'A genuine menace' - is the threat from the black market being taken seriously?

A growing threat or an exaggerated distraction? Views on the dangers posed to the UK by the gambling black market vary wildly but it is one of the main talking points as the countdown continues to the publication of the government's gambling review white paper.

A PwC report commissioned by the Betting and Gaming Council claimed that the proportion of UK online gamblers using unlicensed operators in 2020 had increased to 4.5 per cent – or around 460,000 people - from 2.2 per cent over the previous one to two years. The amount staked had doubled to £2.8 billion.

Neil McArthur, the then chief executive of the Gambling Commission, poured cold water on the report, saying it was "not consistent with the intelligence picture" and that the impact of the black market "may be being exaggerated".

That was a view echoed by a number of MPs in a parliamentary debate about gambling in March, among them Gerald Jones, who said: "I have heard several times that gamblers will be driven to the unregulated black market. My response is simple: I do not believe it."

However, investigations by the Racing Post last year found that black market operators were indeed targeting UK customers.

Former VIP managers from legitimate firms spoke of being contacted by black market operators for their customer lists, including those who subsequently self-excluded through the Gamstop scheme.

It was also found that there were dozens of websites preying on such customers by actively advertising themselves as routes for circumventing Gamstop.

It is understood that the Gambling Commission has been engaging with Google to tackle the issue of black market websites found on the search engine

Since McArthur's departure last year there has been more recognition of the threat of the black market from the Gambling Commission but few details of what action it has taken and what resources it is devoting to the issue.

McArthur's successor Andrew Rhodes did acknowledge a concern over the black market – "and one that the commission also tackles day in, day out" – in a speech last month, adding that extra resources were being deployed to tackle it.

However, he added: "This is not the overwhelming risk it is sometimes painted to be, nor can it be the excuse for not addressing some of the extremes we see in the regulated industry."

The most recent figures for the scale of Gambling Commission activity to combat illegal gambling websites comes from its compliance and enforcement report for 2020-21.

During that period the regulator said enforcement identified 99 unlicensed remote operators transacting with British customers, although that figure included multiple reports on the same illegal website.

As a result 14 unlicensed operators blocked British customers, ten had their IP address blocked, a further 17 were removed by their host or owner and three websites were suspended.

The figure of 99 was a near 68 per cent increase on the previous year's 59 and more than tripled the 31 recorded in 2018-19, but it is not clear whether that is the result of increased risk or an increased interest in the area by the regulator.

More clarity about the scale and threat of the black market may emerge when the government's gambling review white paper is published.

Government spokesman Lord Parkinson of Whitley Bay told Viscount Astor in a written answer in March that the review had called for evidence on the black market, and would consider the PwC report as part of that.

He said the commission would use some of the additional income it is receiving from a recent fees uplift "to increase its ability to tackle illegal gambling", adding: "The commission is aware that some illegal websites are targeted at people who experience significant harms from their gambling and self-excluded gamblers. The commission is particularly focused on identifying and disrupting these illegal operators."

It is understood that the Gambling Commission has been engaging with Google to tackle the issue of black market websites found on the search engine which advertise themselves as not being part of the online self-exclusion scheme Gamstop.

The commission will also set out where it sees the need for additional powers in the gambling review.

"We recognise the concerns which exist around the black market, but maintain our position that this needs to be balanced with the risks in the regulated gambling sector and so we will continue to maintain our escalation approach which includes disruption and enforcement," a Gambling Commission spokesperson tells the Racing Post.

"Illegal gambling was under consideration by the Gambling Act review, the outcome of which is awaited, but the commission has consistently said it will not delay taking action where we can, until this is finalised. To that end we do anticipate increasing available resource in this area."

The spokesperson adds: "The commission continues to not only actively engage, but drive relationships with other law enforcement bodies in the UK as well as internationally, activity which will continue."

However, Betting and Gaming Council chief executive Michael Dugher does not believe the threat of the black market is being taken seriously enough.

"Black market gambling is a growing threat, a genuine menace, and it’s only going to get worse," he argues. "I don’t think it’s taken remotely seriously. The idea that there’s a quick fix, or technological solution here, is just naive."

