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AGA Report: Americans Wager Over $500 Billion Annually on Illegal Markets
By Jeff Osienya Nov 30, 2022 IndustryA new AGA report has unveiled that players spend half a trillion dollars annually on unregulated gambling markets. The AGA has called for gaming expansion across the country to protect players and channel revenue to state coffers.Based on a newly released report by the American Gambling Association (AGA), US gamblers spend more than $500 billion a year on illegal markets. Besides costing the legal gambling sector $44.2 billion in revenue, state coffers also miss out on about $13.3 billion in tax revenue due to unregulated gaming activity.
In legal markets, gaming operators and suppliers adhere to various licensing requirements for consumer protection, such as anti-money laundering regulations and know-your-customer guidelines. On the contrary, illegal or unregulated markets do not follow any standards. As a result, illegal markets expose bettors to risks, such as preying on vulnerable bettors by offering no commitment to responsible gaming and providing no recourse for bettors if something goes wrong. In addition, they deny state governments revenue, limiting funds used for crucial programs like law enforcement and education.
After the publication of the report, AGA President and CEO Bill Miller said in part:
Quote“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.”
However, as dire as the situation might seem, the US has one of the most tightly regulated gambling industries globally compared to other regions.
Sports Bettors Spend Over 60 Billion in Unregulated Markets
After the Supreme Court of the United States overturned the Professional and Amateur Sports Protection Act in 2018, sports betting has been on an upward trajectory. So far, 31 states have live sports betting markets, with 22 accepting mobile sports betting.
Despite that, according to the new AGA report, it estimates that every year in America, sports bettors wager about $63.8 billion with offshore sites and illegal bookies. Each year, this unregulated activity costs state governments $700 million in tax revenue and legal sportsbook operators $63.8 billion in revenue. Moreover, data currently projects that US bettors will spend $100 billion on licensed platforms in 2022, indicating that illegal sportsbooks capture about 40% of the nationwide sports betting market.
In addition, based on AGA’s report, 49% of sports bettors placed a wager with an illegal bookie in 2021. Meanwhile, a 2020 research published by AGA indicated that 55% of American bettors who wagered on illegal sportsbooks thought they were betting legally.
Illegal Activity on Online Slots and Table Games is Rife
Although the regulation of online slots and table games is minimal compared to sports betting in the US, many gamblers play in illegal iGaming markets. Each year it is estimated that US casino gamers spend roughly $338 billion on illegal online gambling sites.
The said iGaming activity on unregulated markets leads to an estimated loss of nearly $4 billion in revenue for state coffers. This year alone, USA’s illegal iGaming market is expected to garner over $13 billion, almost three times the size of the $5 billion generated from online legal gaming.
Moreover, it’s worth noting that online gaming is legal in only six states – Connecticut, New Jersey, West Virginia, Michigan, Pennsylvania, and Delaware. Thus, about 48% of American gamblers who participated in online slots and table games within the past year did so on illegal iGaming sites.
The Unregulated Gaming Machines Market Takes a 40% Share
Unregulated gambling machines look and function exactly like slot machines found in casinos. But then, these unregulated machines are located in unlicensed areas like malls, gas stations, bars, convenience stores, and truck stops.
So, due to their locations, unregulated gaming machines are usually easily accessible to vulnerable consumers such as minors. In addition, they may be tied to criminal activities like drug trafficking and money laundering. Currently, the number of unregulated machines in the United States stands at about 580,000, whereas roughly 870,000 are regulated. These stats mean that at least 40% of the gaming machines in the country are unregulated.
Additionally, according to state regulatory figures, the operator win percentage on unregulated machines is significantly higher than that of legal casino machines. Taking Nevada data, for example, in the past 12 months, slot machines have had a 7.16% win rate, whereas unregulated machines recorded an estimated 25% win rate.
Miller has therefore called for teamwork in cracking down on the unregulated gambling scene. He said:
Quote“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.”
The unregulated markets, on most occasions, attract unsuspecting bettors by pretending to be legal. Given that they are not bound by strict regulations and licensing requirements and don’t pay taxes, they usually offer more generous odds. Based on how AGA sees it, the best solution for the predicament is the expansion of regulated markets as players get adequate protection in licensed platforms and states to win tax revenue.
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