The UK’s experience warns: attacks on legal gambling strengthen illegal operators

We all clearly understand that in any country the gambling market consists of both a legal and a shadow segment. How “comfortable” illegal operators feel depends on a balanced regulatory policy that gives legal businesses an advantage over the grey market. However, this only sounds good in theory. In practice, achieving this balance is far more difficult than it seems. Even well-developed gambling jurisdictions such as the United Kingdom suffer from the growing strength of illegal operators amid increasing regulatory pressure on the legal sector. That is why Ukraine needs to take into account the mistakes of more advanced countries already now in order to build a more balanced regulatory system.

Recently, one of the top managers of Rank Group - a gambling conglomerate founded in the UK back in the 1930s - speaking at an event organized by the British Gambling Council (BGC), stated that excessive regulatory pressure on legal gambling strengthens illegal operators. According to him, every new restriction and every new tax or levy is a reason for illegal operators to celebrate, because they fully understand that any additional financial pressure on legal businesses creates opportunities for them to profit.

Today, the British gambling industry pays about 40% tax on profits. The country also has significant restrictions on gambling advertising, and the cost of licenses is high. This creates a situation in which it is difficult to operate even for large corporations such as Rank Group. As a result, the barrier to entry for new players in the British market is extremely high, meaning they will look for more accessible jurisdictions.

Another issue concerns how gambling is treated by banks and social media platforms. Due to the archaic nature of the traditional banking system, gambling remains something “suspicious” to it, regardless of whether it is legal or illegal. Moreover, legal gambling often faces even greater difficulties because all its transactions are transparent to the banking system and therefore easier to monitor and block.

Social media platforms also rarely differentiate between legal and illegal gambling, often allowing illegal operators to advertise. And while legal gambling operators must comply with certain advertising rules, illegal operators do not limit themselves in the “creativity” or aggressiveness of their advertising campaigns. As a result, they often appear more attractive to players. Certainly, mechanisms exist to block such advertising on social media, but the process is time-consuming and requires constant monitoring.

This context creates a number of challenges for legal gambling operators, which unfortunately play into the hands of illegal businesses. As a result, instead of using their resources to develop their businesses, legal gambling companies are forced to spend significant time and money adapting to increasingly strict regulatory and tax policies. This leads to an outflow of investment from a particular jurisdiction and an increase in the share of the illegal segment within the gambling market structure.

If the British market with decades of experience faces such problems, Ukraine, with its young industry, certainly cannot afford to ignore them. Excessive pressure and uncertainty place legal businesses in a more difficult competitive position compared to shadow operators, since illegal businesses are not constrained by taxes, licensing requirements, or regulatory rules.

Businesses typically seek clear legislation and reasonable taxes. After all, legal operators are allies of the state in systematically pushing out the shadow sector through regulation rather than through force - an approach that only strengthens the grey segment and increases the amount of revenue the state budget fails to collect.