Offshore Gambling Studies Highly Uncertain, According to Nordic Researchers

A Nordic study analyzing how the offshore gambling market is measured claims that studies are highly uncertain, politically biased, and vary widely depending on methodology.

The study looked specifically at how Nordic researchers have measured the size of the offshore market, primarily in Sweden and Finland. A review of 32 previous studies on offshore gambling found that data sources, definitions, and methods varied widely, leading to unreliable results.

It was conducted by Virve Marionneau (University of Helsinki), Søren Kristiansen (Aalborg University), Tomi Roukka (Finnish Institute for Health and Welfare), and Håkan Wall (Karolinska Institute).

Data Used as Political Tool

Of the 24 studies that estimated the channeling rate of offshore gambling, 19 used data from H2 Gambling Capital, a private market intelligence firm. However, the researchers note that the company does not publicly disclose its methodology and provides different estimates for the same years, which are not always updated relative to past results.

This can lead to reports claiming that the black market is growing faster or slower, depending on how they interpret the data.

The researchers say that “offshore estimates are likely to be political tools.” Gambling industry stakeholders will tailor studies to overestimate the size of the black market, which they use as proof that overregulation is driving users offshore.

When arguing for lower taxes, more marketing opportunities, and reduced social responsibility obligations, licensed companies will claim the black market is growing.

One Swedish study, produced by a company that operates horse racing betting, used web traffic to show the channeling rate, assuming that traffic translated to spending. It also assumed that gamblers on offshore sites spend 10 to 20 times as much as those on regulated sites.

The researchers note, “Whilst spending on offshore gambling websites may be higher than on regulated websites, we found no empirical basis for these estimates nor conclusive descriptions on how these were determined.”

The phenomenon of gambling companies overestimating the size of the black market has been observed in previous research in the UK. In response to an increase in gambling taxes, UK betting companies have frequently argued that this will drive users to offshore platforms.

The study warned about overestimations of the black market, writing, “Overestimations of offshore market shares can deter policy makers from effective policy decisions by generating fear of losing control of the market. These choices can further deteriorate public health and exacerbate harm to consumers.”

Blurred Lines Between Legal & Illegal Operators

Another problem the researchers found was that surveys often found that respondents do not know which platforms are legal and which are illegal. Data collectors would often then exclude these individuals from the results, which impacted the data.

In a survey in Sweden, 17% of people were unsure if they used offshore sites, compared with 3% who said they did. Meanwhile, in Denmark, 8.6% were unsure, compared to 3.8% who reported offshore gambling.

Similarly, a study among college students in Mississippi found many reported gambling on legal platforms, despite the state not allowing online sports betting.

In the Nordic studies, some people reported no offshore gambling but later said they did activities like skin betting, which are not legal in Denmark.

The researchers also added, “(I)t is important to acknowledge that offshore and onshore gambling are not separate market segments as many individuals participate in both.”

More Reliable Sources Required

To more accurately assess the size of the black market, the paper makes multiple recommendations, including:

• Adopt multi-method measurement, not only relying on survey data or revenue analysis
• Include absolute monetary values, not just market shares, to avoid misleading trends
• Improve transparency of data, with providers detailing data collection methods
• Develop and integrate new data sources, for example, bank transaction data
• Standardize methods using scientific best practice, including mandating licensed companies to provide comparable data
• Expand cross-border collaboration to gain a more comprehensive picture of the international market

As the researchers highlight, however, studies are often commissioned by groups with political motivations to show particular results and may therefore not be concerned with accuracy. Accurate studies, however, are required to improve policy decisions and minimize the harm caused by unregulated gambling.