US Gaming Industry Claims Over $500 Billion Gambled Illegally Each Year

US Gaming Industry Claims Over $500 Billion Gambled Illegally Each Year

A recent study by the American Gaming Association (AGA) sheds light on the extensive scale of illegal gambling in the U.S., estimating that Americans wager over $511 billion annually through unregulated channels. This underground economy includes unauthorized sportsbooks, iGaming websites, and “skill” gaming machines, leading to significant financial losses for state governments and legal gambling operators.

The Massive Impact of Illegal Wagering

The AGA's findings reveal a substantial loss in potential revenue for both the legal gaming industry and state governments. Illegal gambling activities reportedly cost the legal gaming market $44.2 billion annually, while states lose out on around $13.3 billion in tax revenue each year.

Here's how the illegal gambling market is broken down:

1. Unlicensed Online Casinos and iGaming Sites: Illegal online gaming, including activities such as online slots and table games, accounts for the lion’s share of illegal gambling, with an estimated $338 billion wagered each year. This part of the market generates approximately $13.5 billion in revenue for unauthorized operators, taking away $3.9 billion in potential tax revenue.

2. Unregulated Sportsbooks: Illegal sports betting, involving offshore sportsbooks and local bookies, sees around $63.8 billion in wagers each year, leading to a $700 million tax revenue loss. Interestingly, this portion of the illegal gambling market rivals the revenue generated by legal U.S. sportsbooks.

3. “Skill” Gaming Machines: These machines, often found in bars, convenience stores, and truck stops, are another major contributor to the illegal gambling economy. Americans spend approximately $109 billion on these machines annually, which robs states of about $8.7 billion in tax revenue.

Why Illegal Gambling Continues to Thrive

Despite the legalization of sports betting in over 30 states, illegal gambling remains prevalent in the U.S. A significant number of Americans unknowingly use illegal platforms, with nearly half of past-year sports bettors admitting to having placed bets with unlicensed operators. Much of this results from offshore sites marketing themselves as legitimate, leading to confusion among bettors about which platforms are legal.

State Revenue and the Strain on Legal Operators

The impact on state revenue is significant, as the lack of regulation around these activities results in missed tax revenue that could otherwise fund education, infrastructure, and public health. With the expansion of legalized sports betting and online gaming in the U.S., capturing this untaxed portion of the market could allow states to potentially double their tax revenue from gaming, reaching around $25 billion annually.

Legalization as a Solution?

The AGA report emphasizes the potential benefits of broader legalization to address illegal gambling. States like California and Texas, where sports betting remains largely illegal, are seen as key areas where regulation could help redirect funds from illegal to legal channels, creating a safer, more transparent betting environment and increasing state revenue.