Why overly strict gambling regulations often backfire on the State

The experience of most European countries and the United States convincingly shows that excessive strictness in gambling regulation rarely delivers the expected results. Fighting the shadow market solely by tightening legislation not only fails to reduce it but often does the opposite — it strengthens it. The reason is simple: when the legal market becomes over-regulated, expensive, or inaccessible to players, a portion of the audience inevitably moves to the "grey" or "black" zone, where there are no safety or accountability standards.

As a result, the state loses twice:

• First, it loses tax revenue;

• Second, it deprives citizens of basic protections against fraud, gambling addiction, or manipulative practices.

  
  

Experience of European Countries

Several EU countries have recorded cases where stricter gambling legislation, particularly regarding online casinos, led to growth in the shadow market rather than its reduction. The most notable example is the Netherlands, where the introduction of strict deposit limits, advertising restrictions, and reinforced responsible gaming rules caused a mass shift of some players to unlicensed sites. This is confirmed by KSA reports, which indicate increased traffic to the "top 100" illegal platforms and a decrease in compliance to around 50%.

Research by Yield Sec for the European Casino Association shows that excessive regulation in the EU generally stimulates the illegal segment, which already generates about 71% of online gambling revenue in the region. Further tightening of rules can only reinforce this trend.

Experience of the United States

The U.S. online gambling market, in turn, is one of the largest but also highly uncontrolled: of approximately $90 billion in annual turnover, only $23 billion is legal, with the rest going to shadow platforms. Illegal operators actively bypass banking controls using P2P payments, gift cards, cryptocurrency mixers, and closed chats, making them difficult to track. Despite strong law enforcement, the scale of intervention is limited, as illegal platforms quickly adapt to changes in legislation, and their players continue to place bets.

What This Means for Ukraine

EU countries and the U.S. have already experienced strict restrictions, which, instead of eliminating the shadow market, led to its growth. Ukraine has the chance to learn from these mistakes and build from scratch a modern online gambling sector where operators operate transparently, the state receives predictable revenue, and players have protection and guarantees.

However, this requires moving away from the temptation to fight harder and instead focusing on building institutions, digital systems, and standards that have proven effective in advanced jurisdictions.

The future of Ukraine’s gambling market depends not on the strength of prohibitions but on the quality of regulation. Efforts should be directed toward improving regulatory tools rather than tightening bans — only this can transform the gambling sector from a threat into a reliable source of state revenue.