The illegal sports betting market has always had a presence in the U.S., particularly after the expansion of the internet which facilitated the creation of illegal, unregulated, offshore sports betting sites. In 2018, right before the overturning of the Professional and Amateur Sports Protection Act, illegal betting was so widespread it was estimated approximately $4.76 billion were wagered on Super Bowl LII, 97% of which was done so illegally. Most of these bets were facilitated by offshore sites. Offshore sportsbooks are enticing to consumers as they commonly advertise themselves as being legal by playing off of the general confusion surrounding sports betting regulations, due to variations from state to state. 

Additionally, offshore sites seem to be a more viable option by offering more favorable bets and better money lines than legal sites. Illegal sportsbooks do not have the pressure of state taxes siphoning off a portion of their revenue, something which forces legal sportsbooks to have marginally worse bets and money lines. The dangers a consumer participating in the illegal market faces include but are not limited to: loss of deposited money if the federal government initiates any proceedings against the illegal book, lack of data privacy, and absence of any monetary insurance policy if issues arise with the bettor’s wager. The illegal U.S. market, despite its risks, generated an estimated $50 billion-$200 billion in 2020. Although the illegal sports betting market is growing, there is a way to mitigate that growth, primarily by legalizing sports betting and having open competitive markets between different sportsbooks nationwide.

While illegal books offer the advantage of better money lines and anonymity, they pose a significant risk for consumers, most of which are not known to the consumer using the illegal sportsbook. There are solutions to minimizing the danger of the illegal sports betting market, most of which require a great deal of consumer education, something which is lacking regarding sports betting. One primary issue is how different gambling laws are on a state-to-state basis. Some states have total bans on gambling such as South Carolina. Meanwhile, North Carolina allows only in-person betting and its neighbor Tennessee only allows online wagering. Legalizing sports betting both in-person and online creates greater clarity and gives consumers more options to choose from when legally participating in sports betting. Having legal options both in-person and online can help to dissuade consumers from participating in the illegal market.

Legalizing online sports betting in every state is the first step in minimizing the black market’s scope. In-person only betting restrictions encourage bettors to look for offshore websites that offer the sports betting experience without having to drive to a casino in order to place their wager. Another issue with black market sites is the lack of taxation they face. As a result, offshore books are able to offer more enticing money lines and bets than their legal counterparts. To counter the market incentive for consumers, state taxes on sportsbooks and their revenues need to stay low so they can offer competitive money lines and odds to their customers.

Constant exchange of information between states on how to best regulate bookmakers, how to ensure financial integrity of both bettors and sportsbooks, and how to address any unique issues which may arise is key for the legal market to gain a leg up on black-market offshore sites. Around 73% of consumers who currently bet on sports believe it is best to do so in a legal manner as it is the safer, and more secure option. Consumers desire safety and security when placing bets and states have the capacity to provide said security. To reap the greatest benefit for consumers, states must work together to minimize the influence of illegal sportsbooks.

States need to practice careful regulation of the sports betting industry if it is going to legally flourish in the U.S. A safe, secure, and well-balanced legal sports betting market offers consumers currently betting illegally a huge incentive to switch. For prospective consumers, the existence of an open and legal market helps ensure that they are not drawn into the illegal market and exposed to the risks which come with it.

Nationwide, legalized sports betting is not only a boon for consumers. Mass legalization of sports betting possesses great benefits for the states as well. With legalization of sports wagering, a new, taxable revenue stream becomes available. For example, New York, which just legalized in-person and online sports betting in January 2022, has already generated $70 million in tax revenue, all of which is marked to be used in financing education, youth sports, property tax relief, and treatment for those with problem gambling habits. 

Using the boost in tax revenue states can do a lot of good and have greater flexibility to tackle issues they may have lacked proper funding for. Additionally, an increased number of jobs will be created with the legalization of sports betting. The effect of legalizing online betting in particular is significant. According to an economic impact modeling system called IMPLAN, in a typical California-styled internet business, online sports betting companies have a 7.3:1 ratio for jobs generated. Meaning, with the opening of a new sportsbook in a state, there are about 7 new jobs created with an online sportsbook for every one created by a physical casino. Better yet, those same online positions created have a 49% higher income rate than working in an in-person sports betting retailer. With greater employment opportunities and a larger tax base to utilize for the betterment of their state, state governments and consumers alike have a lot to gain from the legalization of sports betting nationwide.