responsibly. A system of regulation imposed by law, and executed by experienced, career-professionals across law enforcement and civil service working for the regulator in any market, is the clearest sign that betting and gaming products are not meant for everyone.
Regulating a market when there has been little to no public education – not the fault of any regulator, to be clear, since this duty lies with government – is even more challenging for player protection since those at risk of gambling-related harm do not know where to effectively turn when facing a problem, and escaping a spiral of continued, compulsive play is almost impossible when no gambling cessation helpline or tool historically worked to effectively exclude the black market. Since that black market is just a Google search away, the much-vaunted goal of player protection has, to date, been but a hope. All of the provisions of the legislation, the rules from a regulator, and the fines and threats to licensed status upon regulated operators for breaches of protective measures, target one end: the protection of at-risk and vulnerable individuals.
This will not happen, in any meaningful way, however, if we tolerate the black market and fail to introduce adequate provisions to allow regulators to monitor, police and enforce the meaning of licensing.
Yield Sec: Benefiting all stakeholders across protected, licensed marketplaces
Why then do we tolerate the existence of the black market, given its existence does not simply deflate the betting and gaming balloon, but threatens to pop it, altogether? To date, there have been no effective tools to simply allow for practical monitoring, policing and enforcement. Given my background across the gaming industry, chiefly in player protection as the co-founder of Gamban, I am proud to be part of the team that recently announced Yield Sec, the first effective tool to aid regulators and government to monitor, police and enforce the licensed marketplace for betting and gaming, and remove black-market influence and instability.
The past several months spent realizing Yield Sec - a product formed from a joint venture between customer experience specialists, A GAME ABOVE, and player protection experts, Beanstalk, the makers of gambling cessation product, Gamban - have been focused upon building a solution that caters to one essential: providing for a protected, licensed marketplace.
The operation of a sustainable marketplace, with cared-for customers and practically excluded minors and at-risk audiences, whilst raising valuable taxation revenues for society, predictably, is the only way to support our shared mission across A GAME ABOVE and Gamban: the customer experience. Player protection and the operation of a sustainable industry, onshore and subject to regulation, are, in our view, simply facets of the customer experience, overall, but you cannot effectively or sincerely protect players without protecting the marketplace, first.
Yield Sec’s mission is to help all betting and gaming marketplace stakeholders realise a fair, safe and protected level playing field for licensed, responsible betting and gaming, in which harm is minimised, the customer experience enhanced and society safeguarded.
Society has tolerated the black market, to date, as online betting and gaming, globally, is still a maturing industry. The regulators who have had to adapt to the rise and prevalence of online gambling have done a great job with the tools they had but were often restricted by what specific gaming law permitted them to do and also prevented them from doing in certain instances. By focusing upon stolen taxation yield, we simplify the mission considerably. The dual targets all regulators can focus upon with Yield Sec alongside their mandate are simple: player protection and tax yield.
Working with government and regulators, Yield Sec becomes the catalyst for a truly level, licensed playing field across betting and gaming. With the world’s largest real-time database of black market sites and presence, online, Yield Sec transforms blacklist hopes into blocked sites reality and produces sustainable, predictable performance across taxation-raising. The solution additionally provides for sincere player protection since it removes the easy availability of irresponsible and unwelcome, unlicensed sites from everyone, including minors and those struggling with problems caused by gambling-related harm. Yield Sec effectively creates a regulatory ring-fence for all licensed and soon-to-be licensed markets, aligning the will of politics and legislation to control the offering, availability, and pervasiveness of betting and gaming, with the reality of monitoring, policing and enforcement.