Key differences exist between regulated and unregulated casinos — particularly in regards to the degree of oversight and protection afforded players. Online gambling has become more convenient for players due to mobile applications, cryptocurrency payments, and digital wallets. With increased accessibility, however, comes an increasing split between the regulated, licensed, and monitored environments and those unregulated or offshore casinos.
Although both types of casinos offer players access to thousands of slot games and provide a means of making instant deposits, the nature of the two environments differs significantly. Players who recognize these distinctions minimize the likelihood of committing financially detrimental errors and enjoy a safer gambling environment overall.
Licenses and Regulation
Regulated online casinos obtain a license from a recognized authority (i.e., a regulator). These regulatory bodies oversee the day-to-day activities of licensed online casinos, enforcing specific operational guidelines; verifying the casino’s adherence to established financial practices; and requiring licensed online casinos to undergo periodic compliance audits. Recognized regulatory agencies include the United Kingdom Gambling Commission; Malta Gaming Authority; New Jersey Division of Gaming Enforcement; and Pennsylvania Gaming Control Board.
Once a casino receives a license from one of these regulatory bodies, it must satisfy three primary criteria. First, the casino must demonstrate its financial stability to support its intended operations. Second, the casino must employ a secure payment system that protects player information. Finally, the casino must utilize certified Random Number Generators (RNGs) to ensure all of its games operate fairly. Regulatory bodies will verify a casino uses a separate account for player funds and business funds to protect player funds in the event the casino experiences financial difficulties.
Other regulatory entities that issue licenses to online casinos include Curacao eGaming and the Kahnawake Gaming Commission. Both of these regulatory entities are considered lower tier than UKGC and/or MGA. Although both Curacao and Kahnawake license casinos have operated in a legitimate manner, each entity has varying degrees of oversight, and therefore player protection standards differ among each jurisdiction.
Unregulated casinos, on the other hand, operate without the guidance of recognized regulatory agencies. Some unregulated casinos claim to be authorized to operate offshore; although the validity of these claims cannot be confirmed. Other unregulated casinos simply disregard the regulatory process altogether. The fundamental difference between regulated and unregulated casinos is accountability. A licensed casino is subject to regulation and is held accountable by regulatory bodies for its actions. Unregulated casinos, on the other hand, are solely answerable to themselves.
Security Features
Security is the next key area of differentiation between regulated and unregulated online casinos. Regulated online casinos are required to implement robust security measures, specifically 128-bit or 256-bit Secure Sockets Layer (SSL) encryption, to protect player information. The same regulatory agencies referenced above periodically inspect regulated online casinos to verify compliance with security and audit standards.
In addition to protecting player information, regulated casinos must comply with Anti-Money Laundering (AML) policies designed to prevent financial crimes and protect player identities. Regulated casinos must implement procedures to verify the identities of players and track player transactions.
Unregulated casinos, although potentially employing similar security features as regulated casinos, are not inspected or audited by recognized regulatory agencies. As a result, regulated casinos can provide players with greater confidence in the security of their personal information.
Fairness Verification Methods
Another critical component of regulated online casinos is the ability to assure players of the fairness of games offered. Independent testing laboratories (ITLs), such as eCOGRA, iTech Labs, and GLI Testing Laboratories, provide regulated online casinos with the capability to test RNGs and certify games as fair. ITLs perform millions of simulations of various game types to verify statistically that long-term payout ratios match advertised figures.
For example, if a slot machine advertises a 96% Return to Player (RTP) ratio, ITLs can verify that the slot machine will return 96% of all bets placed over extended periods of play. Regulated casinos are required to use certified software developers and submit to regular testing. Certifying symbols or seals on regulated casino websites allow players to review independently conducted audit results.
Unregulated online casinos often do not provide independent verification of game fairness. Some unregulated online casinos use reputable software developers, but do so without the oversight of an independent auditing agency. Therefore, players of unregulated online casinos have no way of confirming the payout ratio of games.
While some unregulated online casinos promote “provably fair” systems, which incorporate cryptographic techniques to verify individual game outcomes, these systems may be sufficient to create trust, but ultimately are unenforceable by an independent third party.
Player Protection Measures
One of the largest advantages of regulated online casinos is the ability to protect players. Regulators require regulated online casinos to implement Responsible Gambling Tools that enable players to manage their own gambling habits responsibly.
Examples of Responsible Gambling Tools include:
- Deposit Limits
- Session Time Reminders
- Self-Exclusion Programs
If a player feels his/her gambling is becoming unmanageable, he/she may elect to limit or completely exclude himself/herself from the casino. Regulated online casinos must also take reasonable steps to protect vulnerable players and intervene when players exhibit high-risk gambling behaviors.
