Unlicensed gambling – growing threat or exaggerated myth?
Expert Insight provided by Gemma Boore, an Associate with Harris Hagan

In November 2023, Andrew Rhodes, the Chief Executive Officer of the Gambling Commission, took part in a podcast discussion with The Gambling Files to reflect on and discuss topical issues affecting the gambling industry. Amongst the subject matter covered, Rhodes touched in Part 2: HE REVEALS MORE! on black market activity and the steps the Gambling Commission is taking to disrupt illegal gambling in Great Britain.

This reflected themes in Rhodes’ keynote speech at the International Association of Gambling Regulators (“IAGR”) conference in Botswana on 16 October 2023, in which Rhodes noted whilst illegal online gambling market exists in Great Britain, as it does elsewhere:

“it is not a significant concern and this position hasn’t fundamentally changed. However, that does not mean there is no illegal market or no risk”.

Elsewhere, Lucy Frazer, the Secretary of State for Culture, Media and Sport had recently digested the contents of a letter from eight UK horseracing industry leaders, which reportedly warned that affordability checks will cost racing £250 million in funding over the next five years.

A petition was then posted calling for the Government to abandon the planned implementation of affordability checks because “more intrusive checks triggered at a higher threshold risks bettors moving to the black market where there are no consumer protection or safer gambling tools”. This petition accumulated more than 100,000 signatures and triggered a debate in Parliament on 26 February 2024, which we discuss in our article: White Paper Series: Parliamentary debate on affordability and financial risk checks.

So, is the black market really a growing threat, or an exaggerated distraction? What are the Gambling Commission and the Government doing to curb illegal gambling? And what can businesses do if their proprietary content (intellectual property (“IP”)) turns up on unlicensed sites?

What is black market gambling?

The term ‘black market’ gained popularity during World War II (when common household products were rationed to avoid hoarding) and generally refers to an illegitimate market in which commodities are being traded, exchanged or performed in an illegal manner.

With regard to modern gambling in Britain, section 33 of the Gambling Act 2005 (as amended) (the “2005 Act”) makes it clear that it is an offence to provide facilities for gambling to customers in Great Britain from anywhere in the world, without holding a licence from the Gambling Commission unless a relevant exemption applies. Accordingly, it is common within the industry to refer to unlicensed online operators that illegally provide facilities for gambling to customers in Great Britain, without the appropriate licence or falling under a relevant exemption, as the “black market”.

Why is unlicensed gambling bad?

As Rhodes notes in his keynote speech at the IAGR conference, every gambling jurisdiction in the world has illegal online gambling:

“Whether online gambling is prohibited or not, if you can access the internet, then you will be able to find a way to gamble. We all know this. It’s also worth pointing out at this point that what is an illegal, unlicenced [sic] operator for me in Great Britain may be a legitimate, licensed business for you and vice versa.”

From a consumer perspective, one of the fundamental problems is that black market websites are not always distinguishable from those that are locally licensed – at least to the untrained eye. This means a consumer may be gambling on an illegal gambling site without even knowing it and, in this “Wild West” of the remote sector, unlicensed operators are not constrained by regulation. It is common to see consumer reports of problems, such as the inability to withdraw funds and difficulties contacting support in the event of a complaint. 

What is the Gambling Commission doing?

As Rhodes noted in his IAGR speech, the Gambling Commission typically deploys an “intelligence-led approach” to combat black market operators, which means that ordinarily, they will issue a cease-and-desist letter to require the unlicensed operator to suspend their operations. Failing this, the Gambling Commission will implement “disruption techniques, using its partnerships or relationships with other companies”, which can include:

1. asking web hosting companies to suspend or ‘block’ British consumers from accessing the websites;
2. contacting payment providers to remove payment services;
3. liaising with social media sites to prevent websites appearing on search engines or being hosted; and
4. engaging with international regulators, including by sharing information and raising the prominence of the issue – and Rhodes used the keynote as an opportunity to call for collaboration in this regard.

In addition, Rhodes described in his speech more novel steps that the Gambling Commission is taking to disrupt unlicensed, illegal online operators through collaboration with others:

“…this means we’ve been going further upstream, further away from where our formal powers begin and have been looking to work with others to get between those illegal operators and British consumers and generally frustrate their business and force them out of our market.”

And this has included:

1. working with [Gambling Commission] software licensees to prevent access to popular products when their games appear to be available on illegal sites; and

2. engaging with [Gambling Commission] licensees if we discover their affiliates have placed adverts on illegal sites – ensuring licensees remove advertising and encouraging an assessment of business relationships with these affiliates.

Lessons for licensed operators

If you hold a British licence and are contacted by the Gambling Commission about a black market website, we recommend that you take professional advice. You may also want to consider taking one or more of the following steps:

1. verify that your content is being used / your adverts are being placed on an illegal website. Involve your tech teams as they should be able to confirm whether the content is legitimate or an infringing copy of your IP;

2. check that games / links are accessible in Great Britain and if they are, whether you receive any British traffic from the site in question;

3. identify the operator of the website and/or the affiliate that is placing advertisements on the illegal site;

4. consider whether you have a contractual relationship with the operator / affiliate or any member of its group. If you do not have a direct contract with the operator/ affiliate or one of its group companies, consider whether there may be an indirect relationship (for example, via a content distributor or affiliate program);

5. if a contractual relationship exists, investigate how this arose and review all due diligence you conducted on the third party/ies during the contractual relationship;

6. send a cease-and-desist letter (takedown notice) to all entities that you can identify as being involved; cite restrictions in your contract (if relevant);

7. if the third party does not cease the activity or justify their actions:

• terminate any contracts with them promptly. Note that inclusion of such a termination right is a requirement under Social Responsibility Code Provision 1.1.2 of the Licence Conditions and Codes of Practice;
• consider contacting third parties such as hosting providers, domain registrars and third-party search engine such as Google who may otherwise be able to stop the website being accessible by customers in Great Britain;
• your systems and processes for identifying use of your content / placement of your ads on illegal websites; and
• your standard contracts,

8. engage professionals to review:

to mitigate the risk that your IP rights are exploited illegally in the future; and

9. update the Gambling Commission within the deadline they have set on the outcome of your investigation and the steps you have taken to:

• address the present infringement of your IP rights; and
• mitigate the risk of a similar situation occurring again.

Please get in touch with Harris Hagan if you would like assistance responding to a Gambling Commission request, or if would like to discuss the themes in this article more generally.

The word count of this article has been reduced for the IAGA website. If you would like to read the full version, it is available here: Unlicensed gambling – growing threat or exaggerated myth?