PAPSA No Panacea for Black Market Sports Betting in US

Posted on: March 25, 2024, 05:04h. Last updated on: March 25, 2024, 05:04h.

In the aftermath of the Supreme Court's decision to overturn the Professional and Amateur Sports Protection Act (PASPA) roughly six years ago, an air of optimism surrounded the potential curb of the black market in sports betting within the United States. Sportsbook operators pitched the legalization of sports betting to various states as a silver bullet to eliminate or at least significantly reduce illegal wagering activities. However, with 38 states and Washington, DC now on board the regulated sports betting train, the shadow of the black market looms larger than ever.

Key Takeaways:

• Despite the legalization of sports betting in 38 states and Washington, DC, the black market for iGaming and sports betting flourishes in the US.
• Research by the Campaign for Fairer Gambling reveals there are over eight illegal operators for every regulated company, with unlicensed firms generating nearly $41 billion in gross gaming revenue last year.
• The presence of large states without regulated sports wagering and operational limitations on sharp players by regulated operators are among the reasons for the persistence of the black market.
• Addressing this issue requires stringent monitoring, detection, and enforcement actions to protect consumers and optimize the market for legal entities.

The Campaign for Fairer Gambling (CFG) commissioned a study by YieldSec, uncovering that for every regulated entity like BetMGM, DraftKings, or FanDuel, there exists more than eight illegal iGaming or sports betting operators still actively engaging with the US market. Derek Webb, the founder and funder of CFG, stated, "The black market is alive and well in America. Legalizing iGambling was never going to adequately weaken the illegals."

According to CFG's findings, the US houses approximately 860 illegal operators against a backdrop of 103 regulated companies. In stark contrast, these unlicensed entities amassed nearly $41 billion in gross gaming revenue (GGR) in the last year, overshadowing the $16.9 billion generated by their regulated counterparts. The disparity was notably evident during the 2024 Super Bowl, where only 35% of the wagers placed by US bettors flowed through regulated markets.

Why Black Market Sports Betting, iGaming Still Thriving

The persistence of "bootleg" betting in the US can be attributed to several factors, including the absence of state-level legalization in populous states like California and Texas, and restrictive operational practices in states like Florida and New York. Moreover, the allure of the black market is heightened by the significant number of US-facing affiliate sites that promote unapproved internet casino or sports betting outlets, further complicating the landscape for regulated entities.

Another compelling reason for the endurance of the black market is the cautious stance regulated operators take towards sharp players, often opting not to engage with them. This reluctance forces a small, yet influential, segment of the betting population back into the arms of local bookmakers or offshore sites.

Compelling Reasons to Minimize the Black Market

Despite the challenges, there are compelling reasons for stakeholders to strive towards minimizing the black market. The risks to consumers engaging with unlicensed operators are significant, ranging from non-payment on winning bets to exposure to digital fraud. YieldSEC CEO and founder Ismail Vali emphasizes, "The only solution to optimizing the marketplace opportunity for legal brands, state tax revenues, responsible gaming, and a safe consumer environment is to monitor the online audience, detect their activity, police and remove illegal content, including ads, and effectively enforce the law."

As the battle against the black market in sports betting wages on, the focus shifts to the need for comprehensive strategies that combine stringent monitoring, detection, and enforcement. The road to a fully regulated and safe betting environment in the US is fraught with challenges, but the pursuit of consumer protection and market optimization for legal entities remains a worthy cause.