Ismail Vali: Moving to a mountain modelBy William - 1 November 2022
Evidencing why gambling is an iceberg marketplace, Ismail Vali, The Founder & CEO of Yield Sec, explained how the industry can get to a mountain model where more of what is seen is the legal marketplace with an active awareness of crime and its influence on the system.
The impact of regulation and the pandemic has pushed more and more people into online gambling. Regulation wants a geo-specific model, but the customers have already seen what’s on the Internet, the genie came out of that bottle 25 years ago. Customers are used to looking for their favourite brands online. So how do you control what they are looking for and where they end up gambling?
We all think we want a mountain shaped market place in which everything you can see of the gaming universe is basically the regulated industry – but that’s not necessarily the case. What we really have are iceberg marketplaces. Whether you are online or offline, people are searching for you online, but what they end-up communicating with and interacting with is illegal online gambling services.
We are looking at an industry characterised by frustrated economic reality, challenged player protection, increasingly politically driven regulation and it’s targeted towards what the regulated industry can see – which is all about the media and political focus.
This focus believes the gambling industry should be named, blamed and shamed – and fined for everything placed at the door of the gambling industry. The reality is an iceberg floating in a sea of criminality and at no point have we been able to see the real scale of the problem.
Legislators, regulators and protection agencies respond to reported crime. What we’ve not been able to see is the extent of the illegal gambling sector. The point of legal gambling is to replace illegal gambling.
All of us know that there is tons of activity on the Internet: UN global figures for sports betting and horse racing alone, sees revenues for legal operations of $40bn, but on the illegal side we have $340bn, so eight times the size in global terms.
There is a huge amount of business out there for the legal operators to move the needle. The issue so far is how does someone get to a legal website? Illegal websites thrive in legal jurisdictions, which take down that website and block its IP, only for it to re-emerge. In Poland they had an issue with an illegal site – Betsson.pl.
The Polish government declared it as the largest black market site operating in the country and chose to block the website. Betsson.pl just changed to Betsson1.pl. The Polish government issued another summons, another court order and this six month process costs $500,000 every time they initiate the procedure – we are now currently at Betsson81.pl. And you can be sure 82, 83 and 84 are ready to go. IP blocking does nothing, it is not how the black market works. Illegals have been ready with a ‘mirror and repeat’ strategy for years.
How do these illegal sites gain access to the customers? Customers don’t know to look for Betsson.81.pl – so how are they being told to go there? Advertising is key. We often here about banks blocking payments, but do we seriously believe that online gambling companies that operate in this illegal market want a merchant account with HSBC?
They won’t approach banks and ask to open illegal accounts. They want to be able to offer customers open access to PayPal transaction routes, and they want to appear to normalise this transaction. So they use PayPal through online clothing, online food sales, or through Uber transactions – which are payment funnels for online gaming – since consumers can’t tell the difference and no one is checking their bank statements.
The result of all this is that it becomes the ‘fault’ of the legal, regulated gambling industry. What politicians hear is the rise in gambling addiction, problem gambling, the loss of life savings and the abuse of players; they blame this on the legal industry, which lead to constant pressure for new laws. It’s a merry- go-round in which politicians create new laws to regulate online gambling, but they are only regulating the visible market – the US$40n, not the $340bn referenced earlier.
A three per cent movement from the illegal market to the legal market would represent a shift of US$10bn. If this money was to shift, around $3bn would be spent on advertising, $2bn on resulting taxation – which is something that people forget; only the legal industry provides good causes funding for sports and society. What we are supposed to do is replace illegal with legal gaming – and crime should not be the thing being funded – our community should be funded by this, which is the point of legal gambling.
We setup a platform called Yield Sec to look into this problem. I don’t want people to ‘tell’ me there is an illegal online marketplace, I want to be able to ‘show’ that it is real. We built a military AI stack to combat what I see this as a commercial insurgency. The same way that terrorist organisations use the Internet to capture the hearts and minds, converting that audience into acts of terror – this is exactly what the online gaming industry is doing. They want the biggest online audience possible to take dollars and cents.
Fundamentally, the shift is from relying upon gaming law to using criminal law to deal with this issue. Once you declare a contained commercial marketplace, once you have licensees, you have paid the cost of entry into that adult Disneyland. You’re suppoed to be the only ones operating gambling services, but the fact is that there are millions of others operating adjacent to you, using the same advertising and audience generating routes.
If you take the fact that every illegal operator is basically stealing regulated revenue and taxation, it bites much harder. From a law enforcement/government perspective, you can now say that everybody on the legal side of the divide is a ‘Batman’ – putting on a cape and fighting crime. It is not about black, white and grey anymore, it is about legal versus illegal.
