A new report released today by the American Gaming Association (AGA) estimates that the level of illegal betting activity in the U.S. now stands at $511 billion per year.
That amount of unregulated wagers placed with bookies, illicit offshore operators, and unlicenced slots or table game machines translates to $44.2 billion in lost revenue for legal sports betting operators — and $13.3 billion in lost tax revenue in those states which have legalized gaming.
"Illegal and unregulated gambling is a scourge on our society, taking advantage of vulnerable consumers, skirting regulatory obligations, and robbing communities of critical tax revenue for infrastructure, education, and more," said AGA President and CEO Bill Miller. "We have always known that the illegal and unregulated market is expansive, but this report illuminates just how pervasive it is."
According to the study, bookies and offshore operators take in $63.8 billion in illegal sports betting wagers, accounting for only 12.4% of overall illegal gaming activity. However, this sum still costs licensed sportsbooks $3.8 billion in lost revenue while depriving state treasuries of $700 million in lost taxes.
"With Americans projected to place $100 billion in legal sports bets this year, these findings imply that illegal sportsbook operators are capturing nearly 40% of the U.S. sports betting market," read the report.
Illegal online casino slots and table games account for the largest share of illegal iGaming activity, with an estimated $338 billion per year spent — representing two-thirds of total unlicensed betting activity. This equates to $13.5 billion in lost revenue to regulated online betting sites, which are currently on target to generate only $4.8 billion in annual iGaming revenue in 2022.
Correspondingly, the amount spent on illegal mobile slots and table games deprives state treasuries of $3.9 billion in tax collections.
AGA calls on authorities to crack down on illegal wagering
According to Miller, the report is a wake-up call to state and federal authorities to crack down on illegal wagering action, now that 36 states have legalized gambling across the U.S. and bettors have ample opportunity to bet safely with legal online and retail sportsbooks.
The report also found that 49% of sports bettors in the past year have placed a bet with an illegal operator, despite the widespread availability of legal options. Given the exploding American appetite for wagering and the billions in tax revenue at stake, there is ample financial incentive for states to begin taking more aggressive measures to rein in illegal betting activity,
"All stakeholders — policymakers, law enforcement, regulators, legal businesses — must work together to root out the illegal and unregulated gambling market," Miller said. "This is a fight we’re in for the long haul to protect consumers, support communities, and defend the law-abiding members of our industry."
The study comes in the wake of the September release of its "Stop Illegal Gambling" toolkit, which is part of its ongoing campaign to curb unregulated betting. It was on that occasion that the gaming industry regulatory body also made the somewhat stunning revelation that an estimated 55% of sports bettors who use illegal operators are under the impression that they are wagering legally.
Bettors who choose to wager with these illegal books take on additional risk, as not only do offshore books enjoy higher hold rates than legal sportsbooks... but they also fall outside the regulatory scope of state or federal laws, are not obliged to offer self-exclusion options nor monitor for problem gaming — plus the AGA has long pointed out that customers of these illegal outlets have no legal recourse in the event that these operators choose to withhold large payouts.
Biggest losers are illegal slots and table game bettors
The AGA report also revealed that one of the greatest scams being perpetrated on bettors comes in the form of unlicensed slots or table game machines.
There are an estimated 580,651 unregulated machines currently in use in the U.S. that, according to the AGA, represents 40% of all gaming machines in casinos and slot routes.
Relying on state regulatory data, the AGA found that operator win percentages on unregulated gambling machines are significantly higher than on legal casino slot machines.
Figures for the last 12 months showed that unlicensed slot machines have an estimated win rate of nearly 25% as compared to only 7.16% for Nevada slots — which the AGA says is evidence of "how unregulated machines take advantage of customers."
