In February 2023 iGB reported on the ineffective action taken against the illegal gambling market, and 12 months little seems to have changed. What has progressed is analysts’ understanding of consumer activity and the alarming scale of illegal online gambling. The problem runs deep – probably much deeper than most industry estimates would suggest.  

While enforcement efforts to stifle the legal sector’s nefarious counterpart continue, some measures are actually serving to push players into the arms of these illegal sites. By better understanding the illegal market’s size, efforts to stamp the black market out can improve and authorities can target illegitimate players more directly.  

In its annual CEO briefing on 14 November the UK Gambling Commission revealed it is seeking to better understand the various cohorts of online gamblers and predict why they are being enticed by illegal offerings. It is doing so via an evaluation of the UK’s illegal gambling sector, which will be published in the spring. 

Is tracking the illegal market an impossible task?

But collecting consumer data to accurately depict trends in their activities across illegal gambling sites is a seemingly impossible task. And some suspect governments and regulators are manipulating the available data to mask the true scale of the problem.  

“How do you calculate something that’s not recorded anywhere? It’s a bit like calculating the size of the black economy. That’s a very difficult task,” says Richard Williams, gaming lawyer and partner at Keystone Law.  

In a first-of-its-kind report released last September the UK Betting and Gaming Council (BGC) estimated that the UK’s online gambling black market is handling £2.7 billion in bets every year. And this, it said, was a conservative figure.  

Broken down further, this translates to 2.1% of the £128 billion staked with licensed online operators annually. “Those are arresting statistics,” BGC CEO Grainne Hurst tells iGB. 

“We do have high channelisation in the UK, it’s the benefit of a mature market. But what we have seen is even in a mature market the black market risk is still present and growing.” 

Channelisation is king  

European gambling regulators, particularly in newer markets like Sweden and the Netherlands, have used channelisation estimates to assess the success of their legal market’s regulation for years. Denmark has maintained an extremely high channelisation rate of around 90% since its online gambling market was opened in 2012.  

Today, these reports have proved a valuable resource to track the black market’s evolution. And these estimates could play a key role in influencing governments and law enforcement to step up actions against illegal gambling.  

“In Sweden where I live and work the channelisation discussion is like the mother of all arguments,” says Gustaf Hoffstedt, secretary general of Sweden’s gambling trade body BOS. “No other assessment [of the licensed market] has as much influence over the government and the authority and the discussion on how to find good ways to regulate gambling markets.”  

There are notable inconsistencies in the methodology of these reports. In Sweden, there are three slightly different estimates available: one from gambling regulator Spelinspektionen, another from horseracing monopoly ATG and a third commissioned by BOS. Spelinspektionen’s estimate, which uses data from H2 Gambling Capital and player surveys, puts the market’s current channelisation at 86%.

ATG’s Q3 2024 assessment, based on consumer traffic to illegal sites, puts the range at 70%-82%, while the BOS-commissioned projection, which also uses consumer survey results, puts the rate right between the other two reports at 77%.   

How accurate is the reporting?

Making the information available to the sector, the government and consumers is important to help them understand the scale of the illegal market, but there is an argument to be had over which methodology is most accurate.  

“That’s obviously a very good question and I don’t really have a good answer to it,” laments Hoffstedt. “It’s very hazardous to believe in a single channelisation analysis. I believe that using a number of assessments from reputable sources probably comes quite close to reality. It’s interesting not just to assess the channelisation level, but how the level develops over time.”  

Hoffstedt believes the accuracy of the figures will improve over time through the use of various methodologies. BGC’s Hurst agrees: “As this work develops, I expect [uniform methods and practices] will happen. But it will always be difficult to gauge the extent of the black market because of the tactics operators employ.”  

What are the methodologies?

Ismail Vali, founder of Yield Sec, a technology platform that uses AI and machine learning to scrape illegal gambling player data, is convinced that regulator data will not present a clear picture of the offshore market until it includes real-time data on player activity.  

The UKGC’s 2025 black market report uses various methods to gather its data, including combining web traffic data and gambling behaviour data to estimate the gross gambling yield (GGY) of the online unlicensed market. However, there are concerns over its accuracy: the data was collected between July 2018 and June 2019.  

