Results from a study by geo-tracking company GeoComply show that states which aggressively target illegal gambling benefit more than states that don't.
GeoComply, which monitors America’s gambling industry, compared data from 10 states with similar adult populations, according to Legal Sports Report. The analysis found that legal markets in states that took direct action against illegal operators flourished, while markets in states that didn’t took a hit.
The data comes as the NFL season kicks off, the most popular time of the year for American sports bettors.
Breaking down the data
GeoComply analyzed five states that acted against illegal operators: Arizona, Louisiana, Massachusetts, Michigan, and Tennessee; and five that didn’t: Iowa, Indiana, Kentucky, North Carolina, and Virginia. All 10 states offer legal sports betting, with only Michigan also offering legal online casino gaming.
A comparison across the two classifications found that legal active betting participants grew 10% quicker in states that took action than those that didn’t.
It also revealed that account registrations were 39% higher in states with legal enforcement compared to those that were laissez-faire, said Kip Levin, CEO of GeoComply.
“These findings demonstrate that enforcement works. When states crack down on illegal sportsbooks, players migrate to the legal, licensed market, where they’re protected and where their play generates state tax revenue.
“Consumers often can’t tell the difference between a state-regulated sportsbook and an offshore site, but when regulators take action, it raises awareness and helps guide players to safer, accountable operators.”
August and September are key months for sportsbooks. The beginning of the NFL and college football seasons is a popular time for customers to create new sportsbook accounts.
Taking action
States have taken a variety of approaches to dealing with the spread of offshore sportsbooks. The most popular method has been using cease-and-desist orders, which give recipients a short period to stop illegal business or face legal action.
A report from the American Gaming Association found that offshore operators still control about one-third of wagers placed in America.
That number is down from the 40% reported in 2022, partly due to the addition of new legal jurisdictions, though it still represents an enormous amount of lost taxable gaming revenue.
Americans legally wagered close to $150 billion on sports in 2024, a 23.6% year-over-year increase and a new record, while sportsbooks claimed $13.7 billion in revenue.
Assuming one-third of wagers were lost to offshore sportsbooks and a 10% tax rate, which is well below the standard that is imposed in numerous states, that means that states lost out on at least $685 million in tax revenue.
In a letter last month, 50 state attorneys general encouraged the US Department of Justice to fight against the “rampant spread” of illegal online casinos and sports betting platforms.
“We seek the USDOJ’s cooperation in ensuring these companies are brought to justice to the fullest extent available under state and federal law, both criminal and civil, for any potential violations.”
GeoComply concluded its study by stating that it processes more than one billion transactions per month, and it expects a noticeable uptick now that the NFL and college football are back in season.