A recent analysis from the American Gaming Association (AGA) indicates that illegal and unregulated gambling constitutes a significant segment of the U.S. gaming industry, resulting in substantial losses in revenue and tax revenues for legitimate operators and public services.
According to AGA’s recent findings, Americans are estimated to bet around $673.6 billion each year through illegal and unregulated gambling channels. This activity produces approximately $53.9 billion in annual income for offshore betting sites and unlicensed operators, leading to an estimated $15.3 billion in lost tax income for state governments annually.
The growth of the illegal market–fueled by a rise in unregulated online gaming, an influx of unauthorized «skill» machines, and the ongoing prevalence of illegal sports betting–has increased by 22 percent since the AGA’s previous report in 2022. Even with the availability of legal gambling options, illegal operators now represent nearly one-third (31.9 percent) of the overall gaming revenue in the United States.
«Illegal gambling operations are flourishing at the cost of American consumers, draining billions in tax revenue from state budgets and undermining legal markets,» commented AGA President and CEO Bill Miller. «It’s crucial that we implement a national crackdown on this widespread illegal market that is depleting state resources and jeopardizing consumer safety.»
The report reveals that there are currently over 625,000 unregulated gaming machines active across various venues such as bars, restaurants, and convenience stores, marking a 7.7 percent rise since 2022. These machines are responsible for generating $30.3 billion in revenue and costing states about $9.5 billion in lost tax income.
Additionally, revenue from illegal online slot games and table games reached $18.6 billion, which is almost a 38 percent increase in three years. The proportion of iGaming participants relying solely on legal platforms has dropped from 52 percent in 2022 to just 24 percent currently, with nearly half (49 percent) now engaging with both legal and illegal gambling sites.
Last year, Americans placed around $84 billion in bets with illegal bookies and offshore sportsbooks. This generated $5 billion in income for these illegal entities and resulted in $1 billion in tax losses. While the percentage of bettors exclusively using illegal methods has decreased by one-third since 2022, 10 percent of sports bettors still rely solely on unauthorized sources.
«These criminal operations function in secrecy with no consumer protections, no responsible gaming practices, and without providing any economic benefits to the communities they exploit,» Miller emphasized. «Addressing this issue requires not only enhanced enforcement within the U.S. but also collaboration with international partners to shut down offshore operations and ensure accountability.»
Implications for the U.S. Esports Betting Sector
The AGA’s findings have significant implications for the rapidly developing esports betting market in the U.S., which frequently intersects with online gambling and digital audiences.
Offshore operators may increasingly attempt to attract esports fans and even professional players through unregulated platforms that offer match betting, skin gambling, and fantasy-style contests without proper safeguards against minors or match-fixing.
As regulated esports betting continues to expand in the U.S., a thriving illegal market could undermine its credibility, divert tax revenue, and increase integrity risks within tournaments. To uphold the industry’s legitimacy, rigorous enforcement measures and proactive educational initiatives will be necessary to guide players toward legal, regulated avenues.