Finally, regulated online casinos must protect player funds. Specifically, regulated online casinos must segregate player funds from business funds to ensure that players can access their funds regardless of the financial status of the casino.
Dispute Resolution is yet another critical aspect of player protection. When a player believes a casino has treated him/her unfairly, regulated online casinos provide official complaint channels to regulatory agencies. Regulatory agencies investigate complaints, and where necessary, enforce fair treatment and compensation for players.
As previously mentioned, unregulated online casinos rarely provide effective dispute resolution mechanisms. Players of unregulated online casinos are forced to rely solely on the Customer Service Department of the casino, which is inherently biased toward the interests of the casino. If the casino chooses to ignore the concerns of a player, there is little recourse available to resolve the dispute.
Legal and Financial Risks
Whether offshore casino use is allowed or prohibited in a country is highly dependent on the country in which the player resides. Some countries permit offshore casino usage, while others either restrict or prohibit it entirely.
By playing at regulated online casinos, players ensure that their gambling activity complies with applicable federal, state/provincial, and local laws. Regulated online casinos also implement geo-blocking technology to prevent players from accessing their platforms from restricted geographic areas.
Additionally, regulated online casinos simplify the tax compliance process for players. Regulated online casinos provide documented transaction records and operate in accordance with established tax laws recognized by relevant taxing authorities.
Unregulated online casinos pose significant legal uncertainties for players. For example, players may be subject to potential tax liabilities associated with their winnings. Additionally, financial institutions may freeze player accounts and refuse to release funds to unregulated online casinos if the institution deems the casino to be operating illegally.
Finally, players of unregulated online casinos assume the risk of losing their funds should the regulatory authority decide to shutter the unregulated online casino. Because unregulated online casinos operate without the oversight of recognized regulatory agencies, players of unregulated online casinos have limited recourse to seek redress.
Withdrawal Reliability
Withdrawal reliability is another critical factor that distinguishes regulated online casinos from unregulated online casinos. Regulated online casinos are required to process withdrawals in accordance with clearly defined Terms and Conditions. Regulatory agencies hold regulated online casinos accountable for honoring withdrawal requests.
Therefore, regulated online casinos are incentivized to maintain a reputation of reliability regarding withdrawals. Experienced players often assess regulated online casinos based upon their withdrawal speeds and reliability. Casinos regulated by the Malta Gaming Authority or the United Kingdom Gambling Commission typically process withdrawals within 1 to 5 business days, depending upon the method used by the player to withdraw their funds.
Unregulated online casinos can vary greatly in their withdrawal reliability. While some unregulated online casinos may process withdrawals promptly, others may intentionally delay or deny withdrawal requests. Players may also encounter excessive documentation requests, unforeseen fees, or arbitrary restrictions on withdrawals.
The majority of the time, these issues arise from the fact that unregulated online casinos are not bound by regulatory rules governing payment obligations.
Know Your Customer (KYC) Verification and Identity Protection
The Know Your Customer (KYC) verification process is yet another key distinction between regulated online casinos and unregulated online casinos. Regulated online casinos are required to verify player identity prior to processing any withdrawals. This process is designed to protect players from fraud and identity theft, as well as to assist regulated online casinos in complying with anti-money laundering (AML) regulations.
Typically, regulated online casinos require players to submit documentation demonstrating their identity (e.g. Government-Issued Photo Identification); their residency (e.g. Proof of Address); and payment history (e.g. Payment Receipts).
Although some players view KYC as an inconvenience, it serves to protect both the player and the regulated online casino.
Unregulated online casinos, on the other hand, may either bypass or substantially reduce the scope of the KYC verification process. By doing so, unregulated online casinos may allow for quicker account registration, but increase the risk of player account fraud.
Ultimately, regulated online casinos adhere to KYC verification standards uniformly, while unregulated online casinos may apply KYC verification standards inconsistently.
Comparison of Regulatory Agencies
Not all regulatory agencies are created equally. Each regulatory agency has its own standards and level of enforcement. Regulatory agencies that are considered “high tier” include the United Kingdom Gambling Commission (UKGC) and Malta Gaming Authority (MGA). Both of these regulatory agencies are considered to be highly authoritative and enforce their standards uniformly.
On the other hand, Curacao eGaming and the Kahnawake Gaming Commission are considered to be “lower tier” than the UKGC and MGA. Although Curacao and Kahnawake are considered to be more accessible and less expensive for online casinos seeking licensure, each regulatory agency has less stringent standards and enforcement mechanisms than their counterparts in the UK and Malta.