“That’s the year before Yield Sec data started,” Vali notes, adding that at the time the UKGC did not want to work with the company. “We use an apples-to-apples methodology across legal and illegal sites so we know what players were on which websites and how long they spent there. And we can work out what we call a value per visit [across both legal and illegal domains]. We have found that much more reliable than working from GGR (gross gaming revenue).”  

One argument in favour of consistent methods across all reports is to stop governments and regulators overestimating channelisation rates, which Hoffstedt says is often done to present the image of a healthy and thriving legal market. “There’s a general view that reports are mostly speculation and assessments from governments and authorities tend to assess channelisation at a higher rate compared to the industry.”  

Are some regulators overestimating their channelisation data?

One interesting example is the Netherlands, where regulator Kansspelautoriteit (KSA) estimated the country has a 95% channelisation rate in an October market report, thanks in part to strict rules around advertising, it said. But data on player spend and GGR made by illegal sites suggested the rate was closer to 87% as players on average spend more money on illegal sites than on licensed sites.

Despite the discrepancy in the data, the KSA chose to publicise the higher rate, which was based on estimates from Nielsen-owned market research company GfK and H2 Gambling Capital. H2 uses an in-house industry forecasting model to determine the size of legal markets rather than illegal ones. 

Likewise, in an update on Germany’s regulated market last June gambling regulator Gemeinsame Glücksspielbehörde der Länder (GGL) put the value of the illegal gambling market at €600 million, or just 4% of the overall sector. But local trade body Deutscher Online Casinoverband (DOCV) argued the figure was closer to 20% of the online market, as the GGL had calculated the revenue as a percentage of both retail and online GGR in the country.  

Monopoly support 

While channelisation has long been on the radar of private operators, BOS’ Hoffstedt has seen monopoly operators take more of an interest. In ATG’s black market report in March it flagged that local payment identification measure Bank ID was available to illegal operators. This, CEO Hasse Lord Skarplöth said, should be stopped by banks in Sweden.  

“It’s definitely a benefit that legacy operators have joined in on this advocacy against the illegal market,” he says of ATG’s report. “They have a big market share in many European jurisdictions and probably also connections to the government that private operators don’t have.”  

Monopoly operators have been hit hard by growing competition in their respective markets. In Finland the Veikkaus monopoly saw profits plummet 19% in H1 in what is one of Europe’s remaining grey markets. But the jurisdiction submitted its new gambling laws to the European Commission for review in November and is on the way to liberalising its online gambling market by January 2026.  

Is enforcement against the black market working? 

Newly reformed markets like Finland and Ireland, which passed its Gambling Regulation Bill into law in October, can formulate and enact regulations to challenge the illegal gambling market before the market matures and a shift in rules can harm already established local operations.  

There are mixed views on whether current enforcement actions are sufficiently stifling unlicensed actors in licensed markets. Statements notifying the sector of geo-blocking efforts and financial penalties being issued appear almost every day, but ultimately illegitimate operators are circumnavigating these efforts by launching mirror websites and making their operations too difficult for authorities to track down.  

IP blocking has proven particularly ineffective according to authorities. KSA chairman Michel Groothuizen told Dutch industry news outlet Casino Nieuws last October the process to block a site could up to year as individual cases are put to a court.  

“I am jealous of [our] colleagues at the Authority for Online Terrorist and Child Pornographic Material, the ATKM. In some cases, they can have things removed from the internet within an hour,” he said. Of course, online gambling is much lower down the government’s priority list.  

Similarly, Google’s policy changed last September to reject certification applications from gambling operators and affiliates without local licences. The GGL has since reported favourable results from the measure, but DOCV vice-president Simon Priglinger-Simader is not so sure it is working, as operators are able to circumvent the measure.  

“It’s a great step forward in Germany and definitely a best practice example for other markets,” he remarks. “But when it comes to the final impact, we’re not sure yet.”  

Brazil’s black market crackdown 

Meanwhile, in preparation for the launch of licensed online betting earlier this month, Brazil’s government ordered the country’s telecoms regulator Anatel to block over 5,000 blacklisted sites. However, Anatel president Carlos Baigorri cast doubt on the task last November, suggesting the authority lacks the technology and manpower to effectively shut down illegal gambling domains.  

