Europe’s Hidden Gambling Crisis: How Tax Policy Created an 80 Billion Euro Black Market
Europe has a massive gambling black market problem. Illegal online gambling generated nearly three-quarters of the European Union’s gambling revenue in 2024. This means most people who bet online use sites that break the law.
The numbers are huge. Unlicenced firms took a 71% share of gross gaming yield from the 27 EU member states and contributed €80.6bn of an €114.3bn marketplace. Legal gambling companies only made about 33 billion euros. The illegal sites made more than twice as much money.
This creates big problems for everyone. Players lose protection. Governments lose tax money. Legal companies lose business to criminals.
Why People Choose Illegal Gambling Sites
People pick illegal gambling sites for simple reasons. These sites offer things that legal ones cannot give.
Illegal sites let people bet without limits. They do not check who you are. You can start betting right away. They give bigger bonuses and better odds. Some even use fake celebrity ads to trick people.
Legal sites must follow strict rules. They check your age and income. They set limits on how much you can bet. They make you wait to withdraw money. Many people find this annoying.
The tax problem makes this worse. When governments tax legal sites too much, these sites cannot compete with illegal ones. Tax rates above 20 percent on GGR would lead to lower channelling rates and lower overall tax revenues. This pushes more people toward black market gambling.
How Much Tax Is Too Much
Research shows there is a sweet spot for gambling taxes. An optimal channelling rate would be achieved with a tax rate of 15–20 percent on GGR. This keeps most players using legal sites while still giving governments good tax money.
Countries with low tax rates keep more players on legal sites. The UK charges only 21% on a point of consumption basis. This helps the UK keep about 90 percent of players on legal gambling sites.
Countries with high taxes lose players to illegal sites. Germany has the highest gambling tax in the world. Casinos are taxed 90% of their gross gaming revenue. This pushes many German players to use offshore sites that pay no taxes.
France and Portugal tax gambling at more than 40 percent. These countries only keep about half their players on legal sites. The rest use illegal gambling websites.
The Real Cost of Black Market Gambling
The black market costs everyone money. Governments across the EU lost €20bn in tax revenue in 2024 due to illegal gambling. This money could pay for schools, hospitals, and other public services.
Legal gambling companies also lose out. For every €1 earned by regulated operators, illegal competitors generated €2.40. This makes it hard for honest companies to compete and grow.
Players face the biggest risks. Illegal sites offer no protection if things go wrong. You might not get your winnings. Your personal data might get stolen. There is no help if you develop gambling problems.
Different Regions Face Different Problems
The black market hits some parts of Europe harder than others. Eastern Europe emerged as the most vulnerable, with 82% of its €35.5bn online gambling revenue derived from illegal sources.
Western Europe also struggles with this problem. Western Europe followed closely, with 72% of the region’s €44.3bn market captured by unregulated operators.
Even the best-performing regions still have major issues. Southern and Northern Europe do better but still lose more than half their gambling money to illegal sites.
How Illegal Sites Attract Customers
Black market gambling sites use smart tricks to get customers. These included fake positive reviews, the use of national flags and bank logos to create false trust, and exploiting social media platforms such as TikTok, Twitch, and Instagram.
Some illegal sites even use new technology to fool people. They make fake videos of famous people saying good things about their sites. They copy the look of trusted banks and government logos.
Sports events help illegal gambling grow. The illegal market grew by 53 per cent compared to 30 per cent in the regulated sector, which Yield Sec said was fuelled by the men’s European Football Championship and the Olympics.
These events bring millions of new bettors who do not know the difference between legal and illegal sites. Many find illegal sites through social media ads during big games.
What Governments Get Wrong
Many governments think higher taxes will fix gambling problems. This idea does not work in practice. High taxes just push people toward illegal sites that offer no protection at all.
The UK learned this lesson years ago. When the UK had lower taxes, it kept about 90 percent of players on legal sites. When other countries raised taxes to 40 percent or more, they lost half their players to the black market.
Some experts now question if tax rates matter as much as people think. The regression analysis found no evidence of a negative correlation between that taxation rates and channelling rates within Europe. This suggests other factors might be just as important.
But most industry experts still believe taxes matter a lot. They point to clear examples where high taxes drove players away from legal gambling sites.
The UK Faces a Big Decision
The UK government now thinks about raising gambling taxes. This could be a big mistake based on what happened in other countries.
Plans by No11 to increase the levy on bookies in line with online casinos could thrust punters towards black market bookies. About 1.5 million British people already use illegal gambling sites.
The UK currently has good control over its gambling market. Most players use legal sites that follow safety rules. Raising taxes could change this and push more people toward dangerous illegal sites.
Industry leaders warn against tax increases. They say higher taxes will not bring in more money. Instead, they will drive business away from legal companies toward criminals.
Why This Matters for Everyone
The black market gambling problem affects more than just gamblers and gambling companies. It touches everyone in society.
When people use illegal gambling sites, they get no help with addiction problems. These sites want people to bet as much as possible. They do not care about player safety or responsible gambling.
Legal gambling companies must follow strict rules about problem gambling. They have tools to help people who bet too much. They work with addiction experts and fund treatment programs.
Illegal sites offer none of these protections. This means more people develop serious gambling problems that hurt families and communities.
Smart Policy Choices
Countries that want to control gambling should focus on smart policy choices rather than just raising taxes.
The best approach includes reasonable tax rates, strong enforcement against illegal sites, and good player protection rules. Countries also need to make legal gambling attractive compared to illegal options.
The optimal tax rates for achieving both high channelization and high tax revenues are between 15-20% of the Gross Gaming Revenue. This range keeps most players on legal sites while still bringing in good tax money.
Countries should also block illegal gambling sites and payment methods. They need to work together across borders since illegal sites operate from many different countries.
What Happens Next
The gambling black market will keep growing if governments make the wrong choices. High taxes and strict rules drive more people toward illegal sites every year.
81 million Europeans, representing 18% of the population, interacted with illegal gambling services during the year. This number will get bigger if nothing changes.
Smart governments will learn from the mistakes of others. They will keep taxes reasonable and focus on making legal gambling better than illegal options.
The choice is clear. Governments can work with legal gambling companies to protect players and collect taxes. Or they can drive everyone toward criminals who offer no protection and pay no taxes.
The Bottom Line
Europe’s 80 billion euro gambling black market shows what happens when tax policy goes wrong. High taxes do not fix gambling problems. They just move gambling away from safe legal sites toward dangerous illegal ones.
Countries that want to protect players and collect taxes need to find the right balance. This means reasonable tax rates, strong enforcement, and making legal gambling better than illegal options.
The evidence is clear from multiple studies and real-world examples. Smart tax policy keeps players safe and brings in steady tax money. Bad tax policy creates black markets that help no one except criminals.
