Mirrors & Smoke: How the Black Market Steals Regulated Revenue & Tax as the Sports Calendar Plays

Written By:

Steen Madsen, Bill Pascrell, III, and Jack Symons, Members of the Supervisory Board, Yield Sec

The return of sports has brought some sense of normality to most international betting markets. Whilst games are presently played in largely empty stadiums, it’s clear that the audience at home is watching and many are choosing to bet on their favourite sports teams, leagues and contests. This calendar of events is the core driver for betting activity and the gaining and retaining of customers across every jurisdiction. The bigger the event, the more action and opportunities bookmakers will offer both before and during the currency of a sports or special event, and the more customers will be attracted to back their passion with money to “have an interest” in the game.


The early impact of the pandemic, with the cancellation of many major sports events, led to a clear substitution effect with players tilting activity towards poker and casino, in particular. This has quickly shifted back, firmly in favour of sports betting, as the NFL returns and soccer leagues embrace a new season.


This changing balance of revenue, between betting and gaming, should for most regulated markets, be a neutral consideration for government: so long as revenue is directed through licensed, regulated operators, their profits can be taxed and public funding realised.

This, however, is not a simple matter for one key reason: the presence of the unlicensed, unregulated black market.


This problem is further complicated by the black market offering: an unrestricted spread of betting across sports and special events – happily featuring US Election betting, for example, despite its ban across all US States – with a multitude of gaming products alongside, allowing for the easy cross-selling of players.


The core challenge for any government and regulator is to raise tax and protect players around the activity of betting and gaming. The restriction of certain products across licensed sites, whilst ignoring their reality and open availability across the black market, presents a clear dilemma for that core challenge: you cannot protect players, whether generally or specifically around certain undesirable products, nor secure predictable tax yield, if you do not protect the marketplace, first.


Echoes: The black market reacts quickly to community conversations

Online, the black market hides in plain sight. It mirrors each jurisdiction’s cultural, news and sports cycle for the events it requires to gain relevance and revenue. All the social and search traffic that trends can easily and simply be targeted towards tangible profitability by offering betting events on sports and cultural highlights. Relevance can be harnessed by hijacking the echo of community conversations around those events, with PR-value odds and commentary supplied to media and content platforms for free to drive one essential: the mass movement of traffic that can be converted to customers across a huge range of unrestricted, unlicensed black market sites and apps.


Blocking these websites, apps and platforms, through traditional blocklist means, is simply not enough. The moment one destination URL has been identified, reviewed and removed, the black market operator has already established hundreds of mirror versions of their transactional destination, all with slight URL and/or brand name differences.


This movement from one to many to myriad is part of the black market playbook: illicit operators will move like smoke to avoid official detection, discovery and disconnection from the oxygen of each marketplace. Simply listing and banning one “brand name” site for a black market operation that routinely features thousands of URLs as a business-as-usual process is not, then, going to work.


The revenue that these black market sites and apps “redirect” from the licensed, regulated marketplace is not by way of any “loophole” or customer-champion offer of fairness and choice. It is by echoing what already exists, legally, in each market, and exploiting the product challenge across betting & gaming: for most consumers, the industry’s products look, feel, operate and achieve largely the same outcomes.


How then should customers determine between what is legal and licensed versus what is offshore and illicit? Consumers respond to opportunities in and around the sports and cultural calendar, across products they have habitually followed and are excited by. Effecting change in the expectation of that behaviour – being able to bet on the games and events that matter – is not as simple as rolling out a new regulation, to be observed amongst a compliant, regulated pool of licensed operators.


That type of change, in today’s betting and gaming marketplaces, is but a hope given the widespread presence of the black market. If only the licensed sites implement those changes, given that they are made to be compliant by an effective regulator, the action of adapting consumer expectation will have an unforeseen consequence: fuelling the growth of the black market and providing them further opportunity to steal regulated revenue and steal the tax that should have been paid on that revenue.


In an era when the reliance upon public spending could not be greater or more urgent, and with economic instability around the raising of future tax in the short to medium term, surely we need more precise methods to realise and raise mass revenue from taxation across what are enduringly popular products for a segment of the adult population?


Silence: We cannot simply ignore the black market

The problem presented by the black market has long existed. At one point in every market, all sites and apps were effectively “black market” offerings, given that there was no specific law regarding the internet and betting and gaming. Many countries, particularly those across the Middle East and Asia, still have this pre-regulation position today. That does not mean they don’t have gambling in those countries, and the vast majority of nations and states have become keenly aware of the need to pass legalisation measures for iGaming such that they can affect and control the marketplace.


Legalisation, especially across something that for consumers has “always existed” is tricky, however. The passage of the law is to enable a jurisdiction’s ability to control industry and realise tax from it. Regulators are entrusted with the day-to-day reality of that control and measures that, within the law, provide for player protection and responsible gaming. Often, regulators are left without tools when it comes to the black market: how can you effectively control an operator that is offshore, unlicensed and seeking to remain uncompliant and untaxed?


The threat from the black market is an issue for government and one that comes with public policy difficulty: how to effectively educate the public concerning legal, licensed and regulated betting and gaming, without promoting gambling itself? Most public safety and financing measures come with public education: the wearing of safety belts in cars, the smoking ban, even the day that income taxes are due by, are all popularised and change behaviour through mass-market advertising campaigns in the first instance.


The silence around public education of betting and gaming from a government perspective is understandable: it is a challenge to educate consumers about the benefits of the licensed gambling industry, which pays tax and is regulated to promote player protection, without actually popularising the activity of gaming itself.


