Paper for Entain Says Channelisation Should Be the Test of Gambling Policy

A new paper by the former New South Wales regulator Paul Newson argues that Australia's bans on online casino and in-play betting are handing the market to offshore operators, and that the country's illicit tobacco trade shows how quickly practical control is lost. It was prepared for Entain Australia and New Zealand, and it lands as New Zealand prepares to award its first 15 online casino licences.

• The paper, titled The Price of Losing Control: Channelisation and Regulatory Failure in Online Gambling, argues that the central policy question is not whether to regulate but whether a regime keeps the legal market credible, attractive and enforceable
• It was written by Paul Newson, principal at the advisory firm Vanguard Overwatch and founder of the Regulating the Game conference, and prepared for Entain Australia and New Zealand
• It uses Australia's illicit tobacco trade, now an estimated 80% of total consumption with a cumulative excise shortfall projected at A$65 billion by financial year 2030, as its warning of what losing practical control looks like
• It says New Zealand's incoming online casino regime will be decided by licensing cost, product scope, advertising symmetry and the untested enforcement capability of the Department of Internal Affairs
• Seven recommendations follow, led by a standing black-market dashboard and a published minimum enforcement baseline that commits each regulator to a short list of deliverable disruption actions

Australia's Two Online Prohibitions Are the Paper's Main Target

A research paper published this month argues that the success of a gambling regulatory system should be judged largely on channelisation, the share of play that stays inside or moves into the licensed market, and that on this measure Australia's settings are failing. The paper, The Price of Losing Control: Channelisation and Regulatory Failure in Online Gambling, was written by Paul Newson, principal at Vanguard Overwatch, and prepared for Entain Australia and New Zealand.

"Prohibition does not work," the paper states. "The historical evidence across tobacco, alcohol and gambling consistently demonstrates that where legal supply is unavailable, over-frictional or uncompetitive, consumers do not stop consuming. They migrate to illegal supply." The practical priority for a government serious about harm, it argues, is not to eliminate demand but to "minimise harm by regulating the legal market effectively and channelling consumers away from illegal operators", with tax revenue a secondary benefit.

Australia prohibits online casino and online poker and maintains a ban on online in-play sports betting. Newson argues both prohibitions are "under increasing pressure as offshore operators offer precisely those products to Australian consumers outside any regulatory perimeter". The paper draws on regulatory material, enforcement data and comparative policy from Australia, New Zealand, Great Britain, Sweden, Belgium, Finland and Japan, and it is careful to say that regulation does not by itself create a black market. Illegal markets grow, it argues, when law, market design and enforcement fall out of alignment far enough that illicit supply becomes the easier or more profitable channel.

The Tobacco Case Is Doing the Heavy Lifting

The paper's central comparison is Australia's illicit tobacco trade, which it puts at an estimated 80% of total consumption, with a cumulative excise shortfall projected at A$65 billion, approximately $46.9 billion, by financial year 2030. It adds that the May 2026 federal budget wrote down tobacco excise forecasts by roughly A$8 billion, approximately $5.8 billion, over five years to 2029/30 against estimates made six months earlier, with the 2026/27 forecast alone falling by about 26% in that half-year. The Australian Border Force, the paper notes, has said that curbing the black market is not possible through law enforcement investment alone.

"A regime can continue to speak in the language of public protection while steadily losing practical control of supply, revenue and compliance to criminal enterprise," Newson writes. "Gambling is not the same market, but the policy parallel is difficult to ignore."

New Zealand is treated as the live case study. The Department of Internal Affairs is preparing to issue up to 15 online casino licences, and the paper lists four practical challenges that will decide whether the regime channels players or simply layers licensing over a porous market: the cost and burden of licensing, the scope of permissible products, advertising rules applied asymmetrically between licensed and unlicensed supply, and enforcement capability, given that the department has no established track record in online casino regulation. It quotes Paul James, Secretary for Internal Affairs, telling Regulating the Game 2026 in Sydney that "online casino gambling is already in New Zealand".

The paper also cites Entain's own submission to the New Zealand select committee, which argues for a limited, locally anchored first round of licences rather than issuing all 15 at once, and it flags that submission as an interested-party argument that should be treated as such. Michael Phelan APM, former chief executive of the Australian Criminal Intelligence Commission, is quoted from the conference's black-market panel saying offshore leakage is "not helped by government policy" where fragmented laws and differing turnover taxes create "legislative arbitrage" for price-sensitive gamblers.

Seven Recommendations, and One That Costs Almost Nothing

The recommendations run from measurement to enforcement. They call for a standing black-market dashboard covering legal share of play, illegal-site traffic and search demand, blocking and takedown activity, payment-disruption outcomes, self-exclusion evasion indicators and enforcement speed, published alongside a minimum enforcement baseline. They ask governments to treat alternative payment channels as a priority, noting a figure of 43% of illegal operators accepting cryptocurrency deposits against 5% of legal operators. They point to Great Britain's dedicated Head of Illegal Markets role, £26 million in Exchequer funding over three years and an inter-agency Illegal Gambling Taskforce as the benchmark for enforcement resourcing.

Three further recommendations extend liability beyond the operator, to affiliates, hosts, advertisers and influencers, and ask regulators to name publicly the banks, landlords, payment processors and hosting providers that keep illegal operators running. A sixth asks for a regular review of black-market drivers, including whether existing product prohibitions remain defensible on channelisation grounds. The seventh cuts the other way: black-market arguments should not operate as a blanket veto on consumer protection.

The Paper Anticipates Its Own Strongest Objection, and Answers It

A paper prepared for a licensed operator arguing that prohibitions should be reviewed invites one obvious reading: this is a brief for a bigger market. Newson gets there first, devoting a section to Australian population research showing monthly gambling participation falling from 37.1% to 32.9% between 2015 and 2022 while higher-risk gambling rose from 3.7% to 4.7%, with the sharpest increases among under-35s. The conclusion drawn is that a safer legal market is not the same thing as a larger one. That does not neutralise the commission, and readers should weigh the source, but it does mean the argument has to be answered on the evidence rather than dismissed on the funding line. Regulators who reject the framing still need a better account of where the offshore players went.

The Dashboard Is the Recommendation a Regulator Could Adopt Tomorrow

Of the seven, the standing dashboard is the cheapest and the most awkward. Sweden already treats channelisation as a public-control metric and the Dutch regulator monitors both player-protection outcomes and illegal-market share, so the precedent exists. The discomfort is that publishing channelisation forces a regulator to define success in a number that can fall, and to say in advance what it will do when it does. That is precisely why it is the recommendation most likely to be praised in principle and deferred in practice. Australia's own enforcement record is measured today in sites blocked, which counts activity rather than control.

The Timing Points at New Zealand, Not Canberra

Australia has just passed its biggest gambling reform in a generation, and nothing in this paper will reopen the online casino question there this year. New Zealand is the market where the argument can still change an outcome, because licence conditions, product scope and advertising rules are being set now. The paper's most testable claim is that a regime built with high entry costs, narrow product scope and asymmetric advertising restrictions will produce licensed operators that cannot compete with the offshore incumbents already serving the country. Within about eighteen months of the first licences, New Zealand will have a channelisation number of its own, and it will settle the question better than any submission can.

Channelisation is a useful test precisely because it can be failed. The harder question, which this paper raises and does not fully resolve, is what a government is supposed to do once the number says it is losing.