Posted on: November 30, 2022, 02:46h. 

Last updated on: November 30, 2022, 03:45h.

The US gaming industry, led by its preeminent lobbying arm, the American Gaming Association (AGA), says more than half of a trillion dollars is gambled illegally each year.

US gaming industry AGA unregulated gambling
A bank of unregulated and untaxed Pennsylvania Skill gaming machines inside a convenience store in Pennsylvania. Such unregulated gambling, the American Gaming Association claims, hurts the legal US gaming industry. (Image: WFMZ-TV)

In a new report titled, “Sizing the Illegal and Unregulated Gaming Markets in the United States,” the AGA concludes that US residents gamble an estimated $511 billion each year. That’s done through illegal and unregulated sportsbooks, offshore iGaming websites, and in-person on so-called “skill games.”

The massive spending comes at a cost to both the licensed industry and the numerous programs it supports through gaming taxes, the AGA asserts.

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

The AGA says the $511 billion in unlawful betting each year robs state governments of $13.3 billion in associated tax revenue annually. The illegal operations also supposedly cut into revenue for the legal gaming industry by around $44.2 billion — which is nearly half of the $92 billion in combined gross gaming revenue generated by the commercial and tribal gaming industries in 2021.

Illegal iGaming Outpaces Sports Betting

Sports betting is legal and regulated in more than 30 states. But iGaming — legal online slot machines and interactive table games — remains limited to only six states: New Jersey, Delaware, Pennsylvania, West Virginia, Michigan, and Connecticut.

Offshore iGaming sites, typically based in the online gambling meccas of Malta, Gibraltar, and the Philippines, cater to US gamblers looking to bet from the comfort of their own homes. Though illegal, US law enforcement rarely penalizes or cracks down on players who gamble on an illegal website.

The AGA says offshore internet casino websites take about $337.9 billion in bets each year. That equates to net revenue of about $13.5 billion. Should that money have been wagered through legal, regulated iGaming platforms in the US, the AGA says the gambling would have generated about $3.9 billion in state tax income. That nearly $4 billion instead goes to the offshore platform operators.

As for illicit sports betting, the AGA believes offshore online sportsbooks and underground bookies who take bets in-person generate a yearly handle of approximately $63.8 billion and estimated revenue of $3.8 billion. That equates to a projected state tax loss of an additional $700 million.

Skill Gaming

Finally, the AGA believes the controversial skill gaming machines that have infiltrated several states, most notably in Pennsylvania and Virginia, take an estimated $109.2 billion in coin-in wagers each year. The terminals, which are common in restaurants, bars, grocery stores, and gas stations, aren’t monitored for fair play by an independent gaming regulator.

The AGA says skill gaming host venues and the terminals’ manufacturers and route distributors split nearly $27 billion in profits last year. The AGA estimates that there are currently more than 580,650 unlicensed, unregulated, and untaxed skill gaming machines operating across the US.

The AGA is calling on federal and state lawmakers to work with the legal gaming industry to enact laws to curb such unregulated gambling.

“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,” Miller concluded.