Chavdar Vasilev is a gambling news writer with several years of experience in the iGaming industry. He started creating promotional content but soon found he loved reporting on the industry itself. Since then, he’s delivered...
Read Full BioOnly one quarter of gross gambling revenue (GGR) in the US comes from legal platforms, according to a new report by the Campaign for Gairer Gambling (CFG).
The findings, published in a supplement to the USA National Online Gambling Report 2024, revealed that 74% of GGR is generated by illegal offshore operators.
CFG commissioned an online market intelligence platform, Yield Sec, to analyze all 50 states. The report also challenges the notion that reducing or removing illegal online gambling reduces gambling spending.
On the contrary, states with online sports betting and online casinos report a 261% GGR per capita compared to those without any legal online options.
The report attributes convenience as a driving factor for Americans to choose illegal platforms:
“For Americans, illegal gambling brands have become the homes of choice and convenience, and existed far in advance of legal online betting and gaming options. This legacy effect, and the current choice and convenience of illegals having all products, at better prices and with cross-sell promotions, compared to legal rivals, means the average consumer sees little to no downside in choosing an illegal provider… if they even realize they’re illegal.”
Yield Sec’s platform does not rely on operator-reported data. Instead, it scans the internet for relevant keywords related to gambling.
Once it separates the information between legal and illegal gambling groups, it then uses AI, machine learning, and expert reviews to prioritize threats posed by unlawful gambling platforms.
The platform then utilizes its proprietary Yield Sec Matrix to rank risks based on factors like revenue loss, market impact, player protection, regulatory compliance, and tax implications.
Illegal Market Growing Faster Than the Legal Market
The USA National Online Gambling Report 2024 estimates that the total GGR in the US for 2024 was $90.1 billion. Of that, legal platforms generated $23 billion (26%), while illegal operators took in $67.1 billion.
Compared to 2023, total GGR increased by 56%. Dividing between legal and illegal platforms, the licensed operators saw a 26% yearly increase, while offshore generated 64% more.
One likely reason is the disproportionate balance in platform and affiliate representation:
- Legal online gambling platforms: 95
- Affiliates promoting only legal platforms: 106.
- Online illicit gambling platforms: 917 (nearly 10 times more)
- Affiliates that promote offshore operators: 668 (six times more)
Ismail Vali, founder and CEO of Yield Sec, says,
“Yield Sec surveillance shows that the legal industry is being undermined at every turn by criminal competitors who offer greater value, bigger bonuses, and lower barriers, since they pay no tax, no licensing and exploit all forms of regulation in the absence of sincere monitoring, policing and enforcement against them.”
Legal Platforms Losing Visibility and Audience Share
An alarming statistic is that legal platforms captured only 12% of the total audience exposure to online gambling in 2024.
And while some lawmakers are targeting gambling ads by regulated operators, illegal platforms often utilize major sports events, such as the Super Bowl, March Madness, and the Olympics, as recruitment tools.
An additional concern is that the US mass media are promoting offshore operators as if they were legal.
Another threat to regulated online gambling platforms is the growing popularity of sweepstakes casinos. However, in recent months, several states have targeted these platforms. Montana banned them in May, followed by Connecticut. Others, like New York, have taken a direct regulatory approach to chase sweepstakes casinos out of their states.
Legal iGaming States See Better Regulated Market Share
Regulated operators in the states with legal iGaming have captured a significantly higher percentage of the total GGR:
- The legal sector in Pennsylvania generated $3.58 billion, or 57% of the total GGR.
- New Jersey’s legal sector generated $3.55 billion, accounting for 58% of the total.
- Michigan’s legal operators generated $2.91 billion, 57% of the total.
In contrast, in many high-population states like New York, Ohio, California, Illinois, and Texas, illegal operators dominate the market:
- In California, where no online gambling is legal, the illegal sector generated $5.49 billion, or 100% of the total GGR.
- In New York, the country’s biggest sports betting market, the illegal sector generated $5.3 billion, or 72% of the total gambling revenue.
