Research Firm Sees $9.5 Billion in Illegal Gambling Costing States

Unregulated and illegal gambling thrives in states with no legal betting options — and it remains a problem in gambling-friendly states as well. A research firm study suggests three key states lost about $9.5 billion to the illegal market in 2023.

Yield Sec conducted the study on behalf of the Campaign for Fairer Gambling (CFG), a gaming advocacy corporation based out of Beverly Hills, CA. Its estimates suggest the US lost about $40.9 billion in online gambling and sports betting revenue to the black market last year.

The American Gaming Association puts the number at about $44.2 billion in illegal gaming revenue each year.

The Campaign for Fairer Gaming then asked Yield Sec to look at three markets for its May 30, 2024, report:

• Minnesota, with no online betting
• New Jersey with iGaming and online sports betting, and
• New York with online sports only.

CFG founder Derek Webb said illegal online operators are “unchallenged despite the expansion of legal gambling.” He added:

“These three states continue to accommodate over 800 illegal operators who operate with zero regard for state law.”

Webb’s organization commissioned Yield Sec to purchase internet data. For its part, YS used artificial intelligence to measure illegal and unregulated gambling in the US.

AI also determined if users were ending their searches at legal or illegal gambling sites. Yasmine Scott, Yield Sec’s head of public relations in Europe, explained the process.

“The tracking and analyzing of the data is always done at the meta-level. We look at audiences, we build out their profiles, and we track their activity. So I don’t know that it’s you personally going from this site, to this site, to this site, but I can see an IP address in Las Vegas.”

AI helps Yield Sec track IP traffic to an illegal or legal site within a state. It also knows how much time an IP user spends placing bets and how often the user returns to sites.

Yield Sec then uses gross gaming revenue numbers as a benchmark to assess the extent of black market betting in each state.

Focusing on Illegal Gambling in Three States

Minnesota

Minnesota hasn’t legalized sports betting and iGaming in the Land of 10,000 Lakes, but the legislature was close to an agreement on Minnesota sports betting as the 2024 legislative session drew to a close.

In the meantime, YS research suggests the state lost about $1.5 billion to illegal online casino games and another $929 million in illegal sports betting in 2023.

New Jersey

Legal New Jersey sports betting is available, and the Garden State has the country’s most established online casino market.

New Jersey banned sports bets on in-state college programs, so the state loses taxable revenue to the illegal market. Black market gambling isn’t taxed, so even well-established New Jersey sportsbooks operate at a disadvantage.

Yield Sec suggests New Jersey lost $996 million to illegal sports betting and $719 million to black market casino offerings last year.

New York

New York has the nation’s highest sports betting tax rate at 51%. That level of taxation pushes sports betting operators to reduce bonus offer incentives. Customers also see less favorable betting markets since the house needs a higher profit margin to offset New York’s tax rate. YS estimates:

• The state lost $3.4 billion to illegal iGaming in 2023. Online casino games aren’t legal in the Empire State.
• New York lost another $1.9 billion to illegal sports betting. New York sportsbooks can’t accept bets on in-state college programs.

Ismail Vali, founder and CEO of Yield Sec, said Thursday’s findings reveal a stark reality:

“Illegal gambling operators are brazenly stealing money from state and federal coffers and legitimate American industry. It’s time for the federal government to end this theft in broad daylight.”

Michigan Gaming Control Board Targets Bovada

Like New Jersey, Michigan legalizes online casinos and sportsbooks. The state’s gaming board is taking steps to rein in the illegal market.

The board issued a cease-and-desist order to Curacao-based Bovada. The off-shore company collects US bets but dodges the rules of a regulated market, including security protocols and taxation.

READ MORE:

• 9 Reasons Not To Bet At Illegal Sports Betting Sites
• Minnesota Sports Gambling Effort Runs Out of Time in 2024 Legislative Session
• Senator Addabbo Requests Governor Support For New York Online Casino Legislation