We have an industry characterisation in which illegal operators say they are operating in ‘grey markets.’ We are a grey market operator because we have a licence in another jurisdiction. We have a licence in Finland, but we don’t have a licence in The Netherlands or Sweden. You MUST have a licence to operate in The Netherlands!
You absolutely have to have a licence to operate in Sweden. If you don’t like that fact as an illegal operator – you are a crook. You should call yourselves what you are – a criminal. And we as an industry should also call them what they are – they are criminals – not grey market operators.
Yield Sec monitors everything in the marketplace, all of the ads, all of the apps, social media and searches. We identify everything and analyse it – in terms of what’s legal and illegal and we prioritise into a threat matrix – 500 people playing illegal Pai Gow poker in New York is a problem, whereas two million placing illegal bets on the Super Bowl is an issue that we need to deal with now.
And enforcement is about enabling content removal for the benefit of all legal stakeholders. For the illegal part you need to be able to go to the social media platforms and tell them to remove this content, as it affects the ecosystem as a whole.
For one individual operator, such as BetMGM – your affiliates are running illegal ads because they are not obeying the rules. You need to remedy that as affiliates aren’t licensed in most places today. You as an operator will be penalised for what they’ve done in your name, so remove that content too.
In Switzerland, for example, our system produces many different views of the market. We visualise the marketplace, which is changing every hour of the day. It shows the legal position, which is the view in the minds of the government, but this is completely different when you add in the black market.
If you add legal, organic illegals and paid traffic, Bet365 immediately appears in the chart as the ‘dark heart’ of Switzerland. Swiss law says that to be a gambling customer making online gambling and sport betting bets, you’d need two separate accounts, according to the law. Bet365 know this, so they position themselves in the middle to offer customers convenience. You can have one account with us and from a customer perspective, this is not illegal – it’s just what’s available on Google.
Sports betting operators are largely left to operate this way because going after them is expensive, and if black market brands understand one thing, it’s pay the least to make the most. So they have gone after the new online operators in Switzerland in 2019, as they are weak and new – which means they can attack them.
This is what happens when you bring in affiliates – affiliates are SEO optimised and are under less threat – as they don’t need to establish transactional routes. What they need to do is get to the audience.
Affiliates noted the weakness between legal casino accounts and sports betting accounts, and they started attacking the individual brands. MyCasino, StarVegas, SevenMelons – all of these legal brands are being feasted upon, because in Switzerland, everyone went from having names such as ‘Casino Baden’ as a brick and mortar business, to Jackpot.ch.
The switch in brand was a move to cover all of Switzerland, but what happened is that the brick and mortar brands were being used illegally online. You click on CasinoBaden.online, but it’s not Casino Baden. It is a bunch of black market operators.
We have now got to the stage in which Switzerland is such a lucrative market for black market operators that they are queuing to get into the country – that’s how attractive the marketplace is right now. Switzerland has become fundamentally compromised by illegal insurgents. And having broken into the online gambling market they are able to cross sell, by giving online gambling customers free bets on their sports betting platforms.
You have to know and understand the scale of the total marketplace. You need to be able to stop, as an individual brand, what is basically funnel pickpocketing. If you are MyCasino.ch, you need to make sure that you are not being picked upon for your online terms and your brick and mortar terms. Find out where the black market and the affliates are sitting in your chain. You need opportunities against all competitors, both legal and illegal ones. Yield Sec give you a picture of everything that is going on.
The legal ones are interesting to you – and the illegal ones are dangerous to you. You can then remedy and optimise your marketing – are you buying the right key words, key terms, search words, or are you just paying too much for them?
What we’ve found in the case of Switzerland, is that all the legal casino brands are just kicking each other in the teeth for the same customers every day. And the illegal guys know that and they are spending less money to get to the same audience. They are activating those customers for longer and for more money.
We have one view of the marketplace at Yield Sec, we know how much traffic the legal brands have, and we know how much traffic the illegal brands have – so we get to a value per visit which comps over to GGR. We can’t see black market value, we can’t hack their books. Instead, we use widely available data to extrapolate from our systems a clear view of what the customer is worth in the overall marketplace.
This industry is beset by crime. We can show you what that crime means for your business on a daily basis, a product basis, a match-by- match and event-by-event basis, and show the relationships between all of the stakeholders; law enforcement, treasury department, competitor brands and by working together holistically we can remove crime from the ecosystem.
What we have today is the iceberg marketplace, but we want to get to mountain marketplace, where more of what we see is the legal marketplace and we are actively aware of crime and its influence on the system each and every day.