Editor’s note: The column was written in early July.
With MLB, MLS, NASCAR, NBA, NHL and PGA all finally back in play, the sports calendar has gone from nearly empty to as busy as ever. Between the influx in sports and early signs of pent-up demand for sports betting, bookmakers are expecting a busy summer.
New American Gaming Association (AGA) research shows that average spending with illegal bookies fell 25 percent in states with legal sports betting in 2019. Many of those bettors are moving their action online: legal online and mobile betting spend increased 12 percent, while illegal offshore operators saw a 3 percent increase in states with legal sports betting.
Bettors overwhelmingly prefer legal operators, with 73 percent saying it’s important to only bet through legal providers. Despite this, 52 percent of sports bettors participated in the illegal market in 2019. The research found that illegal sports betting is driven largely by confusion about online operators. More than half (55 percent) of consumers who placed most of their wagers with illegal operators believed they were betting legally.
The Covid-19 pandemic has potentially exacerbated the confusion about the legal and illegal markets. While legal operators were limited to offering niche sports like Belarussian hockey and Swedish handball, offshore bookmakers gained publicity by taking bets on everything from politics to the weather, shark migration patterns to whether your friends’ marriage will survive the pandemic.
While these wagers may seem benign to the average consumer, offshore sportsbooks endanger bettors by providing no responsible gaming measures, guaranteed payouts or safeguards for financial data. Of concern to all of us—especially our partners in federal law enforcement—illegal gaming operations often perpetuate dangers outside sports betting by funding money laundering, the drug trade, even human trafficking. What’s more, these bad actors pay nothing in the way of taxes, nor do they create jobs in our communities. Both are keys to recovery from the impacts of Covid-19.
The AGA is committed to the legal market’s continued growth and supporting the industry’s recovery following the pandemic. Our efforts to put illegal bookies and operators out of business are focused on three key areas:
- Coordinating with law enforcement: Our longstanding relationship with federal and state law enforcement agencies continues to prove effective in exposing and cracking down on these unregulated businesses and the associated crimes they perpetuate.
- Promoting policies that allow legal operators to compete: Providing customer convenience—consumers prefer to wager through legal channels when they are available. Accessibility is important. That’s why policymakers should allow customers to use intrastate mobile to make wagers as well as modern payment options that they’re accustomed to using in their daily lives.
- Avoid costly statutory mandates: Sports betting is a low-margin business, so it’s critical for states to establish reasonable tax rates and licensing fees. Imposing league fees and/or official data mandates also harms the competitiveness of legal operators, who are forced to pay additional costs that are not borne by the illegal market.
- Eliminating excise taxes: Burdensome and ineffective federal excise and head taxes unnecessarily put legal sports betting operators at a competitive disadvantage with illegal operators. The AGA is working with the Congressional Gaming Caucus to advocate for eliminating these taxes, which will allow legal operators to offer competitive odds and free up capital to invest in operations and employees.
- Educating the public: The AGA is committed to educating media and bettors on the distinction between the legal and illegal market. We send corrections on at least a weekly basis to reporters and editors reporting on illegal (and often preposterous) odds and are regularly calling out this irresponsible reporting. Through our “Have a Game Plan, Bet Responsibly” public service campaign, we’re focused on educating bettors on the core principles of responsible sports wagering, including where and how to bet legally. We also make it easy by offering a comprehensive list of legal operators on the AmericanGaming.org interactive sports betting map.
The AGA cannot do this alone. It will take everyone involved in the sports betting ecosystem to stamp out the illegal market—which is even more important as the industry begins its economic recovery.