The growth of illegal online gambling as an unintended consequence of digitalisation

In the modern world, it is hard to imagine life without technology. Smartphones, the Internet, and mobile applications — all of these have become an integral part of our everyday life. The availability of high-speed Internet and the continuous digitalisation of services contribute to improving the quality of life, economic development, and the creation of new opportunities for businesses and consumers. At the same time, technological advances have opened the door to new challenges and risks, including in the gambling sector. One of the main challenges is the simplification of operating illegal gambling platforms, which creates serious problems for both legal companies and players.

It is the rapid development of technology and the transition of the gambling business to online that have created favourable conditions for illegal operators. The main reason is that the online segment cannot be controlled by traditional methods — and illegal platforms are taking advantage of this. Due to the "uncontrollability" of the Internet, traditional regulatory mechanisms such as regulatory restrictions, licensing requirements, or law enforcement oversight do not effectively apply to them. This allows illegal gambling organisers to have unimpeded access to players 24/7. In addition, it is very difficult for the regulator to control this interaction with players, because illegal operators do not report to them and operate in the informal sector. Such activities lead to significant financial losses for the state and undermine confidence in the legal gambling market.

Last year, a study by the European Gaming & Betting Association (EGBA) showed that about two-thirds of online gambling revenues in the European Union are generated by illegal operators. The total volume of GGR (gross gaming revenue) from illegal companies in the region accounted for almost 71% of the entire market — more than 80 billion euros out of 114.3 billion. The most serious situation is observed in Eastern Europe, where illegal operators receive up to 82% of gambling revenue. In Western Europe, this figure is about 72%; in Southern Europe — 58%; and in Northern Europe — 55%. This trend highlights the widespread activity of illegal operators across Europe and the urgent need for a comprehensive response to combat this phenomenon.

The growth of the illegal gambling market in the United States is also concerning. Over the past three years, it has expanded by 22%. According to a study by the American Gaming Association, illegal operators control 31.9% of the country's total gambling market. Interestingly, the share of illegal activity in online betting and online casinos has decreased, while the share of illegal slot machines has increased by 7%. This demonstrates the high adaptability of illegal operators and, consequently, underscores the need for regulators to develop new and more effective methods to combat them swiftly.

Obviously, in all jurisdictions, the issue of combating operators is one of the main tasks for national regulators. To address it, new mechanisms are being created to speed up the process of responding to and blocking the operation of black online platforms. To combat this phenomenon more effectively in Ukraine, the state agency PlayCity has launched a system for tracking illegal websites. In just two weeks of operation, the system processed 236 applications and blocked 145 websites. The blocking process takes up to 9 days. First, PlayCity makes a decision, then the National Commission for the Regulation of Electronic Communications informs providers, and they are obliged to close access within 3 days.

If providers ignore their obligations, users have the opportunity to file a complaint through the system, which helps to increase control and accountability. In addition, there are plans to use artificial intelligence to automate the detection and blocking of illegal websites, which will significantly enhance the effectiveness of efforts to combat the shadow segment of online gambling.

The example of PlayCity is particularly noteworthy, as the fight against illegal operators in the online segment requires innovative solutions, such as the use of AI and process automation — especially since illegal platforms quickly adapt to new enforcement methods. Such solutions will help make the legal gambling market more secure and protect users from engaging with illegal platforms.