- In Ohio, illegal platforms generated $5.26 billion, accounting for 85% of the total.
- Texas, another state with no legal online gambling, had a $4.5 billion illegal market.
- Offshore operators collected $3.54 billion from Illinois players, accounting for 76% of the total amount wagered in the state.
Ohio, in particular, stood out for its high per capita illegal gambling activity. The state reported $316 GGR per capita spending on online casinos, far more than any other state (legal or illegal). Illegal sports betting in the Buckeye state accounted for $130 per capita, also the highest among any other state.
Legalizing online casinos has been discussed as a solution in Ohio. Last month, two separate bills were introduced in the House and the Senate to legalize iGaming. The House bill also proposed a ban on sweepstakes casinos.
However, like in many other jurisdictions, the proposals face tough opposition from the retail casino sector.
Legalization Does Not Equal Harm Reduction
While the illegal sector is booming in Ohio, CFG warns that the state’s legal sports betting market is also a cause of concern.
Darek Webb, Founder of CFG, warned that the state is “the alarm bell America needs to hear.” He added,
“Just one year after legalizing online sports betting in 2023, losses for Ohioans had already reached 1.33% of average income per capita to online gambling – the heaviest burden in the country, and more than twice the national average. Across the US, we’re not seeing illegal gambling being replaced, we’re simply seeing total consumer losses grow. In states with full legalization, losses are now 261% higher than where there’s no legal online gambling at all. This isn’t progress, it’s escalation.”
According to the CFG State Supplement, the effect of GGR per capita as a percentage of average income is negative with the legalization of online gambling:
- The US national average GGR per capita is 0.62% of the average income.
- States like California, with no legal online gambling, have a GGR per capita average of 0.31%.
- States with only legal online sports betting (e.g., New York): GGR per capita is 0.77%.
- States with online sports betting and online casinos (e.g., New Jersey): GGR per capita is 1.12% of the average income.
The alarming trend is that the growth from illegal to legal online sports betting, or when states legalize online sports betting, results in a 148% increase in GGR per capita as a percentage of income.
Meanwhile, when states legalize both online sports betting and online casinos, that rate increases by 261%.
Methodological Considerations and Industry Debate
While the CFG report highlights the growing issue of illegal gambling platforms in the US, it’s essential to note some limitations in the methodology used by Yield Sec.
Yield Sec’s platform does not rely on operator-reported data, as offshore operators are usually privately owned and do not report revenue figures. Therefore, the platform relies on scanning the internet for relevant keywords related to gambling.
After separating the information between legal and illegal gambling groups, it then uses AI, machine learning, and expert reviews to prioritize threats posed by unlawful gambling platforms.
The platform then utilizes its proprietary Yield Sec Matrix to rank risks based on factors like revenue loss, market impact, player protection, regulatory compliance, and tax implications.
Additionally, transparency around Yield Sec’s relationship with CFG is essential for context. One of CFG’s four members is Matt Zarb-Cousin, also a co-founder of Gamban, a gambling-blocking software, and a senior advisor to Yield Sec. That relationship could contribute to CFG’s significant reliance on Yield Sec data.
Further complicating industry dynamics are the past tensions between CFG and the iDevelopment and Economic Association (iDEA), a trade group representing online gambling interests.
Last year, CFG commissioned a study from NERA Economic Consulting, which revealed similar results to Yield Sec’s findings. IDEA publicly contested the findings, prompting a public exchange with CFG over the impacts of online gambling legalization.
Interestingly, while advocating for tiger regulation and increased taxation, CFG supports event prediction platforms, such as Kalshi, and sports event predictions in particular.
What’s notable about this is that these event predictions are at the center of several legal battles between Kalshi and state gambling regulators, who claim they’re illegal sports betting.
Legal discourse has blossomed because prediction markets function similarly to regulated gambling platforms but operate under a different regulatory framework, which is subject to less strict oversight.
