How black market bookies have spread through racing - and even solicit business at Cheltenham

No racing event is more important for bookmakers than the Cheltenham Festival. That truth applies equally to firms operating on the right and wrong side of the law, as became surprisingly and brazenly apparent at jumping's mecca last March.

Most major bookmaking firms have a presence at Cheltenham. Some are there laying bets. Others use the four days to promote their brands through big-race sponsorships or by providing hospitality. Almost all the major firms have close links to a meeting synonymous with the betting industry's household names. But it is also useful to firms whose identities are much less familiar.

That was certainly true last year, as Fitzdares chief executive William Woodhams can testify. While entertaining clients at Cheltenham, it became apparent some of Woodhams' guests were being approached by a representative of a large online operator licensed on the Caribbean island of Curacao but thought to be based in Montenegro.

That business, which is not regulated by the UK Gambling Commission and therefore should not accept UK customers, is ostensibly a cryptocurrency operation but is believed to accept bets and pay out in sterling, including on British horseracing. Multiple sources told the Racing Post that prominent within the organisation is a high-society Englishman with contacts in the sport.

"In the last 18 months we've seen a sustained attempt by offshore bookmakers to engage our customers," says Woodhams. "We even discovered an employee of one operator offering free bets to our members in the Fitzdares Club at the Cheltenham Festival. There is perverse irony that offshore operators can take boxes and entertain at racecourses even though they don't contribute to the data, levy and tax costs that fund the racecourses."

William Woodhams: "In the last 18 months we've seen a sustained attempt by offshore bookmakers to engage our customers"Credit: Astrid Templier

This story is just one example of how the booming black market is no longer the preserve of shady offshore websites or anonymous figures on encrypted messaging apps, but increasingly operates openly, sometimes fronted by well-known figures, offering high-rolling punters, including owners and trainers, a bespoke, unrestricted betting service, the like of which many can no longer access via the regulated market since the advent of affordability checks.

The size of the gambling black market is huge globally, but historically has accounted for a relatively tiny slice of UK betting activity – a consequence of Britain having such a diverse and developed regulated market. However, it is growing rapidly. A PwC report commissioned by the Betting and Gaming Council claimed the amount staked by UK online gamblers on the unregulated market in 2020 had doubled to £2.8 billion in the previous one to two years. For British racing that trend is dangerous, with the BHA calculating that for every £10 million of gross win that moves to the black market, the sport loses £1m in levy funding and around £1.5m in media rights.

Through simple online searches, it is easy to create accounts with offshore operators unlicensed by the UK Gambling Commission. Such sites can be attractive to those finding it hard to bet with regulated bookmakers due to affordability checks or account restrictions.

Many of these offshore firms also explicitly target those signed up to the UK's Gamstop service, which blocks access to bookmakers. A search for 'non-Gamstop bookmakers' brings up 441,000 results on Google, with results including pages titled '31 Most Trusted Betting Sites not on GamStop 2024', 'Legit UK Betting Sites Not On GamStop' and 'Non Gamstop UK Betting Sites 70+ Legit Sites Ranked'.

Illegal betting does, however, come in many forms. Punters pushed away from the regulated market can find other avenues to bet, including via websites such as those found through search engines, but big punters are increasingly being tempted by an informal network of seemingly reputable agents, typically operating on WhatsApp. As well as being unlicensed and thus contributing nothing to British racing or the exchequer, it is believed these are often simply the lowest level in a pyramid of ever increasing liquidity, at the top of which sit gangs involved in organised crime and money laundering.

The scale of the problem

The Hong Kong Jockey Club and the Asian Racing Federation Council on Anti-Illegal Betting and Related Financial Crime have been central to the sport's efforts to learn more about the betting black market, which the HKJC last year described as "the number-one threat to the integrity of racing".

Highlighting that threat and the size of the black market, HKJC executive manager racing integrity and betting analysis Tom Chignell says: "The offering on horseracing by illegal and under-regulated operators has increased in the last few years – the United Nations Office on Drugs and Crime estimates a total of US$1.7 trillion is bet illegally annually. An example of this is that large crypto market-based operators are offering fixed-odds betting on global racing, including British racing.

"Integrity investigations are compromised when operators fail to provide account-level detail with regulators. Betting operators who rely on agent networks to manage their customers often do not actually know who their customers are due to the agents blurring the audit trail between the operator and the customer and lack of KYC [know your customer] processes."

