Brand-new research from the American Gaming Association has found that illegal and unregulated gambling in the United States is still on the rise, despite efforts from legislators and various authorities to curb its growth. In fact, the study found more than $673 billion was wagered annually by Americans, and illicit platforms still account for almost 1/3 of the US gambling market.

A new report and analysis by the American Gaming Association reveals that illegal and unregulated gambling operations continue to hold a significant share of the US gaming market, siphoning billions from licensed operators and state governments.

According to the report, Americans wager an estimated $673.6 billion annually with illicit operators - ranging from offshore sportsbooks to unregulated gaming or skill machines - denying communities vital resources for public safety, infrastructure, and education. The study estimates that states lose $15.3 billion in annual tax revenue to the illegal market.

Illegal gambling on the rise

The AGA notes that the illegal gambling market has grown 22% since its last study in 2022, fueled by a sharp increase in unregulated online gaming, the proliferation of so-called 'skill' machines, and ongoing illegal sports betting. Despite growth in the legal gaming sector in recent years, illicit operations still command 31.9% of the total US gaming market.

The report estimates the illegal market generates $53.9 billion annually in revenue for offshore betting networks and unlicensed machine operators. "Illegal gambling operators are thriving at the expense of American consumers, siphoning billions in tax revenue from state governments, and undercutting the efforts of the legal market," said Bill Miller, AGA's President and Chief Executive Officer. "It's time for a national crackdown on the pervasive illegal market that is draining state coffers and putting people at risk."

The 'skill' machine problem

'Skill' machines, which are unregulated devices often found in restaurants and bars, and even convenience stores - are one of the fastest-growing threats to legal gaming, the report says. There are now over 625,000 of these machines in operation nationwide, representing a 7.7% rise since 2022.

These machines generate $30.3 billion annually while costing states $9.5 billion in tax revenue. Without regulatory oversight, they pose significant risks to consumers, including lack of responsible gaming measures and potential links to criminal activity.

Illegal iGaming growth

The study also highlights a troubling surge in illegal online casino activity. Revenue from unauthorized online slots and table games has grown to $18.6 billion, an increase of almost 38% from 2022.

Even more concerning is a shift in player behavior: the share of iGamers who play exclusively on legal sites has dropped from 52% back in 2022 to a mere 24% currently. Meanwhile, the percentage of players who use both legal and illegal platforms has nearly tripled over the past three years, now at 49%. Although illegal operators hold a smaller share of the total iGaming market compared to three years ago, the rapid growth in mixed-site play signals a persistent challenge for regulators.

The analysis finds that Americans wagered roughly $84 billion with illicit bookmakers and offshore sportsbooks in the last year, producing $5 billion in revenue for unlicensed operators and causing $1 billion in lost tax revenue.

Still, there are some signs of progress: sports bettors using only illegal sources has dropped by one-third since 2022, and the illegal market's share of total US sports betting revenue has fallen from 36% to 24%. However, one in ten sports bettors still place wagers exclusively through illegal channels.

"These bad actors operate in the shadows with zero consumer protections, no responsible gaming obligations, and no economic return to the communities they exploit," Miller said. "Combating them requires not only stronger US enforcement, but also continuing to work closely with our international partners to shut down offshore operators and hold them accountable."

The AGA's findings are based on research conducted by The Innovation Group, which surveyed 2,454 adults on their gambling habits over the past year with both legal and illegal operators. The study also analyzed publicly available data on the size of the legal US gaming market and certain state-level machine markets.