South Africa Faces a “Pandemic” of Illegal Gambling Operators

The South African Bookmakers Association (SABA) is sounding the alarm over a surge in illegal gambling activities, urging regulators to take immediate action against unlicensed operators that are siphoning significant revenue from the legal market.

Illegal Operators Dominate the Market

The legal gambling industry in South Africa is under significant threat from a burgeoning black market. According to a recent analysis by intelligence platform Yield Sec, commissioned by SABA, there are 2,084 illegal gambling operators actively targeting South African consumers. These unlicensed entities account for a staggering 62% of the country’s gross gaming revenue (GGR) for the 2023/24 fiscal year, leaving the legal market with just a 38% channelisation rate.

Sean Coleman, the chief executive of SABA, expressed deep concern over the situation, describing it as a “pandemic” facing the industry. He emphasized the urgent need for gambling regulators to implement measures such as geo-blocking and payment restrictions to combat the illegal market.

Coleman stated: “There’s a frustration from the industry and the operator side with the lack of efforts by some of the regulators to protect our market, and the inefficiencies with the National Gambling Board specifically.”

Under South African law, offshore operators are prohibited from accepting bets from local consumers, regardless of their licensing status in other jurisdictions. However, Yield Sec’s report revealed that only three out of the top ten operators accepting bets from South Africa are licensed by local regulatory bodies, with Hollywoodbets being the only licensed operator among the top three. This highlights significant enforcement gaps that are allowing unlicensed operators to flourish.

Lack of Public Awareness and Economic Impact on Tax Revenue

Coleman pointed out that not enough is being done to educate the public about the risks associated with illegal gambling. He noted that current legislation allows for South Africans to have their winnings confiscated if they bet with unlicensed operators.

“I don’t think the regulators know exactly the extent of—and I’m emphasizing this word—the pandemic that this market faces in terms of illegal operators”, he highlighted.

The prevalence of illegal gambling operations is not only undermining the legal industry but also depriving the government of substantial tax revenue.

Coleman highlighted the economic implications: “We now have facts and figures that show the extent of the money that is leaving our shores. Imagine what our nine local governments could do with an additional R3.5 billion (€183.3 million) in tax revenue.”

Collaborative Efforts to Tackle the Issue

In a bid to address the crisis, SABA has signed a Memorandum of Understanding (MOU) with the Mpumalanga Economic Regulator. This partnership aims to work collaboratively on strategies to combat the illegal gambling market moving forward.

Coleman also expressed intentions to liaise with international gambling regulators to consider implementing geo-blocking techniques focused on the 25 most popular unlicensed sites targeting South African consumers.

Coleman conveyed a sense of exasperation with the National Gambling Board, stating: “We’ve kind of given up on doing anything with the National Gambling Board at this stage because of the frustrations and, I guess, the apathy to a point.”

Despite attempts to engage, the National Gambling Board did not respond to requests for comment.

The Scale of the Black Market

Yield Sec’s data paints a concerning picture of the black market’s reach:

  • 27% of South Africans, amounting to 16.3 million people, placed bets with illegal operators in the 2023/24 fiscal year.
  • 1,134 affiliate sites are actively advertising illegal gambling options to consumers.
  • The channelisation rate has deteriorated, falling an additional 1% between 2022/23 and 2023/24.

Ismail Vali, founder and CEO of Yield Sec, emphasized the role of affiliates in driving illegal traffic: “The illegal traffic is primarily being driven by the 1,134 affiliate sites currently advertising illegal options to consumers. The population impact is high, and there’s a massive footprint across everything from illegal lotteries right through to sports betting and multi-product operations.”

The Role of Illegal Streaming

The rise of illegal streaming services for international sporting events, such as the Premier League, is exacerbating the problem.

“Audiences around the world are not paying for sports in the way that they used to. Recent examples of that will be 1xBet and Stake.com sponsoring illegal streams of everything from movies like ‘Joker 2’ right through to broadcasts of the Copa America, the Euros, the Olympics, so that their logos and click-throughs are embedded within the streams”, Vali noted.

In some instances, illegal operators have overlaid betting odds during live streams, with reports of 1xBet doing so during the Olympics 100m race.

Vali warned that there is “no magic bullet” for eradicating illegal gambling operators, as they are adept at circumventing measures like IP blocking. He stressed the need for a comprehensive approach:

“Everybody looks at the world in terms of ‘I need to solve illegal gambling as a problem.’ Illegal gambling is a multifaceted problem. You need to have a multifaceted approach—it just doesn’t work otherwise.”

A Multifaceted Strategy is Essential

Addressing the illegal gambling crisis in South Africa will require coordinated efforts across multiple fronts:

  • Regulatory Enforcement: Strengthening the capabilities of regulators to enforce existing laws and implement new measures like geo-blocking.
  • Public Awareness: Launching campaigns to educate consumers about the risks of illegal gambling and the legal repercussions of participating.
  • International Collaboration: Working with global regulators to monitor and act against offshore operators targeting South African consumers.
  • Industry Cooperation: Encouraging collaboration between licensed operators, regulators, and law enforcement agencies to share information and strategies.

The proliferation of illegal gambling operators poses a significant threat to South Africa’s legal gambling industry, government revenue, and consumer safety. With over a quarter of the population engaging with unlicensed operators, immediate and coordinated action is required to address this complex and multifaceted issue.