Illegal Betting Still Thriving Despite U.S. Regulation, Report Suggests

March 25, 2024
As the legalization of sports betting and online casino gaming is sold to state lawmakers as an antidote to combat the offshore market, illegal online operators are continuing to thrive in the United States, according to the findings of a new report.

As the legalization of sports betting and online casino gaming is sold to state lawmakers as an antidote to combat the offshore market, illegal online operators are continuing to thrive in the United States, according to the findings of a new report.

23-page report produced by Yield Sec on the illegal online gambling market in the U.S. was released on Thursday (March 21) at a news conference at the National Press Club in Washington, D.C.

Yield Sec CEO Ismail Vali told congressional staffers and problem gambling experts that his company's research found there are approximately 860 illegal operators who have been targeting American gamblers for a long time. Those sites are being promoted by 638 affiliate sites that bring advertising and content to consumers.

“You have 50 states in America and this activity has always been going on,” Vali said of the illegal gaming market. 

“We saw recently during the [NFL’s] Super Bowl … how may times Taylor Swift would appear on camera,” he said. “That content is weaponized on social media by those who are promoting illegal gambling sites. So, you have an overwhelming voice for illegal gambling.”

Yield Sec’s research, produced on behalf of the Campaign for Fairer Gambling, counted a total 103 legal online sports-betting and iGaming platforms actively targeting the United States, with the assistance of 119 affiliates. In terms of gross gaming revenue (GGR), legal operators generated $16.88bn, or 29 percent of the market, in 2023, while illegal GGR totaled $40.92bn or 71 percent of the market.

Vali stressed that the illegal gambling business is dominated by operations that are “offshore criminal organizations, generally.”

Growth in the legal U.S. market has affected illegal operators, with offshore GGR declining by $1.11bn between 2022 and 2023, while the legal market gained $4.61bn over the same period. 

“In 2023, we get a rising tide of legal activity, but it is not replacing illegal gambling in anything like the cadence or pace that one would expect,” Vali said. “What is the point fundamentally of legalizing and regulating online gambling? To replace illegal gambling.”

Currently, sports betting is live and regulated in 38 states and the District of Columbia. Legislation to authorize sports betting has been introduced so far in 2024 in Alabama, Georgia, Hawaii, Minnesota, Missouri and Oklahoma. 

Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island and West Virginia have all legalized iGaming, while Nevada regulates online poker games.

“When we get into this legislation on a state-by-state basis, we haven’t been cleaning up the crime that was always there and has been there for three decades-plus,” Vali told attendees at the Campaign for Fairer Gambling event.

Yield Sec monitored the 2024 Super Bowl between the San Francisco 49ers and Kansas City Chiefs to support its research findings that consumers are still using illegal wagering platforms.

The company's report found that 228m wagers were placed on illegal platforms during the Super Bowl, compared with 122m bets on legal sports-betting apps on a game won by the Chiefs 25-22 in overtime.

Even with the rapid growth of legal sports betting, the illegal market accepted 42m more Super Bowl bets than in 2023, which was equal to a $546m increase in handle to $4bn.

Vali described the iGaming and sports-betting industry as an iceberg marketplace where the focus falls on the bright ice above the water line. 

“What we don’t accept or haven’t accepted in marketplace after marketplace, including the United States, is that the business is afloat in a sea of criminality,” he said. “We don’t know how far down the iceberg goes.”

Vali noted the difference between legal and illegal sites was sizable, with the average amount needed to deposit with legal operators, such as BetMGM or Caesars, at $10, with the average minimum cashout being $10.

“So, it is bringing in a new type of consumer,” Vali said. “With an illegal site, the average you’ll have to [deposit] is $100. The average minimum cash out is $130, so you will have your money with illegal operators for longer and you will place more bets because it is a higher threshold to get in.”

The exact methodology used in the report is vague, with Yield Sec saying it used proprietary data to reach some of its conclusions and estimates.

The report says that its “analysis derives from data obtained from our online surveillance as well as from third-party licensors” and adds that Yield Sec's “assessment of large complex online marketplaces is limited by the availability and completeness of data”.

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