This month, the Spanish government released some figures that are perhaps not shocking, but deserve attention.
Over a five-year period, Spain’s gambling authorities have fined illegal operators €465 million ($521 million). Not one cent of that has been collected. Tens of millions in fines are imposed each year against companies that eat into tax revenue, cannibalize regulated companies’ profits, and put customers at risk by providing much worse player protection than the regulated market. Yet not one of them ever gets paid.
This follows an analysis last month by the Campaign for Fairer Gambling, which found that unregulated operators accounted for €91.6 billion of gross gambling revenue in the EU’s 27 member states, compared with €36.5 billion for regulated operators. The specific figures are hard to estimate and many projections are lower, but it seems clear that the unregulated market is a threat throughout Europe.
If a fine is never paid, what’s the deterrent? Yes, if you’re an illegal operator, your site will probably eventually get shut down, but you can make money until then and never have to pay it back. Afterwards, you can launch a new incarnation.
It’s a situation that’s simple enough to explain. Offshore operators are, by definition, offshore. If a company is based on some distant Caribbean island, it is harder to force them to pay up than it would be for a domestic business. Sometimes, due to the business laws in the countries where these operators are based, the ultimate beneficial owners aren’t even known.
“Companies offering these types of activities have their registered office, when this information can be obtained from data available online or in public databases, in non-cooperative third-party jurisdictions,” the Spanish government said in a written parliamentary response to the opposition Partido Popular, according to Europa Press.
But the response also seemed somewhat ambivalent about what it means that Spain has been unable to collect any of these fines.
“The main purpose of the sanctioning activity is therefore not to raise revenue, but to protect the market and consumers,” it said.
That’s a solid approach, but as long as the deterrent is a fine that can easily be dodged, the legal market and consumers are not being fully protected. Punishments for those who wish to take part in the legal market – in any country, not just Spain – have to be both serious and enforceable.
Unfortunately, there probably isn’t a way to do that with regards to the operators themselves without cooperation from the countries where they’re based. Authorities should take steps toward that, but it won’t be a solution any time soon.
The more immediate step must also involve fines or similar punishments for those within local regulators’ reach – web-hosting providers, payment processors, and gambling-technology suppliers. If offshore operators can’t be made to face real consequences for breaking the law, the risk has to be passed on to someone else within the country in question’s jurisdiction. With adequate fines for those intermediaries, they can become the gatekeepers and prevent illegal operators from easy access to the market.
Europe has been moving toward that approach for years, but stopping a particular website or payment arrangement is not necessarily the same as making the underlying business unviable.
The test is whether those obligations carry consequences that change how intermediaries do business. An offshore operator may be able to ignore a fine. Its payment processor or technology supplier should not be able to ignore an order to stop serving it without putting something of its own at risk.
