Blurred borders make regulation very difficult
Also, the existence of a regulator that grants an operator a licence does not necessarily mean that a sports betting company is regulated effectively. There are many so-called ‘regulators’ in the industry which are only too happy to take a sports betting company’s money without providing any control over what they do. This is a perfect arrangement for nefarious activity.
“You’d be better off getting a licence from a houseplant,” quipped one gambling industry insider when asked about a sports betting licence from Curaçao.
COVID-related lockdowns accelerated online gambling by 30 per cent, according to a report published in May 2022 by the Asian Racing Federation (ARF), and this astonishing growth has blurred borders to the extent that even the strictest regulators find it an overwhelming challenge to enforce local rules and legislation.
The days when betting meant putting a few banknotes on a horse at the racecourse or visiting the local bookmaker’s shop to fill in a coupon are long gone. Gambling has moved to the virtual world, where tens of thousands of apps and websites offer live, in-play odds on a bewildering number of sporting events, with football very much at the forefront.
Stopping them from doing so is an onerous task. Geo-blocking which is the practice of preventing websites from being operational in certain countries is not a silver bullet, because the use of a Virtual Private Network (VPN) makes it child’s play to circumvent that restriction. Gamblers have long wised up to this.
A transnational business should require transnational regulation, but no such framework exists, not even within institutions such as the European Union.
This explains why an online operator such as 1Xbet, founded by Russian fugitives who fled prosecution for fraud and illegal gambling in their own country and now run their business from Cyprus, can be black-listed in France and Romania and, at the same time, hold a licence delivered by the Spanish Directorate General for the Regulation of Gambling through one of their subsidiaries, Wagerfair SA. The Valencia head office of Wagerfair SA is little more than a mailbox, as Play the Game found out when we visited the site.
Getting a license can be quick and cheap
The criteria which would-be operators must fulfil to obtain a licence also vary wildly from country to country, which explains why the French Agence Nationale des Jeux (ANJ) has granted a mere 17 licences to sports betting platforms as of mid-November 2023. This is exactly as many as the notorious Isle of Man-based white label provider TGP Europe has registered with the UK Gambling Commission. As of October 2023, TGP is one of 878 betting businesses licensed by the British regulator.
So-called ‘white-label’ agencies use their own licences to provide everything a betting brand needs to operate in a specific jurisdiction without exposing itself to scrutiny. This means that whilst the UK Gambling Commission will know who owns and runs TGP Europe, they will have no idea of who TGP Europe’s clients ultimately are, as there is no obligation for the white-label company to disclose the identity of these clients.
Moreover, holding a licence is not the same thing as being regulated. Acquiring one in Curaçao, for example, is cheap, quick, and easy. All it takes is to approach one of four private Master Licence holders and pay for a sub-licence. Specialist agents can take care of the whole process. Due diligence ranges from superficial to non-existent.
One of the companies specialising in the acquisition of licences, curacaolicense.net, boasts that it can obtain a ‘white-label’ e-gaming licence within a week or two, for a cost of under 18,000 euro per annum, when licences can cost up to 25 times that in other jurisdictions.
Officially, there are 529 such active sub-licensees as of October 2023, all of whom are able to display authentic seals of approval from the Curaçao Gaming Control Board. This way they acquire legitimacy in the eyes of their partners and customers, even though they are subject to close to no scrutiny and are operating illegally in their target markets.
A clear definition of an illegal platform
The Asian Racing Federation (ARF), an association which comprises 28 national racing authorities and racing-related organisations from across Asia, Oceania, Africa and the Middle East, has come up with what is perhaps the most clearly defined characterisation of what constitutes an ‘illegal’ platform.
The ARF asks this question: “Does [this operator’s] regulator licence and regulate gambling/betting offered only to persons located in that jurisdiction?” If the answer to this question is ‘no’, then the operator should be considered illegal.
This means that online platforms which operate legally in a licensed, regulated environment such as the United Kingdom are no more ‘legal’ than unregulated, unlicensed bookmakers if and when they allow gamblers to place bets on their websites from countries where sports betting is illegal, or where they do not hold a licence.
Using these criteria, the ARF identified 61 per cent of the 534 betting websites it surveyed for its 2022 report – the most thorough of its kind ever compiled about the industry – as ‘illegal’.
However, this does not prevent many of football’s most prestigious institutions from engaging with euphemistically called ‘grey market’ operators and promoting them in exchange for partnership and sponsorship fees in excess of what legitimate businesses would normally offer. It is true that the amount of money circulating through this illegal gambling ecosystem is so huge as to defy belief.
The trillion-dollar market
How much the illegal sports gambling market is worth today can only be a matter of conjecture, given the opacity of an industry which is both ubiquitous in its presence on football shirts, stadium LED boards, television screens, and social networks, and secretive in the extreme when it comes to revealing who its key actors are.
However, if the very nature of the business makes it out of the question to come up with exact figures, it is possible to extrapolate from intelligence gathered in the course of prosecutions and made public in courts or from the volume of traffic registered on those websites, which can be gauged accurately with the help of open-source statistical tools.
A sizeable chunk of the illegal market operators will still evade detection, as they conduct their business via networks of agents and not through conventional apps and websites. This will encourage cryptocurrency transactions in order to add another layer of secrecy to their operations.
However, the United Nations Office on Drugs and Crime (UNODC) has come up with the astonishing figure of 1.7 trillion USD per annum in its December 2021 report on illegal betting, which is based on contributions from nearly 200 experts in that field and is the most exhaustive research conducted into the scale of this criminal activity to date.
1.7 trillion USD: this is more than three times the estimated value of the global narcotics trade and a third more than what is thought to be the value of counterfeit goods sold worldwide. No other criminal activity generates as much money as illegal gambling does.
This is a point which bears repeating again and again, as this industry benefits from a misconception that if it involves criminal activity, those crimes are by far and large victimless.
Nothing could be further from the truth. Illegal gambling goes hand in hand with fraud, extortion, tax evasion, money laundering, people trafficking, modern slavery, sexual exploitation, physical assault, torture, and even murder.
Four or five people control the market
The huge number of unregulated sports betting websites which can be accessed in a couple of clicks would suggest that this trillion-dollar business is an impenetrable chaos of small-time operations, like a market teeming with a multitude of stalls, when, in fact, the opposite is true.
Small, independent operators do exist, but they control only a negligible part of the industry, which is dominated by a handful of actors. There are perhaps as few as four or five key individuals in charge when it comes to the biggest and most lucrative of all markets in South-East Asia and the People’s Republic of China.
One single Philippines-registered company, BOE United Technology Corporation, owns the trademark for a dozen of the most visible brands which have been or still are partners of clubs such as Bayern Munich, Real Madrid, Chelsea, and Manchester United among many others.
Play the Game has found evidence that Manchester City’s Asian betting partner 8XBet is directly linked with a number of betting brands whose names are made of combinations of numbers. The most visible of these is 6686, which, like 8XBet, obtained a British licence through White Label agency TGP Europe Ltd.