# What Is the Black Market? Examples of Products and Services

![Black Market: An economic activity that takes place outside government-sanctioned channels.](https://www.investopedia.com/thmb/o8Z3WuNioMlMB8RDjt34Ax9LcrY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/blackmarket.asp-FINAL-2-86c97cf4e3284ef78260ad59a3f2d682.png)

*— Joules Garcia / Investopedia*

## What Is a Black Market?

A black market is an economic activity that occurs outside government-sanctioned channels. Illegal market transactions usually occur under the table to let participants avoid government [price controls](https://www.investopedia.com/terms/p/price-controls.asp) or taxes. The goods and services offered in a black market can be illegal, meaning their purchase and sale are prohibited by law, or they can be legal but transacted to avoid taxes. Black markets are also known as illegal markets, shadow markets, or underground markets.

### Key Takeaways

*   A black market is an economic activity that occurs outside of government-sanctioned channels.
*   Black markets trade in legal and illegal goods and services to avoid taxes, or both.
*   These markets can include the sale of illegal drugs and weapons, human trafficking, and the illegal wildlife trade.
*   Black markets can negatively impact the economy because the activity is not reported and taxes are not collected on the transactions.
*   Black markets may create jobs for those who can't find employment in traditional markets and allow access to medicine and healthcare to individuals who don't have access otherwise.

### Black Market Products and Services

*   Alcohol
*   Animals and animal products
*   Illegal drugs
*   Illegally logged timber
*   Personal information
*   Sexual exploitation and forced labor
*   Tobacco
*   Weapons

## Impact of Black Market Activities

Underground market activity was traditionally conducted in cash to avoid creating a paper trail. With the rise of the internet, many underground market transactions are now done online, such as on the [dark web](https://www.investopedia.com/terms/d/dark-web.asp) using [digital currencies](https://www.investopedia.com/terms/d/digital-currency.asp).

Illegal markets can take a toll on an economy because they are [shadow markets](https://www.investopedia.com/terms/s/shadow-market.asp) where economic activity is not recorded and taxes are not paid. It is often assumed that a country’s [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp) is not accurate because it doesn't account for any business activity conducted in underground markets.

The underground market’s many drawbacks include the risk of fraud, the potential for violence, and being saddled with counterfeit goods or adulterated products, which is especially dangerous in the case of medications.

## Types of Black Markets

An underground market is often a place for the exchange of illicit, dangerous, or counterfeit goods. They are venues where highly controlled substances or products, such as drugs and firearms are illegally traded.

### Human Trafficking

Human trafficking is a very large illegal market. It moves people into forced labor, forced marriages, prostitution, child armies, and the market for human organs. Roughly 50 million people were trapped in modern slavery across the world in 2021, with women and children being the most vulnerable. Experts estimate that sex trafficking and forced labor generate as much as $150 billion a year in profits.

### Counterfeiting

Counterfeit goods form a major part of black market activity. There is a big demand and a large market for these goods, despite strong laws designed to punish those who sell fake goods. The sale of counterfeit goods reduces the profits made by legitimate manufacturers and also undermines confidence in the market as a whole. These products can also be harmful to consumers.

Some of the most commonly seized counterfeit goods seized by U.S. border officials include:

*   Pharmaceuticals
*   Personal care products
*   Electronics
*   Sunglasses
*   Cigarettes  
    

### Currencies

The largest underground financial market exists for currencies in nations with strict [currency](https://www.investopedia.com/terms/c/currency.asp) controls. While most people may shun an underground market because they consider it sleazy, there may be rare occasions when they have no choice but to turn to this necessary evil.

As for illegal currency markets, they exist primarily in nations with currency controls and weak economic [fundamentals](https://www.investopedia.com/terms/f/fundamentals.asp), such as a high inflation rate and low currency reserves. It is also common in countries with a [fixed exchange rate](https://www.investopedia.com/terms/f/fixedexchangerate.asp) where the domestic currency is pegged at an unrealistically high level to the U.S. dollar or other currency. As a result, the currency underground market is flourishing in nations like Argentina, Iran, and Venezuela.

> **Fast Fact**
>
> Other underground markets include illegal gambling, the illegal wildlife trade, and illegal mining, fishing, and logging.

## The Necessity of Black Markets

Some people may have no other option but to use underground markets to get the goods they seek in certain situations. For example, suppose you are on vacation with your family in an exotic location and run out of formula for your baby. You may have to turn to the underground market to acquire formula if nothing is available in local stores.

