Online gambling regulators are in an invidious position, and I say that with some sympathy. Given my usual scepticism about the regulatory impulse, that should tell you something.
Their primary obligation is to protect consumers in their own jurisdiction. That much is straightforward. Considerably less straightforward is what they are supposed to do when the threat to those consumers comes partly from within their own licensed community. Welcome to the black-market problem, where every solution has a sting in its tail.
Consider the following scenario. A major game supplier holds a licence in jurisdiction A. Its content is popular, well-known, and widely distributed across the licensed market. Players seek out its titles the way they might seek out a favourite television series — by name, habit, loyalty. Now imagine that the same supplier is also providing its games to operators who are targeting players in jurisdiction A without a licence. The black market, in other words, is being fed from inside the tent.
What should the regulator do?
The obvious answer, the instinctive one, is to confront the supplier. Give up your black-market business or give up your licence. Choose. It is the kind of clean, decisive action that plays well in a press release.
The problem is that the obvious answer may not be the right one. If the regulator forces that choice, the supplier may do the arithmetic and conclude that the black market is the bigger, more profitable, and considerably less tiresome side of the ledger. It withdraws its games from licensed operators. Many players follow content rather than compliance frameworks and go looking for specific games. They find them on unlicensed sites, with no consumer protections whatsoever. The regulator, in attempting to tighten the market, has inadvertently done the black-market’s marketing for it.
This is not a theoretical puzzle. It is the kind of judgment call that regulators are wrestling with right now, and it illustrates something the public-health lobby rarely acknowledges: Harm does not sit on only one side of the equation.
The jurisdictional question adds another layer of difficulty, and here I have some genuine sympathy for the regulator’s position. A regulator’s mandate covers its own territory. If a company licensed in jurisdiction A is operating illegally in jurisdiction B, whose problem is that? The instinct of a serious regulator is to care. But caring is not the same as having the legal authority to act. Making a determination about whether a licensee has breached the laws of another country requires the regulator to interpret foreign law, a role it was not designed for and probably should not assume.
A sensible position, taken by many regulators, is that if an appropriate authority in the other jurisdiction makes a formal finding, that finding can inform a suitability assessment at home. But absent such a finding, acting unilaterally puts the regulator on very uncertain ground. I would be equally uncomfortable, I suspect, if foreign regulators were making pronouncements on whether my domestic laws had been breached.
But what to do about “rogue” jurisdictions that care little about the gaming laws of other countries? Does this mean that if the Gambling Commission is not willing to weigh in on overseas laws, an operator licensed in Great Britain can provide services to “grey markets” from Great Britain?
The corporate-structure problem compounds this. Black-market exposure is rarely tidy. Ownership pyramids are constructed with multiple degrees of separation between a cleanly licensed entity and the operations that are rather less presentable. A beneficial owner on paper may have no visible connection to the business in practice and proving that the licensed entity and the offshore operation are, in any meaningful sense, the same beast is genuinely difficult and prohibitively expensive. Regulators, like everyone else, have finite budgets and limited resources, and they have to choose where to direct them.
None of which means the regulator is powerless, and this is where I think the more creative and frankly more promising approaches come in.
If you cannot easily reach the black-market operator itself, go after those who make its existence possible. These are the entirely legitimate businesses that, whether through indifference or convenient incuriosity, provide the infrastructure on which the unlicensed market runs.
Payment service providers are the obvious place to start and in my view the most important lever of all. If you cannot pay, you cannot play. I am contacted by high-risk PSPs with remarkable regularity, apparently under the impression that I find their propositions irresistible. They make a very good living processing deposits for operators that no self-respecting bank would touch. They miscategorise transactions, dress gambling payments up as something more wholesome, and pocket a handsome premium for their trouble.
But the PSP is not the only route into the banking system and in some ways not the most elegant one. Operators that straddle both the licensed and unlicensed markets have discovered a rather more refined approach. A legitimate licence from a well-regulated jurisdiction is a surprisingly useful calling card when you are trying to persuade a bank to open an account. The bank sees the licence, performs its due diligence on the regulated entity, and is satisfied. What it may not see, or more probably may not look hard enough to find, is that the same account is quietly processing revenue from black-market operations alongside the legitimate ones. The licence has become a laundry. The regulated market’s credibility is being borrowed to legitimise activity that the regulated market was specifically designed to prevent. I find that particularly galling, and I think regulators and their banking supervisors should too.
Squeezing this entire ecosystem, through pressure on the card schemes, acquiring banks, or correspondent banking relationships, is painstaking work, but it changes the economics of the unlicensed market in a way that blocking a few domains simply does not.
Then there are the platforms. Social media companies in particular have a great deal to answer for here. Unlicensed operators are remarkably adept at finding customers through short-lived accounts, cloaked affiliate links, influencer arrangements, and content indistinguishable from entertainment until you look at where it points. When regulators go after Meta or Google and their peers on this, publicly and persistently, they are certainly right to do so, even if the platforms’ response has so far been somewhere between glacial and performative.
A single regulator may not have much sway with the card schemes like Visa or MasterCard or social media companies like Meta and Google, but a coordinated approach from a cadre of like-minded regulators putting pressure on these companies might have more chance of success.
There are more creative options too. One that I was recently told about and appeals to me involves intellectual property. Unlicensed gambling brands have been quietly registering trademarks in regulated jurisdictions, not because they have any intention of operating legally, but because a registered trademark helps them obtain bank accounts. If intellectual-property offices could be persuaded not to register gambling-related trademarks for entities that hold no domestic licence, that particular piece of financial scaffolding falls away. It is a small thing. It is also exactly the kind of lateral thinking that enforcement requires when the direct route is blocked.
The deeper difficulty, and one that I think regulators find genuinely uncomfortable to say out loud, is that the regulated market’s attractiveness to consumers is itself a regulatory variable. If licensed sites offer a narrower product range, more friction, more interruption, fewer of the games players actually want, and a growing sense that engagement with a licensed operator means submitting to an increasingly elaborate set of hurdles, the unlicensed alternative becomes more appealing by comparison.
A regulator that drives popular content out of the licensed market in the name of enforcement may find they have made a bad trade. I am not arguing that consumer protections are wrong. I am arguing that calibration matters and that the cost of getting it wrong is borne by consumers, not by the regulator.
There are no clean answers here. It is not black and white as the public-health lobby and our media would like to promote. In some circumstances, the balance of risks will justify keeping a problematic operator or supplier in the regulated market, while extracting behavioural concessions, even if that invites the inevitable howls from those who prefer a more theatrical response.
In others, the conduct will be sufficiently egregious that the operator has to go, consumer risk of transference notwithstanding. These are genuine judgment calls, made case by case, in conditions of real uncertainty, by regulators who cannot always say publicly what they know or explain fully why they have decided what they have decided. I do not envy them that.
One thing I am fairly confident about: Regulators will never reduce the illegal market to zero. The online environment is too porous, the tools too blunt, and the commercial incentives on the other side too large. Short of the kind of telecommunications isolation that only the most enthusiastic authoritarians have managed, there will always be a way in for those who want one.
The realistic objective is more modest and, I think, more honest. Keep the regulated market sufficiently attractive that most consumers remain in it, make the unlicensed market sufficiently difficult to access that casual players do not stumble into it, and accept that those absolutely determined to use it will probably find their way there regardless.
That is not a counsel of defeat. A regulator that selects its evidence to fit its conclusions has forfeited the right to claim it is acting in the public interest, when its actions are so egregiously self-serving.
