Franchise Wars – How Citibet and Asia’s Other Biggest Bookmakers have ‘McDonaldised’ Illegal Betting

By James Porteous, Research Head, ARF Council on Anti-Illegal Betting & Related Financial Crime

Illegal horse racing betting exchange Citibet is growing its potential market even faster than in previous years due to technology changes that have allowed the operator to expand access more widely across the Internet. Citibet is now franchised across literally thousands of third-party illegal betting websites via a software “plug-in”, which makes Citibet betting markets and pirated live streams on global horse racing available to any illegal bookmaker.

“Franchisees” can install this software by copy-and-pasting a few lines of code in the back-end of their website, or rely on one of the many gambling software providers which service unregulated betting operators to do it for them. This is the ‘McDonaldisation’ of online illegal betting.

The Asian Racing Federation has warned for almost a decade of the threat of Citibet (aka 长城, LK988 and other names in different jurisdictions), a completely unregulated horse racing betting exchange which has liquidity comparable to the biggest legal racing tote operators in the world – all completely untaxed, with zero know-your-customer or money-laundering controls.

Citibet and illegal betting in general continue to be a major threat to the sport of racing and legal wagering operators on which the sport depends. Citibet turnover is comparable in some markets to the legal market, such as in Hong Kong where it was estimated to have grown 9% in 2022 compared to the previous year while the local legal betting market on horse racing has shrunk.^[1] Citibet betting turnover on racing in Australia was also reported as having doubled in the period from 2019 to 2022.^[2]

Long-term analysis by the ARF Council has indicated that illegal betting turnover can overtake legal turnover; illegal betting provides the perfect avenue to corrupt racing; and over-zealous regulation of the legal wagering industry actually has the opposite effect intended by regulators and drives customers into the arms of illegal operators.

These threats to racing are from a range of illegal betting operators, but we focus on Citibet because it specialises only on racing, and has turnover reported to be USD 50 billion or more a year.^[3]

And though these threats are not new, in 2024 they are greater than ever, because Citibet has massively expanded its target market through this plug-in business-to-business model. Illegal betting on horse racing from every jurisdiction in the world, complete with pirated live broadcasts, in-running betting, better prices than legal tote operators and other product enhancements, has now been “franchised” to a vastly wider audience.

And Citibet is not alone – the biggest betting operators in the world have also adopted this model, thus massively amplifying both their own turnover and the exposure of individuals to illegal betting.

What is Citibet?

Citibet has been the primary platform for illegal betting on horse racing in Asia for around 20 years.

Likely drawing inspiration from the then-new legal betting exchange Betfair, Citibet’s forerunner was founded around 2004 by illegal betting operators in Southeast Asia. This transferred the pen-and-paper model then employed by Asian illegal bookmakers into a tech platform, and proved so popular that it quickly was opened up to non-syndicate members.

Around 2008, Citibet was hacked and all betting records were lost -- but its owner agreed to pay-out any customer’s claim to have made a winning bet. This gave Citibet’s owner enormous “face” – an Asian term for one’s reputation – among illegal bettors and sent its primary competitor for illegal betting on horse racing into irreversible decline.

Citibet has dominated the market for illegal betting on racing ever since – it is by far the largest unlicensed betting operator specialising only on racing, and among the world’s largest illegal betting platforms by turnover.

The majority of Citibet turnover has historically been on Asian racing jurisdictions, but this does not mean it is of concern only for these jurisdictions. It remains to be seen, for example, where the illegal Citibet turnover on Singapore and Macau will be funnelled when those jurisdictions stop racing in 2024.

Citibet is by far the largest and most liquid unregulated illegal betting exchange market for horse racing in the world, with this huge liquidity allowing illegal bookmakers to hedge their risk by laying off liabilities. In March 2024, leading online ‘bet brokers’ were actively promoting Citibet as a means to bet illegally on racing at Cheltenham, as shown in the advert on Instagram shown below.

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This presents integrity issues for global racing, since Citibet as a betting exchange allows corruptors to ‘lay’ horses – profit from them losing not winning and, Citibet obviously has zero integrity safeguards in place nor information-sharing agreements with racing integrity authorities.

Would you like fries with that? Citibet’s franchise model

A key technological development in the growth in illegal betting on racing in the past four years is that Citibet is now franchised across literally thousands of third-party illegal betting websites via software plug-ins.

Citibet does not directly own or operate all of these thousands of websites, but makes its betting markets and pirated live streams on global horse racing available to them via its plug-in. “Franchisees” can install this software by copy-and-pasting a few lines of code in the back-end of their website, or rely on one of the many gambling software providers which service unregulated betting operators to do it for them.

The ease of use, and access to this franchised version is important in boosting the number of potential bettors, because Citibet’s primary network of mirror websites are (a) very complicated for the layperson to understand and (b) often only directly accessible (for the layperson) by agents, and/or via access granted by agents.

