Assessing the Black Market for Online Gambling in Germany: An Empirical Study Based on a Survey among Gamblers

 We are excited to announce that the Blockchain Research Lab is conducting an empirical study to explore the extent of the black market for online gambling in Germany. The study is funded by the Gemeinsame Glücksspielbehörde der Länder (GGL; Joint Gambling Authority of the Federal States). The aim of the study is to shed light on the size and dynamics of this significant yet hidden sector by conducting a survey among gamblers.

Overview of the Black Market for Online Gambling in Germany

Online gambling has become a staple in digital entertainment. Despite the presence of a legal and regulated market, a part of gambling activities in Germany takes place within the black market. This unregulated segment not only poses considerable risks to gamblers but also leads to economic and social costs.

Our study evaluates previous methodologies used to assess the black market for online gambling in Germany, examining their strengths, weaknesses, and validity. Building on these evaluations, we employ a comprehensive survey among gamblers, which enhances our understanding of the black market’s scope and impact within the national gambling industry.

What Defines the Black Market for Online Gambling and Why Is It Attractive to Gamblers?

The black market includes all gambling services operating without a valid license in Germany. These unlicensed platforms offer a broad range of gambling options, including online casinos, sports betting, and poker. German gamblers can easily access these services via the internet, which makes regulating and controlling the black market particularly challenging.

Black market operators frequently bypass key consumer protection measures, such as product regulations, betting and loss limits, or the provision of self-exclusion options, and they typically avoid paying taxes. This gives them a competitive edge over licensed operators. The higher payout rates and broader selection of games available on these platforms often make them appealing to gamblers.

The Social and Economic Costs

The ramifications of the black market are substantial. Not only does it lead to lost taxes and license fees, but it also increases the risk of gambling addiction due to the weaker or no harm reduction and prevention measures on illegal platforms. This elevated risk adversely affects gamblers, their families, and the broader society. Additionally, users of illegal platforms often lack legal protections, making them susceptible to fraudulent practices, such as unfair payouts.

Challenges in Measuring the Black Market’s Scale

Accurately gauging the size of the black market in Germany is complex. While the legal gambling market is thoroughly documented through governmental reports, estimates of the black market often rely on indirect methods such as web traffic analysis or proxy indicators, which are imprecise and yield inconsistent results.

Previous studies offer varied estimates. For example, one analysis indicated that the black market’s share of gross gambling revenue decreased from 22% in 2017 to 6% in 2022. Behavioral data suggests that only about half of the gamblers frequent licensed platforms. Another study, examining tax revenues, noted an increase in absolute terms but a relative decline against total tax income, hinting at a growing preference for black market platforms.

The Complementing of Measurement Methods in Germany

Recognizing the limitations of previous methods, the GGL has highlighted the need for more reliable data on the illegal gambling market. To this end, the implementation of a gambler survey is a complementary and necessary method that aims to provide a more precise measure of the market’s “channeling rate”—the proportion of gamblers utilizing illegal platforms and their spending behaviors compared to licensed options.

A comprehensive survey among gamblers to study the extent of the size of the illegal online gambling market has not yet been conducted in Germany. Our current study follows a “bottom-up” approach, gathering direct data from gamblers to gain deeper insights into their behavior (e.g., frequency, duration, or stakes) and preferences (e.g., platform choice or attention to gambling licenses).

The study aims to provide meaningful insights for developing regulatory strategies that can both improve the appeal of the licensed market and effectively reduce the black market over time. These strategies will help ensure a safer and more regulated gambling environment in the long term.

Looking Ahead

After completing a comprehensive review of existing literature, our study has now moved into the data collection phase. Analyzing these responses will enable us to better understand gambling behaviors and the allure of illegal platforms, informing the development of new regulatory strategies that not only make licensed markets more attractive but also effectively restrain the black market.