Tom Chignell: "The offering on horseracing by illegal and under regulated operators has increased in the last few years"Credit: Scott Barbour

Some believe the UN estimate now falls far short of reality. Technical intelligence platform Yield Sec says the true figure could be $5.1tn, although working purely to the UN's calculation, it believes the $1.7tn being bet illegally translates to a profit for those operators of $340bn, "dwarfing legal gambling profitability by more than eight times".

Identifying what the black market explosion means in Britain, Martin Purbrick, a consultant for GVS EQ and former director of security and integrity of the Hong Kong Jockey Club, says: "In Britain all consumers have open access to the huge global range of online internet-based betting and gambling websites that have been clearly shown by expert analysts as involving a large amount of unlicensed – and usually illegal at the point of sale – betting operators, many operated by major organised crime groups, particularly in Asia. 

"We know from analysis and reporting from around the world that consumers are attracted to these online illegal betting markets because of price, product and customer experience. This is no different in the UK. The UK, without doubt, has a problem with a growing number of consumers going to online illegal betting operators. Our challenge is measuring this.

"Consumer access to illegal betting is not immediately measurable, largely because online betting customers do not respond honestly to survey questions that ask if they have taken part in an illicit or illegal activity. So we know from the expert analysis and reporting that the illegal betting and organised crime problem is huge, but we have difficulty knowing exactly how many consumers bet in these markets."

Purbrick adds: "If any online betting operator that does not have a licence in the UK accepts bets from consumers in the UK, ie at the point of consumption, then this is surely a criminal offence under the Gambling Act. However, there is no apparent enforcement action by the UK gambling regulator against offshore online unlicensed betting operators and also no major commentary regarding the problem.

"Considering what we know from expert analysis regarding the large amount of unlicensed – and usually illegal at the point of sale – online betting operators, this seems to be a major gap in UK enforcement activity."

Outlining its position, the Gambling Commission claims it always investigates allegations relating to unlicensed gambling platforms and that when assessing a case it will consider whether an operator has sought to actively block UK consumers. The regulator reports it works with various relevant parties, including HMRC, banks, website hosts and payment providers, and states 452 enforcement actions were taken in 2022-23, up from 89 actions in 2021-22. The commission also says it last year referred 7,048 individual website domains to Google with a view to their removal from search results.

'The horse has bolted'

When addressing the Culture, Media and Sport Select Committee in September, Gambling Commission chief executive Andrew Rhodes told MPs the size of the black market is "very small", a comment that shocked other regulators, experts and the BHA.

Gambling Commission chief executive Andrew Rhodes told MPs the scale of the betting black market had been overstated

The Racing Post’s 2023 ‘Big Punting Survey’ found 3.6 per cent of respondents had already used a black market operator in the last 12 months. More recently, the Horseracing Bettors Forum carried out its own survey that showed 73 per cent of the 296 respondents would consider using the black market if bookmakers requested additional private information to allow them to continue betting.

However, evidence for growing black market usage is, unsurprisingly, largely anecdotal. One punter, 'Mike', who has been in regular contact with the Racing Post but wishes to remain anonymous given the subject matter, has already crossed the line having decided affordability checks were an insufferable and unacceptable invasion of privacy.

He says: "Following UK bookmaker restrictions I could only use Betfair, which then asked to see my financial papers to carry on using their platform. I will never hand over any financial documents to any bookmaker and nobody should. I refused to hand over the documents and they closed my account.

"The black market bookie I use is licensed in Curacao and it's fantastic. Now I have no stake restrictions, no affordability checks, good continued deposit bonuses and withdrawals the next day into my UK bank. All you need to do is prove your ID and address on opening the account, which is fair enough. There will, of course, be no UK levy kickback from my bets anymore and British racing will therefore suffer. It's a farce.

"I have no concerns about using the black market and have recommended my black market bookie to lots of friends who were in the same boat as me regarding restrictions and affordability checks."

Mike, of course, should have concerns, given the lack of legal protections that come with using an offshore bookmaker, yet he is one of many who have discovered it is easy to find illegal bookmakers – or to be found.

"I know people who could send me down the black market route but I wouldn't want to do that because it's no good for racing," trainer Ed Bethell told the Racing Post this month. Professional punter Neil Channing has received similar overtures.

