The Illegal Gambling Market: Size, Harm and How It Is Fought

Every regulated gambling market has an illegal market beside it: operators serving the country's players without its licence, paying none of its tax, following none of its rules. It is large, it is growing in some markets and shrinking in others, and it is the subject of more claims and counter-claims than any other topic in the industry. This guide describes what it is, how big it is and why estimates differ, who operates it, the harm it does, the tools used against it, and the arguments the licensed industry and regulators have about it.

What counts as illegal

The illegal market is online gambling offered to residents of a jurisdiction by operators without that jurisdiction's licence, where the jurisdiction either licenses online gambling or prohibits it. It excludes grey markets where the law is unclear (covered in the offshore gambling guide) and it excludes lawful offshore play where a jurisdiction permits it.

Within it, three tiers:

Licensed-elsewhere operators. Companies holding licences in Malta, Curaçao or similar, serving the market as they would any other, with recognisable brands, real games and real payouts. The bulk of the illegal market in most European countries.

Unlicensed sites. Operators with no meaningful licence anywhere, often short-lived, often targeting specific markets with local-language sites, mirror domains and aggressive affiliates.

Criminal operations. Sites run by organised crime, sometimes as fronts for laundering, sometimes as outright fraud (taking deposits and not paying), and in some markets connected to illegal betting rings on local sport.

The first tier argues it is not criminal; the third plainly is; regulators treat all three as the illegal market because from the player's and the state's point of view the effect is the same.

How big it is

Estimates come from three methods and disagree by factors of two or more.

Survey-based. Asking players where they gamble. Undercounts, because players do not know or say whether a site is licensed.

Traffic-based. Measuring visits to known unlicensed sites from a country and inferring spend. Overcounts visits that do not convert; depends on the list of sites.

Payment-based. Tracing transactions to gambling merchants outside the licensed set. The most reliable where card and bank data are available; blind to crypto and informal channels.

The figures that result: single-digit percentages of the market in high-channelisation jurisdictions (Denmark, the UK on most estimates, Ontario by its own account), a quarter to a half in markets with high tax or narrow products (Germany, several Nordic countries, France for casino, Italy for casino), and the majority in prohibited markets. Industry bodies, regulators and academics each publish estimates and each has an interest in the answer, which is why the ranges are wide and the guide gives shapes rather than numbers.

Who runs it and how

The licensed-elsewhere tier is run by ordinary gambling companies making a commercial decision about which markets to serve. Their tools are the industry's tools: platforms, studios, payments, affiliates, sponsorship.

The unlicensed tier runs on white-label platforms that let a site be launched in days, on affiliate networks that sell traffic by country, on mirror domains that outrun blocking, on payment methods that evade merchant-code blocking (crypto, e-wallets, third-party processors coded as something else), and on influencer marketing on platforms that struggle to police it.

The criminal tier overlaps with the second and adds laundering, fraud and, in Asia particularly, links to illegal betting on local sport and to organised crime networks operating across borders.

The harm

To players. No age verification, no responsible gambling tools, no self-exclusion, no dispute resolution, no fund protection, and in the worst cases no payout. Self-excluded and restricted players are over-represented, which means the illegal market concentrates the people the licensed market's protections exist for.

To the state. No gaming tax and no data. In a market with 30% channelisation the state collects tax on less than a third of the activity and knows nothing about the rest.

To sports integrity. Illegal betting markets are where match-fixing proceeds are collected, because nobody reports suspicious patterns from them.

To the licensed industry. Lost customers, and an argument the licensed operators make loudly: that every restriction on them is a gift to the illegal market.

The enforcement toolkit

Payment blocking through banks, card schemes and payment institutions, by merchant and by merchant category code. The most effective single tool against card and bank rails.

Domain and IP blocking through internet providers, by regulator order. Effective at raising friction, defeated by mirrors and VPNs; regulators now block thousands of domains a year.

App store and platform enforcement: removing unlicensed apps, refusing unlicensed advertising, acting against influencers.

Affiliate enforcement: acting against affiliates that promote unlicensed operators, and requiring licensed operators to drop them.

Supplier enforcement: requiring licensed studios, platforms and payment providers not to serve unlicensed operators in the market. This has become the sharpest tool, because the illegal sites cannot function without the licensed supply chain's content and technology.

Cross-jurisdiction pressure: regulators conditioning or refusing licences to operators that serve their market unlicensed elsewhere; information sharing between regulators.

Criminal enforcement: prosecutions and asset seizures, effective against the criminal tier where the people and assets are in reach.

Consumer education: telling players how to check a licence. Limited effect, since value drives choice.

Making the licensed market competitive: the tool that works and is politically hardest, because it means lower tax and fewer restrictions.

The arguments

The licensed industry says every restriction (affordability checks, advertising bans, stake limits, bonus caps, product bans) drives customers to the illegal market and that regulators ignore it. Regulators and public health bodies say the industry exaggerates the illegal market to resist regulation, that the evidence of leakage is weaker than claimed, and that protections should not be set by the threat of offshore alternatives. Both are partly right: the evidence from markets that over-restricted (Germany's online casino regime, several Nordic examples) shows real leakage, and the evidence from markets with strong enforcement shows that leakage can be contained without abandoning protections. The honest position is that channelisation is a variable regulators control through tax, product, enforcement and protection settings together, and that a regime that measures it honestly will get the balance closer to right.

What good measurement looks like

A regulator that wants to know its illegal market's size rather than argue about it triangulates: a payment-data estimate from banks and card schemes, a traffic estimate from a maintained list of unlicensed domains, and a survey run by an independent body, published together with their methods and their disagreements. Denmark, Sweden and Ontario have published channelisation figures on this basis, and the figures have been used to adjust tax and product rules rather than to score points. The measure itself changes behaviour: once a regulator reports channelisation, every policy proposal is argued in terms of its effect on it, which is the right argument to be having.

Frequently asked questions

How big is the illegal gambling market? It depends on the jurisdiction and the method: single-digit percentages in well-designed markets, a quarter to a half in over-taxed or over-restricted ones, the majority where gambling is prohibited.

Are illegal gambling sites dangerous? They offer no protections and, at the criminal end, may not pay out. The licensed-elsewhere tier is usually honest and still unprotected.

What is the most effective enforcement tool? Payment blocking and supplier enforcement, combined with a licensed market attractive enough to compete.

Why do restricted players go offshore? Because self-exclusion, affordability checks and account restrictions do not apply there.

Do regulators exaggerate or understate the illegal market? Each side has an interest; the estimates disagree for methodological reasons as well.

Related on iGaming Times

Offshore Gambling Explained covers the grey and black distinction; the regulatory desk reports enforcement actions; the regulatory map shows each jurisdiction's regime; and the Market Entry and Licensing course covers the licensed alternative.

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Regulation, tax and market figures move quickly, sometimes mid-year. Where this guide gives a number, treat it as a starting point and confirm the current position with the named primary source before you rely on it.