OFFSHORE GAMBLING
Now, Yield Sec, an analytics firm specializing in gaming (as well as other online consumer markets), has come up with a methodology which they claim addresses these issues. Its technical platform uses gaming and streaming keywords and phrases to find all instances of commercial and referral gambling content, traffic, audience and advertising popularity. The results are categorized into legal and illegal groups and split by audience personas (and spend propensities), sports, product or event. Once the data is separated, the platform uses AI, machine learning and expert human intervention to rank and value threats to individual stakeholders and the ecosystem overall. The Yield Sec Matrix prioritizes these threats by revenue, market share, player and audience protection, compliance, responsible gaming and potential taxation at the State and National level, according to the calendar and events cycle. Based on the results, its report, How America Bets Online, provides an interesting and far more actionable picture of the scale of illegal online gambling in the US. The Yield Sec report agrees with the American Gambling Association’s figure that GGR for legal online gambling in 2023 was some US$16.0 billion. However, it claims that this figure was dwarfed by the illegal market which it values at almost US$41 billion accounting for some 70 percent of the total six years after the repeal of PASPA. The report gives a total value for online gaming at US$57.8 billion, up from US$54.3 billion in 2022. The legal market gained the lion’s share of the market growth and even captured US$1.11 billion from the illegal operators, although that was barely 2.5 percent of their business. Legal sites have made biggest inroads in sports betting where the legal market accounts for 35 percent out of a total GGR of US$29.5 billion in 2023. This is consistent with a greater number of states legalizing the sports betting vertical and the consequent growth in the addressable market overall. The type of sports betting activity also supports the argument that the legal market is attracting customers who may not previously have been regular punters. The average minimum deposit with domestically licensed operators was found to be US$10 and the average minimum payout was also US$10, whereas for illegal operators this figure was much higher, at US$100 and US$130 respectively. Whilst not conclusive, the
amounts suggest that a rump of experienced gamblers are yet to be attracted to the legal market. Licensed operators are spending US$ millions on marketing and bonuses, but the data suggests they are missing out on large numbers of higher- value customers. This year will likely see some larger operators moving into profit, but other brands are struggling to establish a foothold. Bringing some of this spending back onshore would mean more of them survive and giving consumers a vibrant and competitive market. Of course, it is not just operators missing out. Money spent with offshore brands is lost to the local economy where it would otherwise be supporting jobs and other commercial activity. Lost tax revenues also mean communities are missing out on funding for local services. The persistence of the illegal market and what can be done about it If it is the case that there is a group of experienced gamblers playing with illegal operators, then it’s unlikely that the industry’s warnings of betting unprotected will have much impact. This group is familiar and comfortable with the illegal market and suggestions their bets will not be honored will probably not ring true. In any case, offshore companies like Bovada, MyBookie and BetOnline are long established and will be trusted by customers. That said, another American Gaming Association report , albeit from 2020, found that more than half of Americans that bet on sports with illegal operators believe they are wagering legally. This will likely have changed in four years, but there will still be an education piece to tackling illegal operators. In some jurisdictions around the world, the licensing authority takes it upon itself to inform the public of the benefits of betting with licensed operators, a far cry from the complete advertising bans seen elsewhere. Certainly, to contemplate, as some states are doing, placing restrictions on all types of gambling advertising at a time when there is a large unchannelized component to the market feels self defeating. Offshore operators pay little or no tax and don’t incur the compliance costs that go with the licensed sector. They are thus at a competitive advantage and can choose to plough
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IMGL MAGAZINE | SEPTEMBER 2024
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