How China’s massive illegal betting industry threatens efforts to make sport key part of economy
Orignal article published in the SCMP, March 07 2016.
Global security expert warns that US$600 billion black market remains ‘driving force’ behind sport corruption
China’s vision of transforming its sports industry into a key part of the economy is under threat from rampant illegal gambling, one of the world’s leading experts in the fight against corruption in sport has warned.
The mainland’s State Council issued a ‘guideline’ – read order – in 2014 titled ‘Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption’. One of its key forecasts/commands was that the country’s sports economy would be worth 5 trillion yuan by 2025 – a 15-fold increase.
Entrepreneurs have rushed to get involved in sports, with billionaires Jack Ma Yun (Alibaba) and Wang Jianlin (Wanda) among the most high-profile, while upstart digital media companies such as LeTV are transforming a broadcasting landscape long dominated by the state’s CCTV.
The massive spending spree on footballers by Chinese Super League clubs this winter is perhaps where the impact of this rush to get on the sports gravy train has been most evident, but Chinese companies of widely varying sizes have been snapping up rights to events all over the world, investing in or buying foreign teams, sponsoring competitions, signing partnerships with sports governing bodies, etc.
Concerns over a hard landing for China’s economy do not seem to have dissuaded them – quite the opposite in fact, with many apparently keen to diversify from their primary businesses ; it seems too that being seen to be involved in making the State Council’s forecasts come true is an important tool in building guanxi with government powerbrokers.
But Chris Eaton, executive director of sports integrity at the International Centre for Sport Security (ICSS), says the country’s gambling black market could be a massive anchor on all those hopes of economic lift-off.
ICSS estimates China’s illegal gambling market as worth US$600 billion a year, or 3.9 trillion yuan – not far off the State Council’s 5 trillion yuan forecast for the country’s entire legal sports economy in 2025.
“China remains the single largest sport betting nation in the world, almost all of it strictly illegal and therefore unregulated,” said Eaton, a former Interpol officer who led Fifa’s fight against soccer match-fixing from 2010-2012.
China remains the single largest sport betting nation in the world, almost all of it strictly illegal and therefore unregulated (CHRIS EATON).
“So long as sport betting in China stays illegal and essentially invisible to serious authority, the vulnerability of the Chinese market to corruption, and therefore to facilitating match-fixing internationally, will remain,” he added.
“The unprecedented clamp-down on corruption in China over the past few years has been highly successful and a credit to those involved. However, sport betting is a global platform and unless you plug all systemic holes simultaneously internationally, prodding one market like Macau simply pops it elsewhere like Manila.”
Gambling in China is strictly illegal apart from sports lotteries, except in Special Administrative Regions Macau and Hong Kong. But even in those two cities illegal betting is rampant, with Patrick Jay, former director of trading at the Hong Kong Jockey Club, estimating illegal turnover in Hong Kong to be worth HK$500 billion.
The ICSS, a non-profit based in Qatar that works with governments, organising committees, governing bodies, etc to “promote and protect the integrity of sport”, estimates that 85 per cent of the Chinese sports betting market is illegal, worth US$600 billion. That accounts for the majority of a global illegal market they estimate at US$750 billion to US$1 trillion.
In one of the most recent cases giving an insight into the size of the industry, police in Guangzhou busted an online syndicate last November which they said generated more than 500 billion yuan in bets, served more than a million registered members across the country and had staff all over Asia. In June 2014, Hong Kong and mainland investigators raided a cross-border syndicate they said took up to HK$500 million a day.
While Eaton hailed China’s efforts to revitalise the sports economy, he warned that such massive figures could not be ignored.
“This enormous and laudable investment [into China’s sports industry] must be actively protected from ethical compromise,” Eaton warned. “Assuming wealth alone will protect you from corruption is a fools’ paradise, with innumerable and increasing examples confirming this reality in international sport.
“Even small examples of corruption, when not managed transparently and strongly can undermine massive amounts of good work and investment. Think tennis. Think athletics.”
Eaton lauded China’s anti-corruption clampdown – which has heavily impacted Macau’s gambling-based economy – but warned that betting remained the “driving force” behind corruption in sport. “I am very optimistic [that the country’s anti-corruption efforts will be successful]. The China government is very serious and committed in the area of anti-corruption generally.
“Nevertheless, an international strategy and and international commitment is the best national protection. China must also squarely face the issue of sport betting, the corruption of which is the driving force behind corruption in sport competition.
“With China’s history in anti-corruption it can lead in fora like the G20 and the OECD to create an international regulatory platform to protect sport and sport betting.”
Eaton says unless governments across Asia and beyond legalise and regulate sports betting, it will continue to be an irresistible source of income for criminals. With the clampdown in Macau, illegal operators have now expanded across southeast Asia.
The absolute size of the sport betting market in southeast Asia is just so big and growing that organised crime cannot resist (CHRIS EATON)
“The absolute size of the sport betting market in southeast Asia is just so big and growing that organised crime cannot resist innovating new ways of defrauding gamblers by corrupting sport competitions and the betting on them,” added Eaton.
“Sport betting must be legalised, or at least recognised by all governments, and then strongly regulated and controlled at the national and international levels ... governments must join up to ruthlessly detect and dismantle illegal and invisible black operators, and to also bring the big under-regulated grey operators working out of safe-havens like Manila, out of the shadows and into transparency.
“Only concerted reform and active enforcement in the sport betting industry will save sport from its associated vulnerability to corruption. Fighting only at the fringes is ultimately doomed.”