The Impact of Legalized Sports Betting on the Black Market

When the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) in May of 2018, Casey Clark, Senior Vice President of the American Gaming Association (AGA) said to the radio show Pushing The Odds that he hoped that it would be “the first of many bad days for illegal bookies.”

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Fast forward to July 2020, and the AGA released new data confirming that the legalization of sports gambling across the United States has made a significant dent in the amount being wagered in the black market.

The AGA, which presents itself as the premier national trade group representing the $261 billion US casino industry, discovered that “average spending with illegal bookies fell 25 percent in legal sports betting states last year, while legal online and mobile betting spend increased 12 percent.”

“We've known for a long time that Americans like to bet on sports. This research affirms their interest in moving toward the protections of the legal market,” said AGA President and CEO Bill Miller in a press release. “Giving consumers convenient alternatives to the illegal market, like regulated mobile offerings and competitive odds, is key for getting bettors to switch to legal channels.”

The AGA also uncovered an interesting trend that should make lawmakers in states that are considering legalization feel good about opening up their states to the legal market. The research found that gamblers overwhelmingly want a legal option for sports gambling, as 74% of those polled said that they now only bet with legal sportsbooks.

“I think the more that we can tell people about the protections that exist for consumers to ensure that their bets will be paid out (is important),” Clark told Pushing The Odds on Tuesday. “We've heard a lot about game integrity over the last couple of years and I think that the only way to protect that is to bring all of this activity out of the shadows and into the protections of the regulated marketplace.”

Another interesting aspect of the research was the discovery that 48% of gamblers would change their behavior if they knew that they were betting with an illegal operator. They also found, however, that 52% of all sports bettors are still participating in the illegal market. Indeed, according to the AGA, illegal offshore operators actually saw a three percent increase in states with legal sports betting over the last year.

“Illegal, offshore operators continue to take advantage of unknowing consumers,” continued Miller. “This only worsened during the sports shutdown, with unregulated bookmakers offering odds on everything from the weather and shark migration patterns to whether your friends' marriage will survive the pandemic. The AGA is focused on educating customers on how to wager legally and the dangers of the illegal market, especially with the return of the MLB and NBA this month.”

One way the AGA is trying to educate the public is by offering an interactive map of the US that shows the sports gambling laws for each state. 18 states plus the District of Columbia now offer some form of legalized sports gambling, with as many as four more states getting ready to offer sports wagering in 2020.

With Americans betting over $22 billion on sports since May 2020, educating the public about the dangers of the illegal market has become a major priority of the legal sports gambling industry. Since PASPA's repeal, the AGA reports that nearly $200 million in local and state tax revenue has been generated from sports betting, and as that number grows, other states will begin to legalize the activity.

It's clear from states like New Jersey and Indiana that the future of sports gambling is via mobile applications from legal sportsbooks. The problem is that some states that are considering legalizing sports gambling have casino properties that are reluctant to offer mobile wagering for fear of injuring other parts of their casino business. This has been compared to the time when sports weren't covered on TV because of the fear that fans wouldn't buy tickets to go to games.

The AGA believes offering convenient alternatives to the illegal market, like regulated mobile offerings and competitive odds, is the only way to compete with the black market.

“People have had access to gambling on their phones as easily as if they were ordering an Uber,” Clark said. “I think in order to get people to transition to the legal market you to offer comparable odds, comparable conveniences, and all of the things that they have become used to in the betting market, we have to be able to offer it in the legal market too.”

The biggest fight over mobile wagering right now in is New York, which has upstate casinos with brick and mortar sportsbooks but no such facilities downstate. Thousands of New Yorkers bet legally in New Jersey on their mobile devices every day by simply crossing the river into the Garden State. Other states like California would like to legalize in the future, but they face strong opposition to mobile wagering.

One thing is for sure: Americans love to bet on sports from their mobile devices. In 2019, nine out of every 10 bets in New Jersey were made on a mobile device. And with COVID-19 concerns, being able to place a bet right from your home will be paramount to keeping the legalized sports betting market robust.

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Matt Perrault is a featured writer at BettingPros and the host of the Daily Juice podcast. For more from Matt, check out his archive and follow him @sportstalkmatt.