BGC chief executive Michael Dugher on black market gambling: 'The idea that there’s a quick fix, or technological solution here, is just naive'

The BGC has pointed to PwC's findings about the scale of unregulated gambling in Europe such as Norway, where the introduction of a state monopoly led to 66 per cent of stakes being placed outside the regulated market.

Dugher adds: "The BGC is not crying wolf, it’s real, and there’s a lack of really clear-eyed analysis of the threat the black market poses."

Nevertheless, there are those in the political sphere who believe the gambling industry is using the black market as a distraction to prevent reform.

They include former Conservative Party leader Iain Duncan Smith, who said last month: "If we are worried about that black market, we should simply seek to reform it."

Dugher gives that idea short shrift.

"I know some of these issues are complex, but that’s no excuse for intellectually lazy nonsense," he says.

"You can’t 'reform' the black market, you can only stop people being driven to it. And that means keeping them gambling in the regulated market. That’s not an argument for no change. It’s an argument for getting changes right."

The Gambling Commission was also criticised over its attitude to the black market by Viscount Astor in a House of Lords Grand Committee debate in parliament last month.

He described the black market as "a serious concern" as problem gamblers barred from legal sites "move seamlessly to illegal ones which have absolutely no protections – no player protection, no anti-money laundering, no tax collection and no sporting integrity".

He went on: "What is even more worrying is that the Gambling Commission seems to concern itself only with legal operators and ignores the evidence of the problem of illegal gaming.

"It may be that the commission does not see its remit extending to illegal operators based either in this country or outside it. If that is the case, its remit should be extended and it should have those necessary powers."

However, Dugher does not believe the regulator can cope with the black market.

“Of course not," he says, "and throwing money at the GC or giving them more powers won’t in itself fix the problem. With the greatest respect to the GC, there is no 'enforcement solution' that can fix the black market. Asking a UK regulator to be the global police of the internet is doomed."

Professional punter Neil Channing believes there are reasons for the Gambling Commission to downplay the impact of the black market.

He says: "When they talk about the black market, which I think is very underestimated, it's very difficult for the Gambling Commission to make the argument they are struggling along on £25 million policing a £4 billion industry if they also then have to make the argument that they are unable to deal with the black market.

"If they are seen to be bad at their job it's very hard for them to ask for more money."

And while illegal offshore websites appear to be targeting British punters, there are also issues closer to home.

"It's clear that the black market has increased and it is actually quite hard to police," Channing says.

"In the old days the black market would be pub bookmakers generally and that's pretty easy to police. You just need someone to grass them up and you do a raid.

"When it's all happening over WhatsApp and the money is settled up in the car park or with Bitcoin or whatever, it is really hard to clamp down on that."

While the industry has argued that reforms such as affordability checks will drive customers to the black market, Channing believes restrictions on punters have also had an effect.

"There's a very hidden black market," he says. "This is a conversation I've had with a dozen people in the last two years where they have said my Betfair account went, I couldn't pass the test, so I just send my bets to so and so and he puts them on his account.

"When you speak to so and so they will say I have got five people doing that now, most of them are just doing their money so I just lay them. That happens all the time."

Dugher says he agrees with the Gambling Commission that the black market "is absolutely not an excuse for inaction by any regulated operator".

He adds: "We’re not advocating for no changes – we’re asking for the right changes. We want the industry, jobs and most importantly punters, protected in a vibrant, competitive and well-regulated market.

"Black market gambling will continue to grow if the government gets it wrong in the white paper. It’s as simple as that. A growing black market is a threat to jobs, tax revenues and more importantly it is a threat to safer gambling. Ministers need to wake up."

When the gambling review white paper is published it will become clearer whether ministers are awake to the black market's threat.

Don't miss part two of our special report when Peter Scargill reveals the explosive truth behind how easy it is to gamble via the black market, available on racingpost.com on Monday evening and in Tuesday's newspaper.

Read more:

Revealed: how black market betting sites are preying on gambling addicts (£)

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