Despite the legalization of online gambling in multiple states across the US, illegal gambling still dominates. According to a new report by the "Gambling Total Revenue Movement" (CFG) and data agency Yield Sec, by 2024, only 26% of the total gambling revenue (GGR) will come from legal platforms, with the remaining 74% generated by illegal offshore operators.
This data comes from the supplementary report of the "2024 US National Online Gambling Report," covering an analysis of all 50 states. The report notes that while some believe that combating illegal gambling could reduce overall gambling expenditure, data shows that states with legal sports betting and online casinos have a per capita GGR 261% higher than states where it is not legalized. This indicates that legalization has not suppressed consumption but has instead increased overall participation.
Convenience remains the main factor for the popularity of illegal platforms. Illegal brands have been around for a long time, offering a more comprehensive range of products, competitive prices, and cross-promotion advantages. Even though players are aware of their illegality, they tend to continue using them. Yield Sec uses AI and expert systems to identify legal and illegal platforms from online content and rates their risk based on revenue loss, regulatory compliance, and other factors.
The GGR for US online gambling in 2024 is expected to be $90.1 billion, with legal platforms contributing $23 billion and illegal platforms reaching $67.1 billion. There are 95 legal platforms, with only 106 affiliates promoting them, while there are as many as 917 illegal platforms, corresponding to 668 affiliates.
Yield Sec CEO Ismael Vali points out that legal platforms face fierce competition from "untaxed, unregulated criminal counterparts." The audience for legal platforms only accounts for 12% of the total, while illegal platforms take advantage of major events like the Super Bowl to promote extensively, even being "implicitly legalized" by mainstream media.
The rise of lottery casinos also poses challenges to legal platforms. Some states like Montana and Connecticut have explicitly banned them, while New York has opted for direct regulation and expulsion. In contrast, states with legalized iGaming have better market regulation. For example, legal operators in New Jersey, Pennsylvania, and Michigan respectively hold 57%-58% of the GGR share.
In contrast, in populous states like New York and California, the illegal market holds a significant dominant position. In California, 100% of online GGR comes from illegal channels; in New York, illegal platforms rake in $5.3 billion, accounting for 72%; Ohio reaches 85%. Notably, Ohio's per capita illegal GGR is the highest in the US at $316.
Although Ohio has proposed two bills to legalize online casinos, the retail casino industry strongly opposes them. Moreover, CFG warns that legalization has not reduced losses. In the first year of legalization in 2023, Ohio's per capita online gambling loss accounted for 1.33% of income, more than twice the national average. Nationally, states with legal online gambling have a loss rate 261% higher than states without legal channels.
CFG points out that while legalization has expanded participation, it has also significantly increased per capita gambling losses: states without legal gambling have a per capita loss of 0.31% of income, those with legal sports betting have 0.77%, and those with both sports betting and online casinos have 1.12%.
Although the report provides comprehensive data, it is also important to note methodological limitations. Yield Sec does not rely on operator reports but uses keyword scraping and AI models for identification and assessment. The close relationship between CFG and Yield Sec has also sparked industry skepticism, especially in the context of differing positions with organizations like iDevelopment and iDEA.
For example, CFG commissioned NERA to conduct a similar study, whose conclusions are consistent with this report, but which was questioned by iDEA, sparking calls for public discussion. At the same time, while CFG opposes illegal gambling, it supports event prediction platforms like Kalshi, which are under scrutiny by multiple state gambling regulators due to their operation methods being close to gambling yet operating in a regulatory gray area.
As the industry and policy struggle continues, the report reminds people: legalization is not the endpoint of gambling governance. Without effective regulation, promotion, and user guidance, legal platforms still struggle to shake the massive foundation of the illegal market.
