Evidence from abroad shows the unregulated black market will benefit unless we get the gambling review right

In the final debate in the House of Commons before the summer recess, the Minister heading the Government’s Review of Gambling, John Whittingdale, told MPs: “It is very important that we create a safe space where people are given protection if they are gambling online, but we do not want to drive them away from the regulated sector and into the black market. That is certainly something that we will bear in mind during our consideration of these things”.

I couldn’t agree more. Yet the distinction between betting and gaming in the regulated industry with licensed operators, as opposed to people gambling with the unlicensed, unregulated black market online, is not necessarily well understood by many MPs in Westminster or newspaper journalists.

We all know that anti-gambling campaigners can’t stand high street bookmakers and the big brands in U.K. online betting. The anti-gambling lobby don’t care that BGC members alone employ nearly 120,000 people and pay £4.5 billion in tax in the UK. The black market, of course, pays no tax and employs no one in our country.

Prohibitionists don’t like the fact that millions of us choose to enjoy a bet and they just want to see less gambling. So if the Government’s Review leads to the regulated industry being smaller, they will be happy. But if those same moral crusaders against people having a bet cared about safer gambling, as opposed to just being anti-gambling, they really should be concerned about the black market.

Earlier this year, a major report by PWC found that the number of British punters using unlicensed sites had more than doubled in just two years. The report also found that the amount staked in the black market had doubled from £1.4bn to £2.8bn over the same period.

But, as Whittingdale and the Government consider future gambling regulation here in the UK, there are also important lessons from abroad. Another section of the PWC report suggested that the size of the black market is larger in countries where the regulated betting and gaming sector is less competitive.

One of the countries mentioned, Norway, has a state monopoly for gambling coupled with restrictions on staking, affordability and advertising, which has resulted in a black market that accounts for over 60 per cent of all money staked. Likewise in France, where online casino games are also a state monopoly, the black market for gaming accounts for 57 per cent of all money staked on gaming. In Italy, where gambling advertising is completely banned, the black market accounts for 23 per cent of money staked.

The report by PWC said: “This analysis suggests that the UK has a more ‘open’ online gambling market and currently has a smaller unlicensed market share than our European benchmarks. Whilst it is not possible to isolate the impact of individual regulatory characteristics, the above assessment suggests that jurisdictions with a higher unlicensed market share tend to exhibit one or more restrictive regulatory or licensing characteristics.”

In effect, the report was saying that where betting with licensed and regulated operators is made more difficult, there is a tendency for customers to simply switch to the online black market. It’s not rocket science. 

It is important to stress that in highlighting the dangers posed by gamblers switching to the unsafe, unregulated black market online, that this is not an argument against changes to the regulated industry. It’s simply an argument for getting those changes right.

I have long worried that in the UK, we risk stumbling into well-intentioned but badly-designed changes, where the main beneficiary would be the unlicensed black market.

As a strict condition of their license, operators in the regulated industry rightly have to adhere to certain standards through things like strict ID and age verification checks, no betting on your credit card (except for National Lottery gambling products) and participation in self-exclusion schemes. Regulated operators also offer important safer gambling tools like setting deposit limits and time-outs.

Yet the black market does none of those things. Instead, black market gambling sites – sadly, easily accessible online - take a ‘no questions asked’ approach, with no interest at all in customer safety. Nice customers go to the black market, we lose them for good. No monitoring to identify harms, no interventions to moderate their play and no tools to allow them to gamble responsibly.

According to a recent report from the Gambling Commission, rates of problem gambling remains “statistically stable” at 0.4 per cent and has been around that figure for 20 years. How people gamble in the UK has changed in recent years with more online betting. But there is no evidence that rates of problem gambling have increased. Indeed, there is some evidence that thanks to safer gambling measures introduced recently in the regulated sector, rates of problem gambling may now thankfully be declining.

For comparison, Norway has a problem gambling rate of 1.4 per cent, while a survey by Public Health France last year estimated that the rate in that country was 1.6 per cent – up from 0.8 per cent in 2014.

Meanwhile, a 2015 report comparing online betting in France between licensed and unlicensed (black market) sites concluded: “Gambling on unlicensed sites is associated with more intense gambling patterns and more gambling-related problems compared to licensed sites. Findings demonstrate that gambling activities carried out on state licensed sites are associated with less overall harm to gamblers.”

So as John Whittingdale and the Government continue to grapple over the complexities of future gambling regulation, there is lot at stake. But ensuring that we don’t do anything that sees punters drift off to the unsafe, unregulated black market must be a priority for all of us who care about safer gambling. 

Michael Dugher is chief executive of the Betting and Gaming Council and a former Shadow Secretary of State for Culture, Media and Sport.

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