VPN clampdown creates online headache

Virtual Private Networks (VPNs) have long been used by Chinese gamblers as a sort of invisibility cloak, allowing them to walk through the digital doors of offshore online casino, poker, bingo and sports betting sites undetected.

VPNs straddle a legal fence, they are not illegal and many businesses use them legitimately to skirt the country’s “Great Firewall”, which blocks access to material on the internet that is considered politically sensitive.

But they are not explicitly legal either, and the government has increasingly been tightening the noose around the neck of VPNs, particularly when it comes to those being used to access overseas online gambling sites.  

In January, the Ministry of Industry and Information Technology announced developers offering VPNs must obtain a licence as part of efforts to clean up what it called the “disordered development” of online connections.

At the time, this was considered a setback by offshore online gambling operators, but nothing that couldn’t be overcome. Then Apple dealt something of a hammer blow in July when it pulled more than 60 VPNs from its App Store.  

Apple claims developers were not meeting the licensing requirements set out by the government, but others suggest the tech giant has entered self-preservation mode and is protecting profits – much of its hardware is manufactured in China.

It has also just established a new state-of-the-art data centre in the country, which is one of its largest markets for product sales. For Apple, staying on the right side of the government is clearly a priority.

Overseas online casino operators, who target Asian and Chinese players, are undoubtedly licking their wounds right now, but there are still ways for them to overcome the current clampdown on VPNs.

To do this, they need to create smaller, more bespoke sites that cater to specific game verticals, demographics and player types – slots or bingo, casual or hardcore, low limit or high limit, for example.

These sites should be aimed at a very small number of players – between five and 20 for VIPs and larger microsites for the lower-level casual players. By keeping visitation volume low, the traffic simply won’t be detected.

In China, this is the way online casino operators tend to run their sites anyway. It is very different to the model used in Europe, where the market is predominantly regulated and players access a single “mothership” site.

To effectively overcome the assault on VPNs, operators must move quickly. Speed is key; they need to establish hundreds if not thousands of sites in the coming months and ensure traffic is directed to these new portals.

These sites need to be bold, vibrant, and based on different themes in order to tap into the psyche of different players. Themes can cover anything from comics to movies,adventure, and anime.

This is a tall order for offshore online casino operators, but they certainly have the experience to pull it off. The problem is, though, that it is only a temporary fix and it won’t be long before the authorities are chomping at their heels once more.

Online gambling really needs to be brought out of the shadows and into the light. China is a great example of what happens when the activity is not licenced and regulated, it becomes wild and lawless.

This lack of regulation means players are not protected, companies are not held accountable for their processes and procedures, and countries and governments do not collect the millions of dollars in tax revenues they are entitled to.

This is nonsensical when millions of Chinese players are accessing offshore online gambling sites already via a thriving black market, and regardless of whether the government clamps down on VPNs or not.

The illegal Chinese black market for sports betting is estimated at $600 billion, which accounts for about half of the global sports betting market at $1.2 trillion. It’s probably safe to estimate that live dealer and RNG casino’s value in China is in the hundreds of millions if not billions, though smaller than the sports betting market.  

Regulation and licensing ensures online betting sites, and the businesses that supply them, are operating to the highest possible standards. It allows governments to flush out bad actors, and to establish a secure and sustainable industry primed for growth.

It means online casino operators must effectively identify and register players, separate player funds from operational cash reserves, provide tools to allow players to limit gambling or exclude entirely and much more.

Regulation will do more to clean up the “disordered development” of online connections and end “illegal cross-border business issues” than sending VPNs to the gallows. Because with regulation, there would be no need for VPNs in the first place.

More Asian countries, particularly China, need to embrace licensing and regulation. The Philippines is very much a leader in this regard, and is doing a good job of improving its framework and requirements to cover online gambling.

Asia has the potential to become the largest online gambling market in the world, but licensing and regulation is the key to unlocking it.

*Nick Hill is  commercial director at Flow Gaming.