A recent report found that black market operators in New York, New Jersey, and Minnesota were able to generate $9.5 billion in unregulated online gross gaming revenue (GGR). This represents almost a quarter of the $40.92 billion in illegal GGR across the total online gambling marketplace in the U.S.

The report was commissioned by the Campaign for Fairer Gambling (CFG), an independent group that advocates for gambling reform. It has a deep knowledge of the gambling sector and lobbying practices in the U.S. Yield Sec (YS), a technical intelligence platform, did the research. It helps monitor online marketplaces and offers insights on operational efficiency and regulatory compliance. Its mission is to remove criminal threats to consumer safety, revenue, and taxation.

A focus on three states with different legal landscapes

The report focused on three states with quite different legal landscapes. This helped to provide a good spectrum for the study of illegal online gambling.

In New Jersey, online gambling is legal, and it has an extensive history in this industry. In New Jersey, 43 legal sports betting and casinos are supported by over 100 affiliates who only promote regulated operators. Legal online gambling markets are regulated which means they are subject to safeguarding requirements. Regulated operators generate a GGR of $2.9 billion in New Jersey. According to the report, unregulated operators generate $1.7 billion. Of the total online market, 22% comes from illegal online sports betting and 16% from Illegal online casino gaming.

In New York, only sports betting is legal, and the nine regulated online sports betting operators generate GGR of $1.7 billion. Unlicensed operators in the state create a GGR of $5.4 billion. Much of this is attributed to illegal online casino gaming while $1.9 billion appears to come from unregulated sports betting. Sports bettors make bets on many sports such as football, basketball, and mainstream golf.

In Minnesota, online gambling is entirely illegal. Black market operators in the state generate a GGR of $2.4 billion. Unregulated online casino gambling accounts for 62% and illegal online sports betting for 38%.

A call for federal involvement

In the three states, over 800 illegal operators pay no attention to state gambling laws. The presence of 43 legal operators in New Jersey compared with only nine in New York shows that increasing legal operators doesn’t seem to reduce the impact of illegal online operators. CFG founder, Derek Webb, points out that even with the legalization of cannabis, the illegal market is still flourishing. There isn’t any evidence that suggests legalizing gambling would be any different. The report concludes that it can be hard to challenge illegal online gambling because it has historically been dominant.

Despite the legal US gambling market size constantly increasing, it hasn’t stopped illegal operators. The CFG is calling for federal involvement in the oversight of online gambling. The company is eager to equip policymakers with reliable data. This can lead to more informed debate and smarter gambling policies over the long term. Founder and CEO of Yield Sec, Ismail Vali, says the data shows that illegal gambling operators are stealing money that should go into state and federal coffers.

Dangers of illegal gambling

Research by Yield Sec found that Americans bet $5.37 billion on the Super Bowl this year, and only $1.4 billion was bet legally. Whatever the size of the black market, legal operators are clear about its dangers.

The lack of regulation and oversight means that people who gamble using illegal operators don’t have access to the same level of consumer protection and safe gambling measures found in regulated markets. Many young consumers are unable to distinguish between legal and illegal sites. They may look good and sometimes even better than legal sites. Stopping the unregulated operators isn’t likely to happen overnight. It will require concentrated efforts by all concerned parties.