Since the Supreme Court invalidated the Professional and Amateur Sports Protection Act (PASPA) about six years ago, advocates of legalized sports betting have often cited the potential suppression of illicit wagering markets as a key rationale for its implementation.
Despite the legalization of regulated sports betting in 38 states and Washington, DC, the black market persists. Research commissioned by the Campaign for Fairer Gambling (CFG) and conducted by YieldSec reveals a stark reality: for every regulated sportsbook like BetMGM, DraftKings, or FanDuel, there are over eight illegal iGaming or sports betting operators operating in the US.
The CFG’s report highlights that there are 860 illegal operators compared to just 103 regulated ones. Shockingly, these unlicensed operators generated nearly $41 billion in gross gaming revenue (GGR) last year, dwarfing the $16.9 billion earned by regulated competitors. Even events as significant as the 2024 Super Bowl saw only 35% of US bettors placing their wagers in regulated markets.
Challenges in Curtailing Black Market Operations
The persistence of illicit betting can be attributed to the patchwork nature of legalization across states. Moreover, some entities actively promote unapproved internet casinos or sportsbooks to US consumers. CFG’s findings indicate that 84% of US-facing affiliate sites exclusively promote illegal operators, while 41% work with both legal and illegal entities. Only 16% of affiliate firms focus solely on legal gaming companies.
In the realm of sports wagering, another contributing factor is the reluctance of regulated operators to engage with skilled bettors, known as sharps. While sharps constitute a small portion of the betting population, they are significant drivers of betting volume. However, many regulated operators refuse to accept their bets, pushing them toward the black market.
Urgency of Reducing Black Market Activity
Despite the efforts to legalize and regulate sports betting and iGaming, the black market continues to thrive, posing risks to consumers such as non-payment of winnings and susceptibility to digital fraud.
Ismail Vali, CEO and founder of YieldSEC, emphasizes the necessity of monitoring online activity, removing illegal content, and enforcing the law to foster a safe and responsible betting environment.
As policymakers and regulators strive to mitigate the prevalence of illicit gambling, it becomes increasingly crucial to prioritize consumer protection, tax revenues, and the integrity of the gaming industry.
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