The new franchise model has thus removed a key barrier to entry – knowing an agent –and consequently led to a huge growth in the numbers of people betting illegally on racing anywhere in the world.

Citibet’s plug-in version is a simpler, more user-friendly version with near-identical products and markets, rebates, live-streams and other enticements as the main exchange. Bets on the franchised version flow into the main Citibet exchange to increase liquidity. Franchisees will pay either a revenue-share or subscription fee to access this product.

IBSaaS – Illegal Betting Software as a Service

Citibet is not unique in this new business model. The biggest betting operators in Asia have taken inspiration from the Software as a Service (SaaS)^[4] business model common in modern internet technology companies and made their entire sports betting markets, managed by hundreds of traders and sophisticated big data modelling, available to a host of third-party sites without the capital, expertise or other means to offer complex global sports and racing betting markets by themselves.

The biggest Asian operators thus now deploy their sportsbook technology not only on their own networks of betting websites, but on literally thousands of “franchisees”.

Some of these operators are very well-known brands, with licences in offshore betting havens such as the Isle of Man and the Philippines. Others, such as Singbet / aka Crown / aka Huangguan, widely believed to be one of the biggest unregulated sports betting operators in the world, are not known to be licensed in any jurisdiction. Regardless of licence status, the core customers for both types of operators and their “franchisees” are in jurisdictions where they are unlicensed (i.e. illegal betting).

As shown in the image below, which is an advert for a very well-known Asian betting operator's franchise version, franchisees can benefit from 30+ sports available for betting, 400+ expert traders, and the operator's long-established network of street-level illegal betting customer recruitment agents on the ground across Asia.

Notably, some prominent licensed operators, despite their claims of not serving unregulated markets, also offer their markets and technology as “IB SaaS”. This practice potentially provides them a legal loophole, enabling them to operate within a grey area of international gambling laws, but it is clear that they are massively expanding the global target market of illegal betting.

Why should racing and other sports care?

There may be a perception that Asian betting operators such as Citibet are only of local concern, to individual racing jurisdictions in Asia. But it takes bets on every racing jurisdiction in the world – and the expansion of its markets to a much wider mass market audience of “franchise” customers will likely only drive this liquidity expansion.

For example, the demise of racing in Singapore and Macau – both of which were large Citibet illegal markets – means that that large illegal betting turnover which was previously bet on Singapore and Macau racing has to flow somewhere and it remains to be seen what impact their shutdown will have on other racing jurisdictions.

Jurisdictions who say ‘it could never happen here’ should not be complacent, as shown by the rise in turnover on Australian racing, and the apparent targeting of UK racing betting consumers illustrated by the Cheltenham advert above.

Other sports should also not be complacent – the franchising of the betting markets of the world’s biggest unregulated bookmakers means that there is potential for massive expansion of the illegal betting audience, and thus liquidity to mask corrupt bets on fixed outcomes.

The threat to the integrity of sport is not from licensed and regulated legal betting operators, who share information on suspicious betting with sports authorities, law enforcement and regulators, but with the illegal operators who do not.

The owners of one of the largest sports betting platforms to have adopted this franchise model have even been widely rumoured to be directly involved in match-fixing themselves.

Asian illegal operators who have franchised out their markets on football, tennis, basketball and other sports have and will continue to be used as the primary platforms for sports corruption.

Corruption in racing and other sports is driven by the organised crime groups that profit from illegal betting, including from Citibet.  Public domain cases showing this involvement include criminal cases involving two Australian drug traffickers, one with links to the Calabrian Mafia and one implicated in race-fixing, both of whom were Citibet account holders;^[5] and the cross-border Hong Kong-Mainland China case study in 2017 detailed below.

Case study ^[6][7]

A cross-border police action between Hong Kong and Mainland China in December 2017 underlines the involvement of organised crime in Citibet and the scale of illegal profits involved. Police confiscated the equivalent of ~USD 13.8 million in illegal betting records and ~USD 1.4 million in cash, and arrested 71 people. Police believed some had triad backgrounds and were senior agents of the organisation. Most turnover was on football and racing, via illegal betting networks Huangguan (皇冠) and Citibet respectively, said Police, with pictures showing Citibet prominently displayed on computers used in the control room.

Illegal betting has been described as a foundation upon which most other organised crime activities are supported,^[8] and Citibet profits can bankroll investment in other criminal enterprises such as drug trafficking, vice, and cyber- and telecoms-fraud. The massive liquidity in illegal betting makes it a prime conduit for money laundering. Some experts believe more than 10% of the global proceeds of organised crime, or USD 140 billion, is laundered via online betting each year.^[9]

Most recently, the ARF Council has highlighted that illegal betting operators are now heavily involved in human trafficking and have adapted their technology to a new industry, the global epidemic of industrial cyber-scams. Notably, Citibet is believed to have operations in one of the so-called ‘casino compounds’ in Cambodia involved in such activity, although this cannot be proven.

