Black Market Sports Betting in US Has No Panacea in PASPA

Posted on: March 25, 2024, 05:04h. 

Last updated on: March 26, 2024, 12:26h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

In the roughly six years since the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), sportsbook operators have frequently sold states on potential reduction or outright elimination of illicit sports wagering markets as a reason to legalize the activity.

sports betting offshore sportsbook
The black markets for iGaming and sports betting are still thriving in the U.S. (Image: Shutterstock)

But with 38 states and Washington, D.C. now permitting regulated sports betting, the black market remains alive and well. The Campaign for Fairer Gambling (CFG) commissioned research conducted by YieldSec, and one of the staggering findings was that there are more than eight illegal iGaming or sports betting operators doing business in the U.S. for each regulated company, such as BetMGM, DraftKings, or FanDuel.

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 report says there are 860 illegal operators in the U.S., compared to just 103 with regulated status. Last year, those unlicensed firms generated nearly $41 billion in gross gaming revenue (GGR) compared to $16.9 billion for regulated rivals. The 2024 Super Bowl was a prime example of that trend, as just 35% of wagers placed on that game by U.S. bettors were in regulated markets.

Black Market Thriving

State-level legalization, or the lack thereof in some cases, explains why “bootleg” betting remains so common in the U.S.

California and Texas, the two largest states by population, don’t offer regulated sports wagering. Florida, which is third in terms of population, only recently launched, and its market is controlled by just one operator. New York allows mobile sports betting, but not iGaming. That’s a significant percentage of the U.S. population for illegal gaming companies to target.

Some companies indulge that approach. According to CFG, 84% of U.S.-facing affiliate sites exclusively promote internet casino or sports betting outfits that aren’t approved to do business in the U.S. That’s while 41% do business with both illegal and legal operators. Just 16% of affiliate firms focus exclusively on legal gaming companies.

Specific to sports wagering, another reason why some bettors are inclined to continue giving their business to local bookmakers or offshore sites is that many regulated operators in the U.S. limit, or won’t even do business with, sharp players.

While sharps represent a scant percentage of the overall sports wagering universe, they can be handle drivers for regulated books. But many of those companies aren’t taking their business, forcing those bettors to remain in the black market.

Compelling Reasons to Minimize

While regulated iGaming and sports wagering have to date been unsuccessful in thwarting the unregulated markets, there’s good reasons for politicians and regulators to continue pursuing that objective.

Namely, there are risks to consumers that bet with unlicensed operators, including not being paid on winning bets or being victims of 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,” noted YieldSEC CEO and founder Ismail Vali.