As Australia implements stricter gambling advertising regulations, concerns arise about players migrating to unregulated offshore sites. The legal market faces challenges as compliance costs and restrictions grow, leading to a significant loss in revenue. The offshore sector, with fewer limitations, becomes increasingly appealing to gamblers, raising questions about the future of regulated betting in Australia.
As Australia tightens its grip on gambling advertising, limiting promotions around sports and influencers, industry experts like Tom Waterhouse are raising alarms about a potential surge in players migrating to offshore betting sites. This shift could amplify the challenges faced by licensed operators.
Legal competitors are already losing a hefty portion of their earnings—over 40 cents of every dollar—to taxes and regulatory fees. In contrast, offshore operators, who face none of these constraints, can offer a wider range of products, more flexible customer onboarding, and diverse payment options. The legal market’s stringent requirements for identity verification and transaction monitoring further exacerbate the situation, as these obligations create hurdles that unregulated entities don’t have to navigate.
The disparity between what legal operators can provide and the allure of illegal offshore offerings is widening. As advertising restrictions tighten, the appeal of these unregulated alternatives grows. This trend reflects a familiar pattern: when the legal market faces constraints, the allure of illegal options becomes more pronounced. For Waterhouse VC, this scenario underscores the increasing value of suppliers who help licensed operators compete effectively.
The scale of the issue is staggering. A recent report by H2 Gambling Capital, commissioned by Responsible Wagering Australia, reveals that Australians are losing approximately AU$3.9 billion each year to illegal gambling sites. The share of total gambling activity captured by the regulated market, known as channelisation, has dropped from 74% in 2021 to just 64% today. During the past two years, onshore betting has seen a 5% decline, while offshore gambling has surged by 14%.
Online casinos, which are completely banned in Australia, are a significant driver of this migration. Despite their illegal status, they now account for 26% of all online gambling expenditure by Australians. Additionally, the prohibition of online in-play sports betting, with only limited exceptions, further incentivizes players to seek options outside the regulated market.
When customers leave the safety of regulated sportsbooks, they enter a world with broader product offerings and greater monetization potential. While licensed markets bear the burden of customer acquisition costs, offshore operators are increasingly capturing the value that slips away.
The direction of policy has been clear since the Murphy inquiry, which called for a comprehensive review of online gambling in Australia. The recommendations included establishing a national online gambling regulator and implementing a phased ban on gambling advertising over three years.
On April 2, 2026, the Albanese government unveiled a significant yet narrower package of reforms: caps and bans on TV and radio gambling ads, restrictions on online advertisements unless users are logged in and over 18, and a prohibition on celebrity endorsements. Additionally, gambling logos will be banned from sports uniforms starting in 2027. However, the government did not adopt the recommendation for a single national regulator, leaving the existing federal and state framework intact while offshore operators continue to operate outside of it.
While enforcement efforts are in place, they are structurally limited. The Australian Communications and Media Authority (ACMA) has blocked over 1,500 illegal gambling websites since 2019, but these sites can easily reappear under different domains. Payment channels often bypass the banking system, further complicating enforcement efforts. As a result, the pressure primarily falls on the visible, regulated parts of the market.
According to H2’s consumer survey, three out of five Australian online players have encountered advertising for illegal offshore gambling, primarily through social media and influencers. Alarmingly, half of those using illegal sites were also registered with BetStop, effectively opting out of the regulated system.
Offshore operators may be excluded from traditional advertising channels, but they have become adept at using the algorithm-driven landscape of the internet. This is where their advantage lies in reaching younger audiences. Gambling streams, highlight reels, and affiliate content proliferate across platforms like Kick, TikTok, Instagram, and X, often disguised as entertainment rather than traditional advertisements.
Kick, a livestreaming platform created by the team behind crypto casino Stake, recorded a staggering 4.5 billion hours of content viewed in 2025, marking a 131% increase from the previous year. The platform's primary audience is aged 18 to 24. Reports indicate that one high-profile streamer received approximately 26,000 Ether from Stake, equating to around US$78 million at the time of transaction. Additionally, Stake incentivized content creators with bounties of $500 per million views, later increasing this to $800 in late 2025.
The reach of these influencers extends beyond gambling content. Casino-sponsored personalities on Kick engage in diverse activities, from fight promotions to casual chats, seamlessly integrating casino branding into their streams. A teenager searching for workout routines or boxing highlights can easily stumble upon a channel promoting casino content. This dynamic illustrates how, in a single social media session, a young viewer can be exposed to more casino branding than a licensed operator might secure in a month of television advertising.
Even before the April 2026 advertising changes, Australia was already a high-cost environment for operators. H2 estimates that various fees—including racing fees, point-of-consumption tax, GST, and corporate income tax—collectively account for about 40% of gross gaming revenue, or 54.4% of net win.
Compliance pressures have intensified as well. AUSTRAC has initiated civil penalty proceedings against Entain for alleged serious anti-money laundering failures, while Crown faced a hefty AU$450 million penalty in 2023. The new advertising restrictions are further constricting the last significant marketing channel available to licensed operators, creating a perfect storm of challenges around tax, regulation, and customer acquisition.
While regulation is contracting the licensed market, demand for gambling remains robust. However, that demand is increasingly shifting to offshore sites that offer higher-margin products unavailable within the legal framework. Licensed operators face an uphill battle: customer acquisition has become more challenging, monetization opportunities are narrowing, and operational costs remain steep, all while offshore competitors enjoy structural advantages.
This evolution is shifting the competitive landscape away from marketing and toward product quality and infrastructure. The real value now lies with suppliers who enhance conversion rates, streamline payments, manage risk, and improve customer retention. This is where the competitive edge is increasingly found. Waterhouse VC recognizes this shift, focusing on the infrastructure that supports regulated operators.
Tom Waterhouse recently discussed the ongoing regulatory struggles faced by the industry.
Waterhouse VC invests globally in both publicly listed and private companies across the wagering and gaming sectors. The fund is exclusively available to wholesale investors.
Since its inception in August 2019, Waterhouse VC has achieved a remarkable gross total return of +3,653%, averaging 75% per annum as of January 31, 2026, assuming reinvestment of all distributions.
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