The struggle between the regulated and unregulated gambling markets is much debated by policymakers and regulators all over the world. How do you balance essential consumer protection with the knowledge that legislating too harshly may push gamblers to unscrupulous offshore providers?
The black market is not going to shut down overnight because an alternative legal market has been established, so the only way to beat it is to compete with it.
As legal wagering goes live in more states, legislators have had to consider which restrictions can be used to best effect and which would likely propel players to the offshore markets.
When the Professional and Amateur Sports Protection Act (PASPA) was repealed, many commentators assumed it would be extremely difficult to pull the gambling public back from the offshore providers they were used to. However, research released last week seems to reveal that the majority of gamblers prefer to bet with legal operators where they have the choice.
Research by the American Gaming Association (AGA) reveals that average spending with illegal bookies fell by 25% in states where sports betting was legalised last year, while legal online and mobile betting spend rose by 12%. However, the report also noted a 3% increase in spend with illegal offshore operators in states with legal sports betting.
Commenting on the findings, AGA president and CEO Bill Miller said: “We’ve known for a long time that Americans like to bet on sports. This research affirms their interest in moving toward the protections of the legal market.”
He added, “Giving consumers convenient alternatives to the illegal market, like regulated mobile offerings and competitive odds, is key for getting bettors to switch to legal channels.”
Miller’s philosophy is in line with that of the Brussels-based European Gaming and Betting Association (EGBA), which also regularly advocates for competitive odds and products to ensure that punters do not perceive illegal providers to be offering a better deal.
Germany’s newly drafted regulations have come under fire in particular in recent months, due to various restrictions that the EGBA argues create insufficient incentive to attract players to the regulated offering. The German legislation includes maximum stake limits of €1 per spin on slots, a mandatory deposit limit of €1,000, a prohibition on in-play betting and a ban on advertising for online gambling products between 6 a.m. and 9 p.m.
The fear among industry experts is that the new legislation will fail to achieve a level of channalisation to regulated market services necessary to maintain a viable industry.
Back in the U.S., the AGA found that the key factors influencing punters to choose the legal market over the illegal providers were confidence that bets will be paid out (25%), awareness of legal options (20%), and a desire to use a regulated book (19%). In fact, 74% of respondents said it was important to bet only through legal providers.
While respondents did not highlight a desire to see products more competitive with the offshore market, that may be because many gamblers are hazy on which providers are legal and which are not. Therefore, they would not recognise that better odds and gaming experiences were being offered by one over the other.
The AGA found that 52% of sports bettors admitted to participating in the illegal market in 2019. The study found this to be driven mainly by confusion about online operators, with more than half (55%) of consumers who bet illegally saying they believed they had bet legally.
Part of the problem, according to Miller, is that offshore operators know how to take advantage of consumers’ ignorance of the law. “This only worsened during the sports shutdown, with unregulated bookmakers offering odds on everything from the weather and shark-migration patterns to whether your friends’ marriage will survive the pandemic,” he said.
In a bid to encourage a market that is equipped to compete with its offshore rivals, the AGA has drafted a set of sports betting principles for policymakers in the U.S. As well as advocating robust consumer-protection measures, the principles urge legislators to “establish rational tax rates and licensing fees” to ensure legal operators can function on margins that compete with their offshore rivals.
Likewise, the principles advocate for offering consumers a range of products, including mobile and online wagering, to ensure that illegal alternatives are not more convenient or appealing.
It’s a fine line to tread when consumer protection is necessarily, and rightly, so high up the agenda, but for a burgeoning online market to thrive, it must recognise the unrestricted illegal market it is competing with. With years of prohibition only just behind it, this challenge is arguably more acute in the U.S. than many other regions.
