A newly commissioned report by the American Gaming Association (AGA) has pulled back the curtain on a concerning reality – Americans are funneling a staggering $511 billion annually into illegal and unregulated gambling activities. This massive sum encompasses a range of activities, from unlicensed sportsbooks and igaming websites to so-called “skill games.” Beyond the obvious concerns surrounding consumer protection and regulatory obligations, the report sheds light on a more alarming consequence: the substantial loss of tax revenue that could otherwise bolster state economies.
A Multibillion-Dollar Drain: Tax Revenue Losses
The report’s findings unveil a stark reality: illegal wagering is siphoning an estimated $13.3 billion in tax revenue from state governments each year. This staggering sum serves as a poignant reminder of the significant financial impact posed by unregulated gambling. To put this into perspective, the loss of tax revenue from illegal wagering surpasses the earnings of licensed operators in 2021, who generated $11.7 billion. Furthermore, the report emphasizes that the legal gaming industry shoulders a massive annual loss of $44.2 billion in revenue, nearly half of the combined $92 billion commercial and tribal revenue reported in 2021.
AGA’s president and CEO, Bill Miller, voiced his concerns, stating, “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.”
Gauging the Extent: Methodology and Insights
The comprehensive study, conducted by The Innovation Group, draws insights from a survey of 5,284 U.S. adults, delving into their gambling behaviors with both legal and illegal operators. Additionally, observations of unregulated gaming machines contributed to the findings. By incorporating publicly available data on the size of the legal gaming market and specific state gaming machine markets, the report offers a comprehensive view of the issue.
The Gambling Landscape: Sports Betting’s Role
Within this broader context, the report specifically highlights the impact of illegal gambling on sports betting. An estimated $63.8 billion is wagered by Americans with illegal bookies and offshore sites, leading to a loss of $3.8 billion in gaming revenue and $700 million in state taxes. Shockingly, this suggests that illegal sportsbook operators are capturing nearly 40 percent of the entire U.S. sports betting market. However, these figures also underscore the positive trend of Americans migrating toward the regulated market as legal sports betting continues its expansion across 36 states and the District of Columbia.
Unraveling the World of Illegal iGaming
The report unveils the extent of illegal online gambling, estimating that Americans wager an astonishing $337.9 billion with unregulated igaming websites, resulting in a loss of $3.9 billion in state tax revenue. The illegal iGaming market’s size in the U.S., estimated at $13.5 billion in revenue, is nearly three times that of the legal U.S. igaming market, which is projected to reach $5 billion in 2022. Despite its limited legality in just six states, almost half of Americans (48 percent) who have played online slots or table games in the past year have engaged with illegal online casinos.
The Rise of Unregulated “Skill Machines”
Adding to the complexity of the issue, unregulated gaming machines are proliferating at an alarming rate. Approximately 580,651 unregulated machines are estimated to be in operation in the U.S., accounting for a significant 40 percent of all gaming machines in the country. These machines pose a significant concern as their estimated win rate of nearly 25 percent far exceeds that of legal casino slot machines. The report’s revelations highlight the exploitative nature of these machines, which capitalize on customers’ vulnerability.
A Collective Effort: Protecting Consumers and Upholding the Law
The report concludes with a call to action for all stakeholders – policymakers, law enforcement, regulators, and legal businesses – to collaborate in addressing the pervasive issue of illegal and unregulated gambling. Safeguarding consumers, supporting communities, and upholding the integrity of the gaming industry are paramount in this ongoing fight. As the industry navigates this multifaceted challenge, the collaborative efforts of these stakeholders are essential to mitigate the damaging impact of illegal gambling on the U.S. economy and society at large.