U.S. Advocacy Groups Urge Government Role In Erosion Of Illegal Sports-Betting Market

April 12, 2024
The persistent strength of the offshore sports-betting market in the United States means it is incumbent upon the federal government to step up enforcement efforts, according to industry advocacy groups.

The persistent strength of the offshore sports-betting market in the United States means it is incumbent upon the federal government to step up enforcement efforts, according to industry advocacy groups.

As states rushed to legalize sports betting after the U.S. Supreme Court overturned the federal ban, lobbyists and gaming executives were quick to remind lawmakers that a legal, regulated market was key in shifting consumers away from the offshore market.

But almost six years since the Supreme Court decision was handed down, there has been some erosion of the illegal market along with a consensus among gaming industry organizations that there is still a more prominent role for the U.S. federal government to play in going after the illegal offshore market.

From different perspectives, the American Gaming Association (AGA) and Campaign for Fairer Gambling both are advocating for a cohesive government response to illegal gambling, urging the U.S. Department of Justice (DOJ) to investigate and shut down offshore sites.

“We can all agree the federal government needs to do more,” Chris Cylke, AGA’s senior vice president of government relations, told Vixio GamblingCompliance on Thursday (April 11).

“We don’t know where the DOJ or other agencies may have investigations,” Cylke said. “We can only really press for that to happen.”

Cylke told Vixio that in the Senate Appropriations Committee bill that was part of a $1.2trn spending package signed by President Joe Biden last month there was a restatement that illegal gambling should be a priority.

“The [Appropriations] Committee recognizes the multiple threats posed by illegal and unregulated gambling, including money laundering and the loss of tax revenue,” according to a 225-page committee budget report outlining spending for the federal Departments of Commerce and Justice, Science and Related Agencies for the rest of fiscal 2024 that ends on September 30. 

“The committee encourages the department to coordinate with USAOs (Offices of the United States Attorneys) and external federal partners on efforts to combat illegal gambling and associated crimes,” the Senate report said.

The budget bill also directed the DOJ to provide a briefing to the Appropriations Committee within 60 days of the enactment of the budget act on investigations and prosecutions against illegal gambling operators.

President Biden signed the package of spending bills on March 23.

Currently, legal sports betting is available in 38 states and the District of Columbia, with 30 states and Washington, D.C. allowing online sports wagering. More than $120bn was wagered legally on sports last year.

Still, new analysis released on Thursday by the Campaign for Fairer Gambling found a stark contrast remains between the legal and illegal online gambling markets, especially during the recent 2024 NCAA Men’s and Women’s March Madness college basketball tournaments.

YieldSec, which produced the analysis commissioned by the Campaign for Fairer Gambling, noted that the overwhelming presence of illegal sports wagering during the three-week tournament that takes place in March and early April was a “clear signal” that enforcement and monitoring needs to be prioritized.

Ismail Vali, founder and CEO of YieldSec, estimated the March Madness betting handle was $6.7bn.

But the company's analysis found that the 378 illegal sports-betting operators, which were supported by 651 illicit affiliates aggressively targeting the U.S. market for the three weeks of the tournaments taking place in March and April, secured a 64 percent total share of the market.

That market share can be valued at $4.3bn in illegal betting handle. The remaining $2.4bn wagered legally amounts to just 36 percent of the total market.

“Our findings are a call to action for stakeholders across the board to intensify efforts in combating the spread of unlicensed gambling operations that exploit the online marketplace,” said Vali.

“With the dominance of illegals across our social media channels,” Vali said, “it’s clear that the threats to American commerce, community and consumers are a lot closer to home than ever imagined.”

Vali also called for monitoring and enforcement against offshore sites to be “prioritized.”

“One aspect that has been missing over the last six years is that most of these offshore sites are still operating undeterred,” said Cylke of the AGA.

“There is also consumer confusion that shouldn’t be discounted.”

Cylke said anyone can type in legal sports betting in an online search engine and an illegal offshore site will be among the most popular sites offered to consumers. He also expressed frustration with affiliate advertising that leads consumers to those offshore sites.

Since the Professional and Amateur Sports Protection Act (PASPA) of 1992 was overturned in 2018, the AGA estimates that legal sports-betting options have taken 60 percent of handle from the illegal market. That translates into $64bn wagered illegally in 2022, down from $150bn annually when PASPA was still the law of the land.

Although AGA research indicates that offshore bettors spend more, 77 percent of online bets today are placed through regulated operators, up from 44 percent in 2019. Some 46 percent of gamblers who place the majority of bets illegally plan to move a majority of their business to legal operators over the next year, according to AGA research.

Cylke told Vixio that an area of concern for the gaming industry was regulators and lawmakers being pushed toward policy positions such as advertising restrictions and restrictions on certain bet types. He said those positions are just going to make it harder to migrate consumers away from the illegal market.

“We are still struggling to deal with the illegal market,” said Cylke, adding that the AGA would strongly disagree with any argument that it was the legal sports-betting industry’s failure to migrate people away from the illegal market. 

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