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Black Market Thriving Despite Legalization of Sports Betting

Publish Date:April 30, 2024
Fact checked by: Chris A
Black Market Thriving Despite Legalization of Sports Betting

Black Market Thriving Despite Legalization of Sports Betting

Since the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) around six years ago, sportsbook operators have often argued that legalizing sports betting could significantly reduce or even eliminate the illegal betting market as a persuasive reason for states to legalize the activity.

However, despite 38 states, along with Washington, D.C., now allowing regulated sports betting, the underground market is still thriving. The Campaign for Fairer Gambling (CFG) sponsored a study by YieldSec, revealing a shocking reality: for every legally operating company like BetMGM, DraftKings, or FanDuel, there are more than eight illicit iGaming or sports betting operations active in the U.S.

The black market is alive and well in America. Legalizing iGambling was never going to adequately weaken the illegals,” said CFG founder and funder Derek Webb. “But the presence of the black market has served as a useful foil — the legal gambling sector’s main rationalization for expansion.

CFG’s analysis reveals a stark disparity in the U.S. gaming industry, with 860 illegal entities outnumbering the 103 regulated ones. Last year, these unauthorized operators amassed nearly $41 billion in gross gaming revenue (GGR), overshadowing the $16.9 billion generated by their legal counterparts. The 2024 Super Bowl vividly illustrated this trend, with only 35% of bets placed by U.S. gamblers falling within regulated markets.

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Expansion of the Black Market

The prevalence of “bootleg” betting in the U.S. can largely be attributed to the state-level legalization patterns, or the absence thereof in certain regions. California and Texas, the two most populous states, do not offer regulated sports betting. Florida, ranking third in population, has only recently introduced sports wagering and a single operator monopolizes its market. While New York permits mobile sports betting, iGaming remains off-limits. This scenario presents a substantial portion of the U.S. population as potential targets for illegal gaming entities.

Some companies adopt this strategy. CFG reports indicate that 84% of affiliate websites targeting the U.S. market solely endorse internet casinos or sports betting entities that lack authorization to operate within the U.S. Meanwhile, 41% engage with both legal and illegal operators. Only a mere 16% of affiliate companies dedicate their efforts solely to promoting legally sanctioned gaming enterprises.

In the realm of sports betting, one significant reason bettors continue to patronize local bookies or offshore platforms is that numerous regulated operators in the U.S. either restrict or outright refuse to engage with sharp bettors. Although these experienced players constitute a small fraction of the overall sports betting population, they play a crucial role in driving the handle for regulated bookmakers. However, many of these companies choose not to accept their business, compelling these bettors to resort to the unregulated market.

Strong Reasons to Minimize

Despite the lack of success in curbing unregulated markets through regulated iGaming and sports betting, there are compelling reasons for politicians and regulators to persist in this endeavor. Specifically, consumers who gamble with unlicensed operators face significant risks, such as not receiving payouts on successful bets or falling prey to digital fraud.

“The only solution to optimizing the marketplace opportunity for legal brands, state tax revenues, responsible gaming, and a safe consumer environment is to monitor the online audience, detect their activity, police and remove illegal content, including ads, and effectively enforce the law,” Ismail Vali, the CEO and founder of YieldSEC, remarked.

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