Legalized Sports Betting Fails to Curb Thriving $40.92 Billion Black Market

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In an illuminating new twist, despite the legalization of some form of sports betting in 38 states and Washington, DC since the 2018 Supreme Court’s pivotal ruling on the Professional and Amateur Sports Protection Act (PASPA), there appears to be a persistently thriving black market for betting. Shockingly, its prevalence remains solid in states where even online and retail betting is now lawful.

The expansion, initially believed to wipe out the illicit betting world, has today given rise to an intriguing question – has the ruling inadvertently fueled the very thing it sought to annihilate?

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That New Jersey, a state with robust regulations and provisions for iGaming and online sports betting, continues to grapple with a thriving black market betting scene is a jarring testimony of this paradox. Worryingly, Minnesota and New York echo the same disconcerting narrative.

With the introduction of a recent report by the Campaign for Fairer Gambling (CFG), the murky underbelly of sports wagering is laid bare. The report reveals a staggering figure; wagers worth $40.92 billion were made through unregulated internet casinos and sportsbooks, a cool $9.5 billion of which were made by bettors in New Jersey, Minnesota, and New York.

Derek Webb, the founder of CFG, shares his sharp insights. “Sector-friendly legislation, regulation, and tax rates have not, as was initially assumed, disrupted the indomitable reign of illegal online gambling operators.”

He suggests that even though New Jersey, Minnesota, and New York are playing by the legal rules, over 800 illegal operators continue to exploit the system relentlessly, clearly untouched and undeterred by state law.

The rampant black market in Minnesota may be partially explained by the state’s prohibition of iGaming or sports betting. But the existence of such a market in New Jersey and New York, where both forms of betting have the law’s nod, is indeed a conundrum.

Webb asserts that the introduction of federal oversight might help curb the thriving illegal market.

As Webb emphasizes, “This is one justification for federal involvement in the monitoring of online gambling. Basing decisions on reliable data will enable a more nuanced debate and ultimately more effective gambling policies.”

While law-abiding gaming companies strive to carve out fair and legal terrain in the industry, they often emphasize to policymakers and regulators that countless citizens are still drifting towards the seedy world of offshore entities for illegal betting activities.

They argue that the approval of online casinos and sports betting by the state can increase consumer protection, and bring in considerable revenue. However, the stark reality presented by New Jersey and New York paint a contrary picture.

Disturbingly, Minnesota saw an infusion of an estimated $1.5 billion into unregulated iGaming forums along with an additional $929 million allocated to illicit internet sportsbooks. In New Jersey, despite legal alternatives, bettors spent a whopping $1 billion on clandestine bookies and illicit online sports betting platforms and other $719 million with unregulated online casinos.

Further, in New York, despite a current political push for legalizing iGaming, it has been reported that residents spent a staggering $3.4 billion on unregulated internet casinos and another $1.9 billion on illegal sportsbooks.

As these shocking numbers tell a tale of persisting and thriving black markets, we are reminded that legalization alone may not be enough to eradicate its allure. Perhaps it is now time to explore innovative strategies and revisit inherent human propensities to seek a lasting solution.