Neil Channing: "The number of people who have offered me the black market facility of a WhatsApp bookmaker I vaguely know has doubled"

"The number of people who have offered me the black market facility of a WhatsApp bookmaker I vaguely know has doubled from two to four in the last year," says Channing.

"There are people I know who are using black market bookmakers who probably did that in the past but they are now using them more formally on a day-to-day basis due to affordability checks. I know someone who always used to bet with regulated companies who has no chance of passing affordability checks and can maybe now deposit £100 a month, which equates to his average bet. He is now using the black market.

"Another guy I spoke to has a big Betfair account and found people asking him to place bets for them because they were over their monthly deposit limit. He now lays those bets himself. In effect, he is operating as an illegal bookmaker. That sort of thing must be happening quite a lot.

"Also happening much more is big punters and big punting syndicates trading with each other. Syndicates with ten people who have £1m or £2m between them and bet £10,000 or £20,000 all talk to each other and they all lay each other bets. It equates to illegal gambling and loads of it is happening – and there is more of that now than there used to be."

Woodhams offers one ray of light, saying: "The vast majority of customers who go black return after a year due to some rather shoddy business practices. Who wants to risk their deposits in another jurisdiction?"

Punters do indeed risk losing their money when lodging it with businesses whose very nature means they offer no meaningful player protection or security. Initial join-up offers that seem too good to be true are likely exactly that, while the Racing Post has previously reported that former VIP managers for regulated bookmakers had been approached by black market firms seeking their customer lists.

"For me, the interesting part is shutting it down, although I imagine there is limited resource at the Gambling Commission, BHA and BGC to deal with this," says Woodhams.

"I would suggest the data owners should aggressively police their property and there perhaps needs to be a public consensus that the black market is bad for UK racing. Punters who use the black market are choosing to destroy the sport they love, however valid they may feel their reason to be. Either way, we are tacitly encouraging black market business and then trying to shut the door after the horse has bolted."

One thing leads to another

There is a grim irony that the regulator and government are the architects of this outcome, having introduced a system of affordability checks designed to protect consumers but which has had the unintentional consequence of encouraging punters – both those with and without addictions – towards the black market.

"Affordability checks imposed on betting operators are self-defeating and will inevitably lead to greater long-term levels of gambling harm to consumers," says Purbrick. "This is because the imposition of these checks directly impacts ease of use of online betting by consumers, which is a factor to drive them to online illegal betting websites where there are no checks on customer affordability or often even identity.

"Because online illegal betting operators are not subject to any licensing conditions and regulation, there is immediate potential for far greater levels of gambling harm. I have seen this across Asia, where consumers experience debt from borrowing to fund betting with illegal betting operators. This is a vicious cycle as criminals are often those lending money at extremely high interest rates to fund continued gambling with the illegal market. This is the prospect facing the UK as the affordability checks on legal operators inevitably drive consumers to the illegal markets."

Martin Purbrick: "Affordability checks imposed on betting operators are self-defeating"

Asked if he has a message for those attending Monday's debate, Purbrick adds: "Members of parliament would do well to consider the long-term impact of continually adding regulatory conditions to the legal betting market, when the worse negative social impact comes from illegal and illicit gambling channels. This has not been well considered by the regulator, which is focused on what it knows, licensed betting operators.

"It is important for parliamentarians to remind the regulator to better assess social harm from gambling in parts of the market it does not know, which is online offshore illegal betting operators."

That call would no doubt be supported by British racing's governing body.

BHA chief regulatory officer Brant Dunshea says: "As an active contributor to racing's efforts to monitor and understand the threats posed by illegal and under regulated betting operators, the BHA is conscious that interventions have already led to a migration of customer activity away from legal and well-regulated environments. Not only has this been identified through published international studies, it has also been observed by the BHA in delivering its integrity functions."

One last observation is made by Channing, who references the ongoing decline in wagering on racing, with the Gambling Commission having released figures that show betting turnover on racing fell by £900m in 2022-23.

"There is another point worth making," says Channing. "If current monthly turnover is down 15 to 20 per cent year on year but the Gambling Commission wants to stick to a line that there isn't any significant increase in black market activity, then what they are saying, in effect, is these people have quit betting.

"By definition then they can't be addicts or problem gamblers and thus their actions have simply cut turnover and funding to our sport while failing to achieve their aim. If they want to claim the 20 per cent fall is a measure of the success of implementing affordability, they are either saying these addicts were able to simply quit instantly or they joined the black market."

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