Unlawful Betting Persists, According to AGA's Findings
In the vast and ever-evolving landscape of gambling in the United States, an alarming trend persists: the illegal gambling market. This unregulated sector, fueled by the rise of unlicensed online gaming (iGaming), the proliferation of unregulated "skill" machines, and sustained illegal sports betting activity, generates significant economic losses and poses risks to consumers and communities.
The American Gaming Association (AGA) estimates that this illegal market generates approximately $53.9 billion in annual revenue, a figure that marks a 22% growth since the AGA's most recent report in 2022. This illicit activity costs states approximately $15.3 billion in tax revenues each year, as money intended for licensed operators and state-regulated markets is diverted away.
The costs of illegal gambling are not confined to lost tax revenues. Americans wager about $673.6 billion annually through illegal channels, with illegal operations generating an estimated $53.9 billion in annual revenue for offshore and unregulated operators. The unregulated nature of these activities exposes players to potential harm, as consumer protections are often lacking.
The AGA reports that a third (31.9%) of all bets are placed with illegal operators in the US gaming market. This trend is driven by a spike in illegal iGaming, the proliferation of grey market skill machines, and the continued popularity of illegal sports betting. The share of the total US iGaming market held by illegal operators has decreased compared to three years ago, but the illegal market still accounts for nearly one-third of the total U.S. gaming market.
Unregulated machines, a fast-growing threat to legal gambling, operate across multiple states, generating an annual revenue of approximately $30.3 billion. These machines cost states $9.5 billion in lost tax revenue. Sweepstakes, often viewed as gambling by 90% of US players, are a significant contributor to this unregulated sector.
The illegal gambling market also poses risks to consumers, undermining consumer protections and potentially increasing problem gambling risks. The AGA regrets that this activity denies communities critical resources such as infrastructure, education, and public safety funding, which would benefit from these funds if the gambling activity was channeled through regulated operators.
Bill Miller, AGA's president and chief executive, has urged lawmakers to crack down on the black market in US gambling. He emphasises the importance of regulating this sector to protect consumers, ensure fair play, and generate much-needed revenue for communities. The decline in the share of bettors using exclusively offshore websites and the drop in the share of online gamblers who play on legal sites are promising signs that this call to action is resonating.
In summary, the illegal gambling market persists primarily due to the growth of unlicensed online gambling, skill machines, and illegal sports betting, causing multi-billion-dollar economic losses in tax revenue and creating risks to consumers and communities in the U.S. The AGA's analysis by The Innovation Group underscores the need for stricter regulation to combat this issue and channel the gambling activity through regulated operators, benefiting both consumers and communities.
- The American Gaming Association (AGA) has identified the gambling industry, such as sportsbook and sports betting, as a growing segment within the illegal market, generating approximately $53.9 billion in annual revenue.
- The unregulated casino-and-gambling sector, which includes sports betting, contributes to significant economic losses for states, costing them approximately $15.3 billion in annual tax revenues.
- The wider gambling market, encompassing sports betting and casino-and-gambling activities, is increasingly being threatened by unregulated machines, with these activities generating an annual revenue of approximately $30.3 billion.
