If a confrontation ensues at Tottenham, be ready for a battle
Rewritten Piece:
Unleashing the Gambling Jungle
The regulated gambling world finds itself in a bitter struggle. On one side, it battles the mounting burden of stricter regulations. On the other, it grapples with the rise of the unregulated market.
Consumers are abandoning regulated operators, drawn towards offshore platforms that offer the games they crave without the nuisance of regulations. With no restrictions to abide by, these shadowy operators are thriving.
To curb gambling harm, regulators are stripping games of their thrilling elements. This move could sway those least at risk of gambling troubles, leaving the high-risk players untouched.
High rollers, the much-cherished VIP clients, are no longer receiving the special treatment they once did. Operators now view these big spenders as a regulatory risk, preferring to focus on lower-rolling customers.
AML and affordability checks are intrusive, and many customers resent them. Unregulated operators welcome this business without demanding any personal information, as long as the deposit clears.
Evolution, a live casino games provider, has caught the attention of regulators over its business practices. The British Gambling Commission discovered that Britons can play Evolution's products through offshore, unlicensed operators. It remains unclear if Evolution can fulfill its contractual obligations to halt this practice.
Sweepstakes casinos, historical horserace machines, and prediction markets offering contracts on sports events are all unregulated, at least not by gambling authorities.
These unregulated entities represent a threat to the gambling dollar, yielding no tax revenue. By offering higher bonuses, cashback, and lower fees, they outcompete regulated operators.
Regulators are starting to acknowledge the concerns of operators, but they are left with few options.
To combat offshore operators, the first step for regulators is IP blocking. Regulators request or demand that Internet Service Providers (ISPs) block access to specific websites. In practice, this is much like a game of whack-a-mole. The moment an IP address is blocked, the operator simply switches to a different address, making it easy for customers to find.
In Germany, courts have ruled that the gambling regulator does not have the power to demand an ISP block an IP address. This power belongs solely to the ISP regulator (BNETZA), leaving the German regulator without this weapon.
The next weapon in a regulator's arsenal isasking search engines not to provide the URLs of offshore sites in their search results. This can be effective, but a slight change in the operator's site name can bypass this hurdle.
Pressure can be exerted on financial institutions that make up the payment ecosystem for these operators, asking them to block transactions from non-domestically regulated operators. Many of these institutions comply, but numerous payment service providers are eager, for a premium price, to miscode gambling transactions. A visit to an offshore operator's site will reveal that they accept a myriad of payment methods, including Visa, Mastercard, Amex, JCB, payment wallets like Payz, Skrill, Jeton, and a plethora of cryptocurrencies.
Another method is to send a cease-and-desist letter to the rogue operator, with hopes that this will persuade them to withdraw from that particular market. The question is, what happens if the operator ignores the letter?
Kalshi, a Prediction Market, has aggressively fought back against regulators in New Jersey and Nevada sending Kalshi cease-and-desist letters with a lawsuit of its own. So far, six states have sent Kalshi these letters, and Kalshi is adamant they will continue until their regulator tells them to stop.
Kalshi argues that they are entitled to offer what they call "contracts" on sports event outcomes, given that their company and products are regulated by the Commodity Futures Trading Commission (CFTC), a federal regulator. They claim that gaming regulators do not have the jurisdiction to make these demands because Kalshi is not offering bettingβan argument that seems ironic, considering their earlier advertising promoted betting.
Some state attorneys general are following the same cease-and-desist path with sweepstakes casino operators. If these operators do not comply, the cases may progress to state courts, focusing on whether sweepstake casinos meet the legal definition of gambling under state law. The state could also pass a law specifically banning sweepstake casinos.
The Kalshi case is likely to be more complex, revolving around jurisdiction disputes between the state regulator and the CFTC. Given that Donald Trump, Jr. is a strategic advisor to Kalshi and the current chair of the CFTC is Caroline Pham, a Trump appointee, it seems unlikely the CFTC will relinquish jurisdiction anytime soon. This could potentially reach the Supreme Court.
Once upon a time, being a gambling regulator was an uncomplicated job. The focus was on inspecting operators to ensure they were fit to hold a license and auditing them to ensure compliance with the law. Times have changed, and with entrepreneurial ingenuity and advanced technology, the regulator's job has become much more complex.
Now, the regulator's role has expanded beyond enforcing regulations to addressing gambling harm. What constitutes gambling harm? How can we measure it? Which measures should we implement to reduce it? What elements of games cause the harm? If the "cause" is removed, does the harm decrease?
Regulators now grapple with defining what is and isn't gambling and face a growing geographical challenge, as illegal gambling can now be accessed from within their jurisdiction.
Most regulators are funded by the fees they charge operators. It appears unfair that operators are being asked to fund the fight against illegal operators. In other industries, such as alcohol, are breweries and distilleries being asked to fund the fight against illegal alcohol? But I digress.
I recently spoke with a former regulator who expressed that many regulators lack the will to engage in a legal dispute beyond sending a cease-and-desist letter, and they often lack the necessary resources, human and financial, to undertake more. If this is indeed true, it takes only one rogue operator to undermine the regulated industry's stability.
- The bitter struggle within the regulated gambling world includes not only stricter regulations but also the rise of unregulated dotcoms offering casino-games, lotteries, and sports-betting, attracting consumers with their lack of regulatory nuisances.
- Undoubtedly, the unregulated market's appeal lies in the higher bonuses, cashback, and lower fees compared to regulated operators, leading to a significant threat to the gambling dollar and the revenue it generates.
- Regulators are responding to these challenges, employing strategies such as IP blocking, asking search engines to avoid providing URLs of offshore sites, and pressuring financial institutions to block transactions from unregulated operators.
- Despite these efforts, rogue operators continue to find ways to circumvent these measures, using alternative IP addresses, changing site names, or using numerous payment methods, including cryptocurrencies.
- In an increasingly complex regulatory environment, operators and regulators alike face a significant challenge in maintaining the integrity of the gambling industry, particularly as the lines between gambling and other regulatory domains, like prediction markets and sports events, blur.
