The “Recovery” of the illegal market

The “Recovery” of the illegal market

In many European countries, starting with Italy, the lockdown of legal gaming has brought with it the growth of the illegal market. Ludovico Calvi’s analysis.

By Ludovico Calvi, Board Director, Lottomatica Betting Ltd & President, Glms


The outbreak of Covid-19 on top of a global health crisis, has brought a series of challenges to the gaming industry globally, resulting in the closure of gaming outlets and a massive loss of retail revenues, which have often not been compensated by the growth of digital gaming.
Criminal organisations have been very active since the outbreak of Covid-19 seizing any opportunity – more so during a pandemic crisis – to further their illicit activities. The growth of illegal gaming activities has been acknowledged by public and private stakeholders during the past 12 months.

The director general of the Italian Gaming Authority – Customs and Monopoly Agency -, Marcello Minenna, at the beginning of this year declared that legal gaming in Italy declined by 25-30% in 2020, against an increase in revenues coming from illegal gaming activities. The closure of gaming locations due to the lockdown imposed by the Government has channeled customers’ demand towards illegal outlets. Since the closure following the lockdown, Copregi – Committee for the Prevention and Repression of Illegal Gaming -, has monitored illegal gaming activities in all regions of the peninsula, and acted in 50 provincial capitals, while ceasing 250 illegal halls and imposing fines for over 1 million euros.
The Italian Gaming Authority is planning a review of the current gaming legislation which will touch both retail and digital gaming licenses with the objective of modernizing its regulatory framework, fighting the increasing illegal market, which has seen a recent resurgence due to the effect of the pandemic, and ultimately implementing higher standards of consumer protection.

In the UK, the regulator is seeking to provide the UK government with the most accurate data on gambling participation and further insights on how the market and consumers’ behavior are changing with the objective to support the government on its ongoing review of the 2005 Gambling Act.
William Hill Group CEO Ulrik Bengtsson has recently warned UK lawmakers that they should be very wary not to open up the door to illegal market operators as the 2005 Gambling Act review is underway.
He referred to the recently published PwC Review of Unlicensed Online Gaming in the UK report that saw a sizeable increase in both the number of players using black market sites (210,000 to 460,000) and the amounts wagered (£1.4bn to £2.8bn) within a two-year period.

In the case of Italy, where the administrative and technical obligations of operators are strict, the PwC report estimated that the share of gaming revenues going to offshore operators is between 12% and 23%.

In the European benchmark, the study also highlights the cases of Norway and France, the countries with the greatest restrictions for authorized gaming companies. It is precisely there that the illegal market finds more fertile ground: for Norway it is estimated that unauthorized operators represent 66% of revenues, while in France the percentage is around 57%.
The growing concerns post government restrictions caused by the pandemic are clearly visible in Germany as well where sports betting revenues fell sharply by 20% in 2020, largely attributed to cancelled sporting events but also closures of betting shops due to the Covid-19 outbreak.
The industry reached its lowest point from March to May 2020 but recorded a noticeable increase in betting activity from June onwards as sports fixtures resumed in the summer. Revenue stabilised by September and has remained consistent since but is still nowhere near the peak of 2019.

During the current lockdown, all 5.000 to 6.000 German betting shops nationwide are closed or have been thrown back to the reduced acceptance point operations. The approximately 25,000 employees are mostly on short-time work and fear for their jobs, the operators for their entrepreneurial existence.

The overall picture is very concerning, and the time has come for public and private stakeholders to sit down at the same table and tackle effectively this disturbing trend, which has been accelerated due to the gaming restrictions during the pandemic. I hope that a sense of responsibility will eventually prevail, and that this scenario from a very real and worrying threat turns into a good opportunity for everyone.