Illegal Online Gambling Costs States Billions, Cites New Study

Photo taken in Las Vegas, United States

Article by : Erik Gibbs Jun 4, 2024

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In a recent report commissioned by the Campaign for Fairer Gambling (CFG) and conducted by Yield Sec, the extent of illegal online gambling in New York, New Jersey and Minnesota has been starkly revealed. The findings underscore a significant challenge despite the availability of legal betting options in these states.

Yield Sec’s analysis reveals that illegal gambling operators collectively reap $9.5 billion annually across these three states alone. This staggering figure constitutes approximately a quarter of the estimated $40.92 billion illegal gross gaming revenue (GGR) nationwide. Such a substantial market share highlights the entrenched nature of illicit gambling activities.

In New York, where only online sports betting is legally permitted, illegal operators manage a significant portion of the market. Specifically, 49% of iGaming and $1.9 billion in online betting transactions occur through unlicensed entities, showcasing their dominance despite regulatory restrictions.

Similarly, in New Jersey, a state with legalized iGaming and online betting, illegal operators still command a notable share. Approximately 22% of the state’s GGR, amounting to $996 million, stems from illicit gambling activities.

Moreover, 16% of online sports betting activities, totaling $719 million, are conducted outside legal frameworks, highlighting ongoing regulatory challenges.

Minnesota presents a unique case as it currently lacks legal online gambling options. Here, illegal operators handle a staggering 62% of sports wagering, totaling $929 million annually.

This substantial figure represents a significant portion of Minnesota’s estimated $1.5 billion illegal online gambling market, further emphasizing the pervasive nature of illicit operations where legal alternatives are absent.

Ismail Vali, CEO of Yield Sec, expressed concern over the impact of illegal gambling on legitimate channels, describing it as “brazen” theft. He calls for federal intervention to curb these activities and safeguard the integrity of legal gambling operations.

Derek Webb, founder of CFG, echoed these sentiments, noting the thriving nature of the illegal gambling market despite regulatory efforts. He highlighted the presence of 800 unlicensed operators in just the three aforementioned states, operating with impunity and potentially harming consumers and the industry at large.

Both Vali and Webb advocate for decisive federal action to address the issue comprehensively. They argue that such measures are necessary to protect consumers, preserve the integrity of legal gambling, and mitigate the financial losses incurred by both states and legitimate operators due to illegal gambling activities.