Australia is tightening the reins on gambling advertising, but Tom Waterhouse of Waterhouse VC has raised a spine-chilling question for regulators—will this restriction push more players towards illegal offshore platforms? His logic is straightforward: for every dollar earned by a legal operator, more than forty percent goes to taxes and various fees, while illegal platforms do not pay a cent; legal platforms are restricted in terms of customer acquisition methods, payment channels, and product types, while illegal platforms operate without any constraints. Advertising was one of the few structural advantages in the hands of the legal market, and now this advantage is being narrowed by a new restriction. More painfully, Australians lose up to 3.9 billion Australian dollars annually on illegal websites, and the market share of legal gambling has slipped from 74% in 2021 to 64% today. Over the past two years, the betting volume of licensed operators has decreased by 5%, while offshore platforms have grown by 14%. In Waterhouse's words, the demand hasn't disappeared, it has just switched tracks.
Why do illegal platforms win? Zero tax burden plus limitless products
The competitive advantage of illegal offshore platforms is almost evident in every line of comparative data. Legal operators in Australia have to bear a whole set of costs—horse racing fees, sports broadcasting rights, consumption tax, corporate income tax, anti-money laundering compliance expenses, all of which roughly consume about 40% of gambling gross revenue, translating to a net revenue rate of 54.4%. In contrast, illegal platforms carry none of these burdens.
The gap at the product level is even more stark. Australia strictly prohibits online casino games and only allows online in-play betting within a very narrow exemption range, while offshore platforms can freely supply these. Data shows that although online casinos are completely illegal in Australia, they already account for 26% of the total online gambling expenditure by residents. Once players step outside the regulated system, they are greeted with a richer product menu and higher per-customer monetization efficiency. The legal market bears high customer acquisition costs, while offshore platforms reap the benefits effortlessly.
PASA official website continues to track the changes in the Asia-Pacific gambling market channels, noting that Australia's predicament is not unique. As regulators continuously increase compliance obligations for legal operators, and cross-border law enforcement lacks sharp teeth, the relative attractiveness of the gray market is continuously magnified. ACM A has blocked over 1500 illegal gambling websites since 2019, but blocked sites can revive with a change of skin, and the flow of funds goes through channels outside the banking system, greatly reducing the effectiveness of enforcement.
Misalignment between advertising bans and algorithmic distribution
On April 2, 2026, the Albanese government announced a new round of gambling advertising restrictions: setting limits on TV broadcast gambling ads, online ads limited to logged-in users who are over 18 and can opt out, prohibiting celebrities and athletes from appearing, banning odds-based ads targeting sports fans, and prohibiting gambling logos in sports venues and on players' and referees' uniforms. The reform will take effect on January 1, 2027.
The problem is that while this set of bans can control traditional media, it cannot control algorithm-driven social distribution. The customer acquisition logic of illegal platforms has already evolved to the next stage—gambling live streams, exciting clip edits, and influencer affiliate content spread across Kick, TikTok, Instagram, and X platforms at a very low marginal cost. For example, the live streaming platform Kick reached a total viewing time of 4.5 billion hours in 2025, a year-on-year increase of 131%, with the largest audience group aged 18 to 24 years old. A teenager searching for fitness tutorials or boxing highlights on their phone can be led by the algorithm to a streamer's page full of casino logos in just two steps.
What's more alarming is the precise design of the incentive system. According to reports, a top streamer received at least 26,000 Ethereum coins from the cryptocurrency casino Stake from November 2021 to March 2025, equivalent to about 78 million US dollars at the transaction rate; Stake also paid editors a bonus of 500 US dollars per million views, which was increased to 800 US dollars by the end of 2025. This revenue-sharing system means that every viral clip is recruiting new users for illegal platforms, while legal operators can't even print a logo on a jersey.
The triple squeeze on licensed operators and the value transfer in the industry chain
Australian licensed gambling operators are currently experiencing a three-dimensional siege: tax burdens weigh heavily, compliance is like walking on thin ice—Entain faced civil penalty proceedings by AUSTRAC in December 2024 for alleged systemic anti-money laundering negligence, and Crown Resorts was fined a whopping 450 million Australian dollars in 2023—while the advertising channels for customer acquisition are further narrowed. The combined pressures continuously weaken the competitiveness of the legal market.
Waterhouse's judgment is notably calm from a capital perspective: as regulation shrinks the boundaries of the legal market, while demand does not simultaneously recede, value is shifting from the marketing end to the product infrastructure end. Those B2B technology providers that can help licensed operators improve conversion efficiency, optimize payment experiences, strengthen risk control capabilities, and retain users are becoming the invisible winners in this game. Waterhouse VC's investment logic is precisely betting on this supply chain—no matter how regulatory winds change, the infrastructure that allows legal operators to survive better in the cracks will always be in demand.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
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