“When you talk about 3,000 [illegal] websites on 20,000 [telecoms] networks, that is 60 million checks. Today we cannot guarantee that the blocking is being carried out,” Baigorri warned in an interview with Brazilian newspaper Folha. “As things stand today we are just mopping up ice, and the blockade we have in place is very ineffective.”  

Brazilian stakeholders have instead put their support behind measures to block payments between players and illegal operators. Hugo Baungartner, CCO of local betting firm Aposta Ganha, insists this is likely the only enforcement action that will prevail in the long term. The Ministry of Finance’s Secretariat of Prizes and Bets has committed to prohibiting unlicensed players from using instant payment method Pix, which is operated by the government’s Central Bank of Brazil.  

“The only way to [block illegal sites] is through Pix payments methods,” Baungartner tells iGB. “Blocking IPs or URLs doesn’t have any effect in the long term. And that’s not something that we, the industry, are telling them [to implement].” 

Pix blocking is the best option

The CCO expects the initiative to have a 70% success rate as blocking Pix payments will prevent illegal sites from taking payments and providing a seamless customer journey. 

Comparable measures in Germany are reaping results says Priglinger-Simader. “We hear from the GGL that they see a real impact in payment blocking. Many of them are not able to receive payments services anymore which means this seems to be the best enforcement option at the moment.”  

Unfortunately, the illicit market is particularly innovative and from this has come the proliferation of crypto-powered betting sites, which authorities are not yet able to mitigate. It will be interesting to see if Brazil’s government is able to ban crypto sites from operating in their licensed market, as they have pledged.  

Repressive and draconian regulations 

Ultimately, enforcement is only one element of the complicated strategy needed. Hurst isn’t convinced. “Enforcement will never prevent black market gambling on its own,” she says.  

“You have to keep the regulated market the most attractive place to bet and game. Draconian measures do not prevent gambling, instead they drive up black market activity.”  

Tightened restrictions in regulated markets, or “draconian measures” as Hurst calls them, are inadvertently aiding the black market’s growth. Taking the Netherlands as an example, a 7.3% gambling tax hike by 2026 will likely stifle the still-young market. And in response to the measure, both LiveScore Bet and Flutter’s Tombola have exited the Netherlands. Stakeholders have warned others will face a similar fate.  

The market is becoming less attractive to both operators and players due to less competition and additional costs. Hoffstedt believes all licensed European jurisdictions [are] focusing too heavily on repressive measures. Neal Manashe, CEO of the publicly listed Super Group strongly agrees, likening these regulatory changes to civilians being punished for the actions of criminals. 

Among these measures are the affordability checks and slots stake limits being initiated in the UK. “It is counterproductive to safer gambling efforts if regulations make the legal sector a less attractive option. We certainly see that with spending checks that include friction – customers simply do not want to hand over private financial information. In that scenario they will either stop betting, or consider shifting to the black market,” Hurst says.  

But she remains optimistic about the actions of the UKGC. “We are really encouraged by what we have heard from the UKGC in recent months on this issue, and we are keen to collaborate.”  

Keeping an eye on your suppliers 

In its October 2024 briefing, UKGC CEO Andrew Rhodes advised operators to carry out sufficient due diligence on their supplier partners, “to ensure none of [them] are directly or indirectly engaged in supporting unlicensed activity”. Both Williams and Priglinger-Simader flag this suggestion as controversial.  

“I think it’s incredibly difficult for licensed operators to bring that pressure to bear on the suppliers,” Williams laments. For his part, Priglinger-Simader says the onus should be on the regulator to ensure suppliers are being compliant.  

Every stakeholder has a role to play in stamping out illegal gambling but there are conflicting views on the role operators, regulators and governments should play in these efforts. It is up to the sector to work together with their third-party stakeholder to determine how to best approach the problem. And at the moment Vali says a constructive effort, one that includes neighbouring sectors like sports, streaming, internet services and digital media, is required. 

“The ecosystem connected to this issue is vast,” Hurst concludes. “We need to keep the pressure on, keep raising this issue in the media and with policymakers, and ensure those other stakeholders are aware they have skin in this game too.”