When it comes to betting and gaming, the public generally hears from two sources:

  1. the industry, seeking to gain customers as any business does

  2. the media, as they report upon those licensed sites who have breached rules

As a result, the public is often left with a jaded view of betting and gaming – too many ads, and too many large financial fines, amounting to a view of an industry that many do not identify the regulated versus unregulated duality within.


Licensed operators facing fines and control should be viewed as a good thing – it shows a system of regulation, reviewing, checking and working, and an industry co-operating, complying, paying and changing their behaviour. Chalking this routine regulatory reality up as somehow a demonstration of the betting and gaming industry’s lack of care for its customers and society, as the media often does in these cases, is simply incorrect. If they did not care, they would be offshore, unlicensed and unregulated – they would be part of the black market.


Patience: Waiting to act against illicit operators leads to lost revenue, stolen tax and abused players

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 run the business of regulated betting and gaming.


To date, there have been no effective tools to simply allow for practical and patient monitoring, policing and enforcement that would remove black market influence and instability, and create the truly level, licensed playing field for customer choice and operator sustainability.


As members of the supervisory board of Yield Sec, with backgrounds across betting and gaming law, industry operations, player protection and gambling-cessation therapy, we have spent considerable time and energy focusing upon the marketplace challenge and are proud to have introduced a cross-stakeholder response to what governments and regulators everywhere require: the provision of a protected, licensed marketplace, free from the criminal theft of taxation and wholesale abuse of players.


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.


The technical and advisory solution presented by Yield Sec in each market is targeted towards a long-game view of the fight against the black market. The system follows the money to identify all significant threats to revenue and adapts to respond to these, in real-time, based upon the presence of the black market across popular cultural and sporting events.


How much money could a marketplace lose, at operator revenue and government taxation levels, with unrestricted US Election betting, for example? How much could be lost by not monitoring, policing and enforcing to exclude black market activity around events like the Grand National, in the UK, and the Super Bowl, in America? The black market habit of mirroring the legal, licensed betting economy needs to be shattered to fully realise the potential in any regulated marketplace – only Yield Sec, working for government and regulator, and alongside all betting and gaming stakeholders, can help achieve a future where blacklist hopes are transformed into blocked sites reality to produce sustainable, predictable performance across taxation-raising.


Grace: Delivering truly meaningful player protection from marketplace sustainability

Of course, any solution that just focused upon the money would miss the consequence of betting and gaming for those who could suffer gambling-related harm. Yield Sec protects the marketplace, first, for one reason: only by protecting the marketplace can you sincerely protect players.


Responsible gaming measures like self-exclusion, for example, can easily become ineffective and meaningless for those caught in a spiral of compulsive play if black market presence persists. Excluding from a national register of licensed, regulated sites appears as a perfect measure only if you remain silent about the insidious impact of the black market. Illegal operators do not engage with any player protection or gambling cessation measures since they are not onshore nor subject to regulatory control.


Their products, however, reach far into today’s regulated markets and make a mockery of player protection measures. What protection is there really, for an individual problem gambler who has self-excluded from the legal, licensed industry but can easily find a fix for a habit of addiction via a simple Google search and an online transaction that does not appear any different from other gambling sites?


Consider that experience when a particular product has been removed from regulated operators in a marketplace – like political betting, for example – and it’s possible to see how the black market gains from legal and regulatory change, unintentionally acting as an effective point of difference for them in their marketing versus licensed and regulated competitors.


Betting and gaming comprise a group of products that must be offered, enabled and consumed responsibly. It is for this reason that lawmakers and regulators face a challenge in the provision of a level, licensed playing field and it is by way of this currently uneven terrain that the black market has been gifted an opportunity to grow, adapt, steal tax and abuse players.


Yield Sec provides each marketplace with the ability to reach an equilibrium, 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 to ensure that only those operators who pay to enter, can, and only those operators who protect their audience and consumers, remain.


You can learn more about protecting the licensed marketplace for betting and gaming at Yield Sec.com



ABOUT YIELD SEC

Yield Sec is a product from Beanstalk, the makers of Gamban, and customer experience solution specialists, A GAME ABOVE, that focuses upon the two essentials all governments and regulators need to balance:


1) Player Protection

2) Taxation Yield


Yield Sec will: -produce sustainable, predictable performance across taxation-raising from betting and gaming by removing black-market influence and instability -provide for sincere player protection as it removes the casual availability of irresponsible and unwelcome unlicensed sites and apps from everyone, including minors and those struggling with problems caused by gambling-related harm Yield Sec is the catalyst for a truly level, licensed playing field across betting and gaming, focusing upon the money - whether for good causes or taxation - generated by the licensed industry, and promoting legal operations through monitoring, policing and enforcing against the black market to create effective player protection.


Yield Sec understands how the betting and gaming black market works online, and our system works to find it, flag it and block it.


YieldSec.com



IN Transparent.png

- EI Industry News: News On Demand -

The Most Current Industry Perspectives By Top Global Experts

Ei%20Industry%20News_edited.png

Hong Kong Address

Suite 1104, Crawford House, 

70 Queen's Road Central, 

Central, Hong Kong

South Africa Address

P.O. Box 25, Strand, 7139,

Western Cape, South Africa

Contact

+852 5511 8385

+2710 500 9849

+2711 083 8386

info@eventus-international.com

Copyright EVENTUS INTERNATIONAL LTD 2020 © All rights reserved.