The advent of online gambling caused an unprecedented boom in the casino industry—and one that’s lasted for several decades. It’s no wonder: with increased convenience and a wide array of options, more gamblers than ever are choosing to forgo the traditional brick-and-mortar casino to stay in the comfort of their home.

However, with this increased flexibility comes increased opportunity for the side industry of illegal gambling. It’s long been suspected that illegal platforms and less-than-reputable gaming sources are on the rise and now we know: the American Gaming Association has the data.

It’s a stunning report: even with expanded gambling options around the country, Americans alone are putting half a trillion dollars per year into offshore online sites, unlicensed platforms, unregulated gaming machines, and even neighborhood bookies. Every dollar contributes to illegal and unregulated markets and there’s no sign of slowing down.

This report shows that unregulated American gambling robs the state and local governments of amounts in excess of $13.3 billion dollars in annual tax revenue: almost $2.5 billion more than was generated by legal operators in 2021 (reported at $11.7 billion).

It doesn’t stop there: the legal gambling industry is also losing out on $44.2 billion in annual revenue: the equivalent of almost half of the 2021 combined commercial and tribal revenue of $92 billion.

The hit isn’t only financial: it’s also a matter of time before users are investing in playing online games in licensed casinos. Industry developers use these statistics to decide what new games and themes to introduce and which platforms to back. Illegal gambling produces un-trackable data: data that doesn’t (and can’t) contribute to the greater evolution of the community.

AGA president and CEO, Bill Miller, says it best: “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…We have always known that the illegal and unregulated market is expansive, but this report illuminates just how pervasive it is.”

How Much of Illegal Betting is Sports Betting?

The American Gaming Association report estimates that Americans give about $64 billion to illegal bookies, as well as offshore sites. This results in a loss of $3.8 billion in gaming revenue and a staggering $700 million loss in state taxes alone.

Americans are projected to place up to $100 billion in legal sports bets this year, suggesting that a further 40% of the US sports betting market is simply lost to illegal gambling operations.

The numbers are significant—and they demonstrate more than illegal betting itself. They also demonstrate the movement of the legal market, as legal sports betting has expanded to include 36 states and the District of Columbia.

The report found that while 49% of past-year sports betters have placed bets with illegal operators, over half of those betters believed that they were wagering legally.

Is This Only Happening in America?

Creating proper regulations around sports betting and the difficulty in enforcing those regulations isn’t, however, a uniquely American problem: Brazilian President Jair Bolsonaro refused to sign a bill for the regulation of sports betting in the prominent South American country.

Bolsonaro objects on moral grounds and is quoted as saying: “Sports betting is different from games of chance. In Brazil, if gambling is allowed, then there will be a problem. Slot machines cannot be legal.”

“In my opinion, there is a difference between bets and gambling. I think that Brazil is not yet mature enough to discuss this, but Congress has a mandate… as it stands, I will veto it.”

Veto it, he did: when the bill came up for final approval on December 12, 2022, Bolsonaro refused to sign.

iGaming Conclusions

iGaming is a huge industry, with illegal, international iGaming websites alone accounting for an estimated $337.9 billion of the $500 billion annual illegal gaming takes from American citizens. This results in a loss of $3.9 billion in annual state tax revenue.

It’s no wonder: with casino game developers making an impact on the igaming industry it was only a matter of time before illegal platforms stepped in to claim their piece of the pie.

With $13.5 billion in estimated revenue, the illegal iGaming market in the United States is almost three times as big as the legal American iGaming market (estimated to be around $5 billion in 2022).

The problem is one of regulation: as iGaming is only legal in six states, almost half of the Americans who have played online slots or games in the past year have unknowingly played in illegal online casinos. The international market offers more games and options than the American market, particularly with its limited geographical pull.

Findings Regarding Unregulated “Skill Machines”

Unregulated gaming machines account for almost 40% of all American betting machines available to participants. With an estimated 580,651 unregulated machines competing with their 870,000 regulated counterparts, Americans fall victim to unfair operator win percentages or even fully “rigged devices.”

Over the past 12 months, slot machines and new slot releases in Nevada chart at a 7.16% win rate—compared to an almost 25% win rate for unregulated machines.

This stark difference demonstrates how easy it is to take advantage of unwitting American players, many of whom don’t know they’re playing on an unlicensed and unregulated machine. Back-room slot machines, neighborhood bars, and even the corner bodega’s getting in on the action: unregulated slot machines are one of the most insidious ways the illegal gambling industry continues to flourish.

The American Gaming Association has stern words on this subject as well: “All stakeholders—policymakers, law enforcement, regulators, legal businesses—must work together to root out the illegal and unregulated gambling market. 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.”

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