Players are best served by understanding the relative strengths of different regulatory agencies. Generally speaking, regulatory agencies that issue higher-tier licenses provide better player protection.
Real-World Example: Withdrawal Delayed Due to Lack of Regulation
A real-world example illustrates the difference between regulated online casinos and unregulated online casinos. A player wins $12,000 on a regulated casino licensed by the Malta Gaming Authority. After completing standard KYC verification, the regulated online casino processed the player’s withdrawal. The player received their winnings within 4 business days.
On the other hand, a player won $8,500 on an unregulated offshore casino. The casino delayed the player’s withdrawal, repeatedly requesting additional documentation from the player. Eventually, the casino closed the player’s account, claiming the player violated terms and conditions (although none existed).
The difference between the two examples is the regulatory oversight. In the first instance, regulatory oversight ensured the regulated online casino complied with the terms of the player’s withdrawal. In the second instance, no regulatory agency intervened.
Examples such as this occur frequently enough that experienced players prefer to gamble on regulated platforms.
Identifying Regulated and Unregulated Casinos
Players can determine whether a casino is regulated or unregulated by analyzing several characteristics. These include:
Presence of a verifiable license issued by a recognized regulatory authority (i.e. UKGC or MGA)
Certifications from independent testing laboratories (i.e. eCOGRA or GLI)
Clear and transparent Terms and Conditions
Availability of Responsible Gambling Tools (e.g. Deposit Limits, Self-Exclusion)
Secure Website Encryption and Verified Payment Processing
Collectively, these characteristics provide strong evidence of a legitimate regulated casino.
On the other hand, unregulated casinos often do not display verifiable licenses; offer unrealistic bonuses; and operate under vague and/or unclear policies.
Why Some Players Gamble at Unregulated Casinos
Despite the inherent risks, some players choose to gamble at unregulated casinos for a variety of reasons. These include:
- Offering larger-than-average bonuses
- Fewer restrictions on player activity
- Support for cryptocurrency payments
- Access to offshore casinos when local casinos are restricted
The emergence of cryptocurrency gambling has expanded the number of unregulated casino platforms. Cryptocurrency transactions allow for rapid deposit and withdrawal capabilities without restrictions imposed by traditional banks.
Some unregulated casinos are reputable and maintain good reputations. However, since no regulatory agency monitors unregulated casinos, players are left with no alternative to relying on the reputation of the casino to determine whether or not the casino is trustworthy.
Marketing and Bonus Offer Differences
Regulated casinos must adhere to strict advertising guidelines. Promotional materials, including bonuses, must be presented clearly and realistically. Regulatory agencies prohibit deceptive promotional practices.
Unregulated casinos often engage in exaggerated advertising practices. Examples of exaggerated advertisements include:
Extremely-large bonuses (e.g. up to 500% deposit matches)
These exaggerated advertisements can attract players to unregulated casinos, but often contain restrictive wagering requirements and/or hidden limitations. Experienced players analyze the fine print of promotional materials and realize that size does not necessarily equate to quality.
Regulated casinos tend to focus on sustainable promotional practices rather than promoting aggressive marketing campaigns.
Long-Term Trust and Industry Reputation
Players build trust with regulated online casinos over time through consistent compliance with regulations and treating players fairly. Regulated online casinos invest considerable resources into compliance systems, legal oversight, and player protection.
Players who place value on their security and reliability tend to select regulated online casinos as their preferred gaming option.
Selecting a Safe Online Casino
To protect themselves, players can follow a systematic approach when evaluating a casino to consider. This includes:
Verifying the regulatory agency issuing the license through direct contact with the regulatory agency
Verifying the certification of independent testing laboratories (e.g. eCOGRA, iTech Labs, GLI)
Reading player reviews that focus on withdrawal reliability
Ensuring availability of responsible gambling tools
Avoiding unreasonably large bonus promotions
Following this systematic approach will significantly diminish the risk of losing player funds.
Conclusion Regarding Regulated and Unregulated Casinos
The decision to gamble on an online casino versus an offline casino can be made for many reasons. Ultimately, the decision will depend upon the type of experience desired. However, players who gamble online have the opportunity to select from two vastly different ecosystems — regulated online casinos, and unregulated online casinos.
Regulated online casinos operate in a strictly controlled environment, governed by regulatory bodies that establish and enforce standards for player protection, fairness, and financial security. Players of regulated online casinos have recourse to regulatory agencies for assistance when disputes arise.
Unregulated online casinos operate in an uncontrolled environment. Although some unregulated online casinos provide a fair experience to players, the majority of unregulated online casinos present a myriad of risks, including delayed or denied withdrawals, unfair gaming practices, and uncertainty regarding the legitimacy of player winnings.
