Banning some wagering props can drive bettors to illegal markets: IBIA study

March 6, 2024 8:24 PM
  • Rege Behe, CDC Gaming Reports
March 6, 2024 8:24 PM
  • Rege Behe, CDC Gaming Reports
  • Canada
  • Europe
  • Oceania
  • United States

A new study suggests that banning certain prop bets and other forms of wagering may result in unanticipated outcomes. If a bettor can’t find the bet they want through a legal sportsbook, they may turn to unregulated operators.

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“Whilst politically attractive, this study confirms that bet restrictions are a blunt and counterproductive instrument,” said International Betting Integrity Association CEO Khalid Ali in a statement regarding The Availability of Sports Betting Products: An Economic and Integrity Analysis. “They don’t prevent betting, they just drive it into the unregulated market where most of the problems with sports integrity arise. The conclusions are clear: If you want to protect consumers and sports from corrupters, while maximizing tax revenues, then allowing a wide range of sports betting products is essential.”

The study,  prepared by H2 Gambling Capital, looks at the comparative impact of restrictive and liberal market regulation of sports betting products on consumer protection, regulatory oversight, taxable revenue, market and sports integrity. It draws from sports betting operator data, IBIA alert data, and H2’s market data, and was developed in partnership with the Instituto Brasileiro de Jogo Responsável, the Canadian Gaming Association, the Netherlands Online Gambling Association, and Responsible Wagering Australia.

The study’s main finding reveals a correlation between the wide availability of sports betting products and the proportion of consumers placing bets with onshore regulated sports betting operators — known as the channeling rate – thus reducing the risk of exposure to sports betting related fraud in unlicensed markets.

The Availability of Sports Betting Products also highlights specific betting markets with disproportionate impacts on the market and the onshore channeling rate due to size and popularity. This includes football (soccer), that dominates sports betting globally, and tennis, which is particularly strong in Europe. Products like ‘in-play’, ‘side markets’ (e.g. red or yellow cards and corners) and prop betting also have a very significant impact on channeling.

Data from the study challenges assumptions that these markets represent an increased risk of match-fixing related fraud and demonstrates that restricting their availability via regulated onshore operators increases the number of consumers using riskier unlicensed offshore operators.

“We always fall back on the data,” said H2 Gaming Director David Henwood. “There is much conjecture that one of the main reasons customers use offshore betting sites is because they offer a broader range of products than available onshore. The study findings reinforce that point of view. Limiting the choice of onshore bet types – including live in-play – is basically counter-productive. Instead, markets most successful in limiting offshore play – evidenced by a channeling rate of 90% plus – are the ones that have generally opened their onshore provision to a broad product choice. There is much that can be learnt herein in terms of best practice regulation.”

According to The Availability of Sports Betting Products, the 2024 global sports betting market is estimated to be worth $94 billion in gross win and reach approximately $132 billion by 2028, with over 70% ($93 billion) online. Just under half (47%) of all online sports bets are forecast to be placed in-play (or live) in 2024, rising to 51% by 2028.

The study also compares the success of different regulatory approaches to managing growing demand. Jurisdictions that allow a wide range of betting products, such as Great Britain (97%), have a much higher onshore consumer channeling rate than countries that restrict access to important betting markets, like Portugal (79%; restricts football and tennis), Australia (75%; prohibits online in-play) and Germany (60%; restricts football, tennis and in-play).

In addition to protecting consumers from match-fixing related fraud, depressed onshore channeling rates have significant implications on tax revenue and market oversight:

  • Australia would gain an additional $1 billion in incremental tax revenues, and Germany an additional $400 million over the next five years, by permitting online in-play betting markets.
  • The study predicts Germany and Portugal will have a combined loss offshore of around $750 million in taxable revenues due to restricted access to the main football (soccer) betting markets between 2024-28.
  • The Netherlands would experience a $118 million increase in tax revenue over the next five years if it liberalized access to football (soccer) side markets (e.g. red and yellow cards and corners).
  • Portugal would gain an extra $122 million in tax revenue over the next five years by permitting ITF tennis betting products to align with Italy and Spain.

Also noted: By breaking away from the Canadian monopoly model and introduced a licensing system in 2022, Ontario’s onshore sports betting channelization is expected to reach 92% in 2024. In contrast, the rest of Canada combined is forecast to have a rate of around 11% and  lose $2 billion in taxable revenues between 2024-28.

The Availability of Sports Betting Products also assesses the market impact of available core sports betting products based on H2 Gaming’s market data, actual operator data, and IBIA’s alert data. IBIA’s monitoring and alert network covers global B2C betting turnover of over $273 billion in 2023, and over $300 billion if IBIA’s B2B members are included, and uses account-based transactional monitoring data.