UKGC data reveals illegal gambling is often an addition, not a substitute

New transaction-level research offers a rare view into how consumers actually interact with unlicensed operators.

Key takeaways:

• The Gambling Commission used anonymised Open Banking transaction data to analyse consumer behaviour in the illegal gambling market.
• The research found no notable decline in legal gambling activity after consumers were first detected using unlicensed operators.
• The findings suggest illegal gambling is often supplementary to licensed gambling rather than a direct replacement.
• Consumers who used illegal operators were more likely to fall into moderate-risk and problem gambling categories than those using only licensed firms.
• The regulator described the project as a “powerful proof of concept” for using financial transaction data to improve understanding of illegal gambling.

The UK Gambling Commission has published a new study using banking transaction data to examine how consumers interact with illegal gambling operators, providing one of the most direct evidence-based views of the black market to date. The research challenges assumptions that consumers abandon licensed operators when they use unlicensed sites, while also indicating that illegal gambling participants face a higher risk of gambling-related harm.

UK.- The British Gambling Commission has published a new technical report on consumer behaviours and harms associated with the unlicensed market. Following an update in April about trends in the illegal market and our methods for estimating them, this report uses the regulator’s Open Banking dataset to identify specific transactions between consumers and illegal gambling companies in Great Britain and consider the associated harms and financial behaviours.

Whereas much of the available research into the illegal market uses techniques like web-traffic estimates, online surveys and focus groups to provide insight into the illegal market, the Gambling Commission’s latest research uses a large, anonymised dataset of financial transactions from Great Britain residents’ bank accounts. The regulator notes that this has the benefit of enabling direct observation of consumer behaviour in the illegal market, in contrast with most of the available evidence which relies on estimates or indirect reports. 

One particular area where the regulator believes the new research adds to the existing evidence base is the movement between the licensed and illegal gambling markets. 

“When we look at the average numbers of transactions with licensed companies in the months before and after we first detect an individual transacting with an unlicensed operator, we do not see a notable drop in the levels of engagement with legal operators afterwards,” writes Postdoctoral Data Scientist Steven Murphy. “This is consistent with findings in our earlier Consumer Voice research that illegal gambling activity is usually supplementary to legal gambling and challenges the notion that engagement in illegal gambling is a direct substitution of legal activity.

“As this unique cross operator dataset derives from an existing panel of individuals, we can link to the results of surveys, including Problem Gambling Severity Index (PGSI) scores. This enables us to add to the evidence on gambling harms suffered by many people who use illegal gambling companies, considered in the context of their actual financial activity. It may be the first time such an analysis has been completed by any regulator or research team in the world.”

The Gambling Commission compared the distribution of PGSI categories for people who interact with illegal operators with the wider group of people for whom we only detect licensed gambling transactions. The relative sizes of the low risk, moderate risk and problem gambling categories are reversed compared to the population of gamblers with licensed companies. For the regulator, the result implies that consumers who use the illegal market may be at a relatively higher risk of gambling related harm than people that only use legal gambling opportunities.

The report notes several caveats, such as the fact that there may be undetected transactions with unlicensed operators. Moreover the dataset, though large, is not nationally representative, which places limits on the breadth of insight. However, the Gambling Commission believes that the research represents a “powerful proof of concept” for the use of financial transaction data to better understand illegal gambling in Great Britain and elsewhere. 

“It represents a meaningful contribution to our evidence base on illegal gambling that could not be realised from any other evidence source, demonstrating the strength of the Commission’s strategy to draw on the broadest possible range of evidence,” Murphy says. “Moving forward, we will continue our work to expand our use of financial transaction data, remaining open to collaborations with stakeholders in the financial sector and beyond, including banks, payment providers and other organisations with a shared interest in ensuring that gambling in Great Britain is safe, fair and crime free”.

Meanwhile, the Gambling Commission is searching for a new chief executive, after the departure of Andrew Rhodes. The former CEO left in March to pursue a career in consultancy with Hawkbridge. Although his departure was announced eight months ago. In the interim, Sarah Gardner has continued to lead the organisation as acting chief executive. 

A job description issued by Commission chair Ruth Evans outlines a broad set of responsibilities, including leading the regulator’s workforce, working closely with the board and external stakeholders, providing visible leadership on complex public policy issues, and ensuring the Commission remains an influential and trusted authority.

FAQs

What makes this UKGC illegal gambling study different from previous research?

Unlike studies based on surveys, interviews or web traffic estimates, this research uses anonymised banking transaction data to directly observe consumer interactions with illegal gambling operators.

Does illegal gambling replace licensed gambling activity?

The study suggests it often does not. Researchers found no significant drop in transactions with licensed operators after consumers were first detected using unlicensed gambling sites.

What did the study find about gambling harm?

The Gambling Commission found that users of illegal gambling operators were more likely to be classified in moderate-risk or problem gambling categories compared with consumers who only used licensed operators.

Why does the Gambling Commission consider the research important?

The regulator believes financial transaction data can provide unique insights that other research methods cannot. It described the project as evidence that banking data can play a key role in understanding illegal gambling behaviour.

What are the limitations of the research?

The Commission noted that some transactions with illegal operators may go undetected and that the dataset is not nationally representative, meaning the findings should be interpreted with those constraints in mind.