Conclusion - Action has been taken but more needs to be done

Citibet, and other operators like it, have massively expanded the illegal betting target market through new technology. This is a transnational organised crime problem.

The Citibet technology team is believed to be in Taiwan; it appears to have customer service staff in Cambodia; its ultimate owner(s) is/are suspected to be in Malaysia or Singapore; it is suspected to have thousands of agents all over the world. This transnational nature means a similarly transnational law enforcement response, in coordination with other key stakeholders such as racing and other sports authorities, the legal betting operators, internet service providers, is required.

One approach is blocking websites on which Citibet operates. Internet service providers and communications authorities can block these URLs. But because mirror websites are quick and cheap to set up and are essentially infinite, such efforts require ongoing network monitoring and analysis, and information sharing.

The “franchising” of Citibet and other illegal betting operators’ markets to literally thousands of websites will expand access to and use of Citibet ever further.

Ultimately, one of the most effective means of combatting illegal betting is an appropriate legal betting market that can compete effectively. Consumers prefer to wager in legal markets, not with illegal operators. This is intuitive to understand, because they know their deposits and winnings will be safe, and they are not exposing themselves to criminal risk.

Given this preference, effective disruption of Citibet and other illegal operators, through coordinated international law enforcement, website blocking, payment monitoring, and enhancement to the legal product, is a necessity for better protection of those consumers as well as combatting the organised crime groups that profit from this industry.

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_{[1]Asian Racing Federation, ‘Illegal Betting Poses Growing and ComplexThreat to Racing and Sports’, Asian Racing Federation, (21 February 2023), https://www.asianracing.org/news/illegal-betting-poses-growing-and-complex-threat-to-racing-and-sports  , accessed 25March 2024}

_{[2]Asian Racing Federation, ‘Illegal Betting Poses Growing and ComplexThreat to Racing and Sports’, Asian Racing Federation, (21 February 2023), https://www.asianracing.org/news/illegal-betting-poses-growing-and-complex-threat-to-racing-and-sports, accessed 25 March 2024}

_{[3] Peter Scargill, ‘The $50 billion black market bookmaker: how anillegal operator became one of the world's biggest’, Racing Post, (10 July2023),https://www.racingpost.com/news/features/in-focus/the-50-billion-black-market-bookmaker-how-an-illegal-operator-became-one-of-the-worlds-biggest-aCor50U3LV1v/,accessed 25 March 2024.}

_{[4] Software as a Service (SaaS) is a software distribution model inwhich applications are hosted by a provider and made available to customersover the internet, typically on a subscription basis.}

_{[5] ‘Victoria Police calls for changes to sports betting laws as riggedbetting goes offshore’, Herald Sun, 6 December 2015 (www.heraldsun.com.au%2Fnews%2Flaw-order%2Fvictoria-police-calls-for-changes-to-sports-betting-laws-as-rigged-bets-go-offshore%2Fnews-story%2F04e0240252e58c2449ef1fcd2eb766f0&memtype=anonymous&mode=premium&v21=dynamic-groupa-control-noscore&V21spcbehaviour=append)}

_{[6] Christy Leung, ‘Police seize more than HK$100 million in illegalbetting slips and arrest 71 in cross-border crackdown’, South China MorningPost, 4 December 2017 (https://www.scmp.com/news/hong-kong/law-crime/article/2122816/police-seize-more-hk100-million-illegal-betting-slips-and);accessed 25 March 2024}

_{[7] 魯嘉裕, ‘粵港兩地打擊非法收外圍波馬集團　檢逾億元投注紀錄及賭款拘71人’, 香港01, (04 December 2017),https://www.hk01.com/%E7%A4%BE%E6%9C%83%E6%96%B0%E8%81%9E/138690/%E7%B2%B5%E6%B8%AF%E5%85%A9%E5%9C%B0%E6%89%93%E6%93%8A%E9%9D%9E%E6%B3%95%E6%94%B6%E5%A4%96%E5%9C%8D%E6%B3%A2%E9%A6%AC%E9%9B%86%E5%9C%98-%E6%AA%A2%E9%80%BE%E5%84%84%E5%85%83%E6%8A%95%E6%B3%A8%E7%B4%80%E9%8C%84%E5%8F%8A%E8%B3%AD%E6%AC%BE%E6%8B%9871%E4%BA%BA,accessed 25 March 2024.}

_{[8] L Moodie, Organized Crime Section.Illegal Gambling, Paper presented at the Gambling, Law Enforcement SystemsIssues Conference, University of Alberta,Edmonton, March 8 2002. As cited in Banks, Gambling Crime and Society, 2017}

_{[9] Christian Kalb and Pim Verschuuren,Institut de Relations Internationals et Strategiques, Money Laundering: theLatest Threat to Sports Betting?, IRISEditions 2013}

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