Paying a premium over the [face value](https://www.investopedia.com/terms/f/facevalue.asp) of a ticket to see a concert or sporting event is also an example of an illegal market transaction. Lifesaving medicines are often in short supply in certain developing nations and the only alternative to procure them may be the underground market.

Critics say this only serves to perpetuate the illegal and unethical practice of profiteering from someone else’s misfortune, but participating in the underground market is a relatively easy decision to make when someone’s life is at stake.

> **Warning**
>
> Underground market transactions provide no recourse to the buyer in case the product is defective, and a buyer in an underground market can suffer penalties and jail times just as easily as a seller can.

## Example of a Black Market

A modern example of a black market is the [Silk Road](https://www.investopedia.com/terms/s/silk-road.asp) market. This was a digital market that used [Bitcoin](https://www.investopedia.com/terms/b/bitcoin.asp) to launder money and to conduct illegal drug transactions and weapons sales.

The market opened in 2011 and closed in 2013 when it was shut down by the FBI. The man behind the market was a 29-year-old computer science engineer named [Ross Ulbricht](https://www.investopedia.com/tech/ross-ulbricht-dark-net-pirate/). Federal authorities said that roughly $1.2 billion in sales transactions were made by registered users of the Silk Road between February 2011 and July 2013.

It connected nearly 4,000 sellers to almost 150,000 buyers. An individual could purchase almost anything; heroin, rocket launchers, falsified documents, and even murders for hire were discussed. It was known as the Amazon of the dark web.

It led to a global search for Ulbricht. He was finally captured, the illegal market was shut down, and he was serving life in prison. On January 21, 2025, President Donald Trump pardoned Ulbricht.

## What Is a Simple Definition of the Black Market?

A black market is any market where the exchange of goods and services takes place in order to facilitate the transaction of illegal goods or to avoid government oversight and taxes, or both.

## How Does the Black Market Work?

There are a variety of illegal markets, and all of them work in different ways. A black market can be a physical market where two individuals meet to exchange illegal goods—for example, a drug transaction on a street corner. A black market can also exist online, such as on the dark web, where individuals communicate to exchange goods and payments are made in digital currencies.

## What Is an Example of a Black Market?

An example of an illegal or black market would be the human trafficking market that engages in the capture of people throughout the world and their sale into various areas, such as forced labor and prostitution.

## Why Is It Called the Black Market?

There are various theories as to why it is called the black market. These include the association of the word black with shadows and darkness, with the markets that continued to sell slaves after abolition, and the association of the color black with anarchist groups.

## How Big Is the Black Market?

The nature of the black market makes measuring its size very difficult, and estimates vary a lot. The black market is estimated to constitute as much as 36% of the gross domestic product of developing nations and 13% of developed countries’ GDP.

## The Bottom Line

Black markets exist outside of government-sanctioned channels. They trade in legal and illegal goods and services to avoid taxes. The sale of illegal drugs, weapons, human trafficking, and the illegal wildlife trade is common in black markets. They can negatively impact the economy because there is no reporting or tax collection. But, they can create jobs for people who can't find employment in traditional markets and provide healthcare to people who can't access it.

> **Article Sources**
>
> 1.  International Labour Organization. "[50 Million People Worldwide in Modern Slavery](https://www.ilo.org/resource/news/50-million-people-worldwide-modern-slavery-0)."
>     
> 2.  U.S. Department of State. "[Trafficking in Persons Report July 2022](https://www.state.gov/wp-content/uploads/2022/10/20221020-2022-TIP-Report.pdf)." Page 18.
>     
> 3.  Federal Bureau of Investigations. "[Ross Ulbricht, the Creator and Owner of the Silk Road Website, Found Guilty in Manhattan Federal Court on All Counts](https://www.fbi.gov/contact-us/field-offices/newyork/news/press-releases/ross-ulbricht-the-creator-and-owner-of-the-silk-road-website-found-guilty-in-manhattan-federal-court-on-all-counts)."
>     
> 4.  U.S. Immigration and Customs Enforcement. "[HSI Seizes Biggest Anonymous Drug Black Market Website and Assists in Arrest of Operator and Overseas Co-conspirators](https://www.ice.gov/news/releases/hsi-seizes-biggest-anonymous-drug-black-market-website-and-assists-arrest-operator)."
>     
> 5.  Federal Reserve Bank of St. Louis. "[How to Measure the Black Market](https://www.stlouisfed.org/on-the-economy/2015/may/how-to-measure-the-black-market)."