Asia-Pacific regulators embrace 'channelization' to tackle gambling black markets

A new term has entered the vocabulary of gambling regulators across Asia-Pacific this year: channelization. It measures the share of gambling activity taking place through licensed, regulated operators rather than unlicensed black-market sites.

The concept has circulated in European regulatory circles for years, with mixed results. In Asia-Pacific it is only now gaining traction, according to a commentary by Ben Blaschke of Inside Asian Gaming, published by CDC Gaming. The argument is simple: a clear channelization figure makes it harder for policymakers to claim black markets do not exist when they tighten rules in the name of being tough on gambling.

Why New Zealand is watching the numbers

New Zealand's Department of Internal Affairs (DIA) has made channelization a central justification for its plan to legalise and regulate online casino gaming. At the Regulating the Game conference in Sydney in March, DIA chief Paul James said the goal was to steer players away from unlicensed operators rather than introduce a new activity.

The reality is online casino gambling is part of New Zealanders' life already today, but without protections. The [Online Casino Gambling Bill] will close the regulatory gap. It will make it legal. We're not introducing online casino gambling, but we are making it above board. No longer gray but clear, full of integrity and transparency. What we're trying to do is nudge or channel people away from unregulated, unlicensed, to regulated and licensed.Paul James, chief executive, Department of Internal Affairs

Paul Newson, a former regulator who now runs the Regulating the Game conference, has gone further in a recent research paper, arguing channelization should be treated as a core test of whether any gambling regulatory system is working. He pointed to Australia's illicit tobacco trade, where heavy taxation is widely blamed for illegal cigarettes now accounting for an estimated 80% of all tobacco sold. Australia's opposition has since said it will push to cut cigarette taxes ahead of the next election, a sign the channelization argument is spreading beyond gambling policy.

The Philippines case study

The Philippines offers the most detailed recent example. Reports cited in the commentary say efforts by regulator PAGCOR to lower barriers to entering the licensed market had pushed channelization as high as 75%. That figure fell back to around 50% after the central bank last year ordered e-wallet providers to remove direct links to licensed gambling sites.

Specialist Philippine gambling law firm Arden Consult described channelization as the more important measure when judging the country's gambling reforms, arguing that tighter rules do not make demand for gambling disappear, only redirect it.

demand for gambling does not disappear when rules tighten, so the real question is which channel that demand flows through, platforms that are licensed, supervised and taxed by the State, or illegal sites that are none of those things. If tougher rules merely move players from a supervised site to an offshore one with no age checks, self-exclusion, local dispute process or Philippine accountability, the State has made the legal market smaller without making gambling safer.Arden Consult, Philippine gambling law firm, in a research paper

What it means for players and policymakers

For players, channelization data offers a practical warning: a ban or a punitive tax does not stop gambling, it simply decides whether the money, and the protections, stay within a regulated system. Licensed operators carry age verification, self-exclusion tools and local dispute processes. Offshore black-market sites typically offer none of these.

For regulators and governments, the figures complicate the politics of appearing tough on gambling. A policy that looks strict on paper can, in practice, push players toward unregulated platforms that pay no local tax and offer no consumer protection. The commentary argues that anyone who publicly backs safer gambling while also pushing for prohibition or uncompetitive tax rates risks undermining the very protections they claim to support.

Whether channelization becomes a standard benchmark across Asia-Pacific, as it has unevenly in parts of Europe, will depend on how willing regulators are to publish and act on the data rather than treat black markets as a problem that disappears once a ban is announced.