Regulation

North Korea’s Clandestine Gambling Sites Earn Nearly $1 Billion Per Year

North Korea betting sites

You wouldn’t guess it based on North Korea’s less-than-stellar track record for economic success, but the country is home to a robust online gambling industry that far outpaces what most people would ever assume. The catch, of course, is that the entire home-grown online gambling industry in North Korea is run by a bunch of government-backed hackers.

It may sound outlandish, but that information comes directly from South Korean Defense Security Command head Cho Hyun-chun. According to United Press International, local media sources first relayed the alarming news after attending a security conference earlier in July.

Cho Hyun-chun reported at the conference that the reclusive regime has employed an army of some 6,800 hackers to carry out cyber warfare, conduct espionage operations and run illegitimate betting sites to raise funds for government coffers. What’s particularly alarming is their effectiveness at raising funds.

North Korea’s online gambling efforts and “other businesses” bring in $866 million per year in revenue according to the director of the Korea Institute of Liberal Democracy, who spoke at the same conference in Seoul. That is quite a princely sum given North Korea’s well-deserved reputation for unintentional comedy over a backdrop of unfathomable human suffering.

An English-language report on the Dong-A Ilbo published last year also noted that North Korean intelligence operatives design and distribute gambling software that can be used to operate illicit gambling sites targeting South Koreans and residents of other Asian countries. That same report notes that the North Korean regime has likely earned significant sums of money by operating gambling websites in addition to selling gambling software to South Korean organized crime groups.

White hack hackers in South Korea first discovered evidence of North Korean gambling operations.  A program titled “poker game server” was uploaded to a security website launched by security experts last year. It was then that white hack hackers found that the poker software contained an IP address that is associated with North Korea’s general intelligence bureau.

A separate report published last year by the Chosunilbo found that just one sports betting site run by the North brought in $4.5 million for the regime in the first half of 2015 alone.

Although the North Korean economy is a mess, many respected sources report that they have surprisingly adept hackers. This makes sense in a way when you consider North Korea lacks the means to compete with its rival militarily and suffers brutal sanctions on physical goods, the digital realm is an attractive means by which the regime can raise money for its own purposes.

Legalization Makes More Sense Every Day

North Korean hackers are hardly the only people involved in illicit online betting operations. These latest reports from the Hermit Kingdom are just the latest in a long history of questionable gambling sites preying on unsuspecting gamblers and raising money for dubious causes.

Does anyone remember those old anti-drug ads that drew a connection between recreational drug use and narco-terrorism? Well as heavy-handed as those ads might have been, we have something similar going on here with illegal online betting being used to fund the oppressive North Korean regime.

Where those ads come up short is the simple fact that it is ineffective to guilt-trip people into complying with the law. Ads like the one linked-to above sure haven’t done much to dissuade drug use in the United States where those ads aired. Likewise, anti-gambling laws have done little to stop people from placing bets online in South Korea.

Online betting sites are illegal in South Korea, yet here we have reports that the North Koreans are raising upwards of a billion dollars a year – most of that reportedly coming from South Korean gamblers.

These recent reports are as perfect an example as any to highlight the failure and unintended consequences of online gambling prohibition efforts. If we assume the South Korean government truly does want to stop people from gambling and truly does not want to send untold amounts of money to its Nemesis in the North, the only possible conclusion is that their prohibition has been a complete failure.

While the South Korean government tries to prevent people from gambling, the people are doing exactly the opposite. Not only has prohibition failed to stop people from gambling, but it has actually pushed significant amounts of money to North Korea. That is money North Korea can use to build nuclear weapons, train hackers who steal untold amounts of money from people around the world and take part in all kinds of other nefarious activities.

Legalization and regulation in South Korea would go a long ways in solving two problems at once. First of all, it would put a major dent in North Korea’s ability to raise funds. Legal, regulated and licensed betting sites would be so much more attractive to normal players and as they play at licensed betting sites, revenue going to the North would dry up almost overnight.

Secondly, legalization would give South Korean authorities a better shot at managing problem gambling. The South Korean government helps nobody by pushing the entire industry underground where there are no consumer protections or government oversight. A legalized market would make it easier for problem gamblers to get the help they need.

The case for legalization grows stronger every time stories like today’s come out. If there’s a demand for a product, someone will always step up to meet that demand. Let the market provide the demand and you’ll get something that is well-regulated and does not send money to inhumane dictatorships.

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