The numbers are in, and millions in America made some type of bet on the World Cup this year. Sadly a large portion of these sports gamblers did it illegally. Unfortunately, for reasons unknown, a huge portion of sports gamblers still do so illegally, and that’s not making the States who spent time legalizing it happy.
It costs many states a significant amount of tax revenue, which is already in the millions of dollars. With that said, there’s a strong possibility that it may increase how much some of us pay in taxes to make the difference in the lost revenues. That’s because a major part of the reason even to legalize sports betting, online or offline, was due to the tremendous amount of tax revenues projected when each bill was under review.
In fact, it was an extremely high number, around $100 billion in sports bets were supposed to be placed this year in legal ways. That means using sports gamblers would use legal betting operators such as DraftKings or FanDuel. These figures came from a forecast in a report prepared by the American Gaming Association, which also had a survey of adults done back in September. The AGA report came out in November, and the overall figures made sense when the survey and report were produced.
While this was being produced, over half of all States in the United States, including D.C., had already legalized betting and sports betting in their own unique format. So some opted in for online sports betting. Other states were more stringent and said it had to be in-person sports betting and designated locations. Then some states embraced this change and accepted both online and offline bets made by sports gamblers.
Yet the report already showed a glaring issue that is making the States consider. Nearly half of all sports gamblers are placing bets with an operator who isn’t legal in any of the States in the past year. About 15% of sports gamblers who place illegal bets do it for all their bets. These illegal operators have a significant market share in the United States, with around 40% of the overall sports betting market. Most of them are online sportsbook operators that are simply based in other countries.
While the legal issue is a major one, as there’s no transparency or oversight with those offshore operators, there’s an even bigger issue to tackle, which is that it has already cost state governments millions in lost revenues this year and doesn’t display any signs of slowing down. Of course, we’re also not talking about a few million dollars here either, but the AGA report has already estimated that it’s going to cost all the States with legal sports betting operations about $700 in revenues per year.
It also doesn’t seem to make much sense since every State was able to build out its own platform with its own rules back in 2018. Since November 2022, the United States has been trending for every State to either legalize sports betting or decide on whether to do so. More States are legalizing it, making it no need to go to unvetted online sites to place bets.
The tax revenues come only if players win their bets typically, making it unnecessary to have to go elsewhere, and it has helped a lot of States with their tax revenue growth. At the same time, it’s helped numerous States that suffered financially during the pandemic to be able to recover nicely. In addition, many of these tax revenues go right back into State infrastructure and programs, even schools, making it a great win for all involved. Some of these tax revenues can also be enormous, such as in the State of New York, which looks as if its 2022 collection is estimated at $650 million.
Yet while these states are seeing excellent figures, they’re still missing a big portion, and with a U.S. Recession looming on the horizon, it could affect all the revenues a State pulls in, including those from legalized sports betting. The last major recession saw tax revenues dip by a third, as you can see by this report and analysis. States combat this by raising their taxes, and having illegal sports betting where no taxes are paid doesn’t help.
It gets worse with other types of gambling, not just sports gambling – and how the States are affected
While legal sports betting seems to be popular, and many advertisements may give that sentiment, the AGA report shows that there are other types of illegal gambling happening in larger numbers than sports betting. In fact, it’s less than 10% of illegal betting happening. Instead, most of it happens with illegal online gambling of table games and slots.
The estimated lost revenue for these illegal activities of online gambling, except sports betting, is estimated to be more than $10 billion in total. It’s not just happening online, but there’s actually around 40% of gaming machines (physical machines) that are not licensed in the United States, eating away from the tax revenues that the States could collect. These are the ones you find in local bars and other venues.
Either way, as this industry continues to grow, actions are being taken by law enforcement officials, but it’s still difficult when the operations are held offshore, away from the United States. And since those gamblers using those illegal sites may not face repercussions, it may not stop as quickly as it needs to.
It’s also been seen that Americans are unaware their actions on those sites are illegal, as they feel as if they can use it; it’s legal. Some are simply comfortable using those illegal sites and feel there’s no need to shift, which is similar to when marijuana was being legalized, but still, some decided to continue to obtain it illegally.
