Managing Editor
Illegal gambling in the US is on the rise, according to the American Gaming Association (AGA), but legal gambling is growing even faster.
The AGA, which represents regulated U.S. gambling companies, estimates that Americans will lose $54 billion gambling illegally this year, compared to $44 billion in 2022, the last time it performed this research.
That’s an increase of 22%, but the regulated market has grown about 34% over the same period. Across all channels, legal US operators earned $115 billion in 2024. At the year-to-date 7.1% growth rate given by the AGA’s Commercial Revenue Tracker, that might be as much as $123 billion for 2025.
In other words, the share of U.S. players’ gambling dollars going to the regulated market is around 70%, and that’s on the rise. If the AGA’s numbers are to be believed, it’s really only in the iGaming sector that unlicensed operators continue to win out. And that’s probably because so few states have a legal option available. Even if every American with access to regulated online casinos used them exclusively, nearly 90% of the population lives in a state where that isn’t an option.
Even in that space, the AGA reports improvement. By its estimate, the market share held by unregulated sports betting operators declined from 36% to 24% since the last report, while for online casinos, the share has fallen from 75% to 66%.
These numbers are of paramount importance for the AGA, whose members compete against the offshore sector as much as they do against one another. Accurately assessing the size of the unregulated market is difficult, so we should take these estimates with a grain of salt. Nonetheless, there are some interesting inferences we can make from them, so let’s dig a little deeper.
Sweeps and Predictions Might Be Eating Offshore’s Lunch
One of the most interesting aspects of the study is what it doesn’t include: sweepstakes casinos and predictions markets. The former were still a niche product in 2022, and the latter didn’t exist at all in their current form, offering contracts that are effectively equivalent to sports bets.
These days, the AGA is fighting a battle on two fronts, and has spent more breath this year going after these gray market upstarts than its traditional offshore enemies.
And yet, comparing the growth of regulated and unregulated online gambling, one might speculate that sweeps and predictions are hurting offshore at least as much as they’re hurting the commercial operators. Probably more, in fact.
For one thing, they target the same markets. Although all these products sometimes accept customers from states with legal options, their most important customers are those without access to legal gambling. It means they don’t have to compete against the marketing efforts of the commercial operators.
Meanwhile, sweeps and predictions have a clearer selling point over offshore sites than they do over locally-regulated ones: Transactions with them are much easier. The Unlawful Internet Gaming Enforcement Act criminalizes financial entities that facilitate offshore gambling. But because sweepstakes and predictions operators skirt the legal definition of gambling, they’re compatible with US banks, credit cards, and mainstream payment processors.
The reason legal gambling is outpacing offshore is no longer just market expansion. Very few new state markets for sports betting and iGaming have opened since 2022. Greater customer awareness may be part of the reason, but the arrival of sweeps and predictions may equally be eating into the offshore sites’ market share.
Many Americans Are Indifferent to Regulatory Status
Although the share of revenue going to legal sites has increased significantly, the share of players who use the legal sites exclusively hasn’t changed much. That was 51% in 2022 and 54% in the new study, a change that may or may not be significant, due to imperfect methodology.
However, far fewer are using illegal sites exclusively. That number dropped from 15% to 10%.
In both studies, over a third of players included both legal and illegal sites among the ones they frequent.
The AGA offers no explanation for this apparent indifference to sites’ legal status. However, a couple of likely reasons spring to mind. Firstly, many Americans live in states with legal sports betting but without legal online casinos. A player in any of those roughly 30 states who wants to play both might prefer legal sites for sports betting, but have no option for iGaming other than sweepstakes or offshore.
Some players may also sign up for both types of sites because they’re bonus hunting. Those hopping between sites to collect signup and first-deposit bonuses might choose a mixture of regulated and unregulated sites in the name of casting as wide a net as possible.
Gray Machine Revenue is Disproportionate to Betting Volume
Another eye-opening statistic is just how bad for the player gray-market “skill” and “zero-chance” machines seem to be. These aim to operate just outside the legal definition of retail gambling by exploiting the ambiguity of the phrase “game of chance.” Some states have declared them illegal, but courts in others—such as Pennsylvania—have found that they can’t technically be considered gambling devices and can’t be banned without changing the law.
The AGA believes these machines earn $30.3 billion annually, over half of the total estimate for unregulated gambling. That’s remarkable in light of the fact that it estimates they only account for 18% of betting volume: $123 billion out of $674 billion.
The AGA’s estimates imply that unregulated sports betting operators hold an average of about 6 cents on the dollar, while unregulated only casinos hold about 4 cents. By contrast, the numbers suggest that gray machines hold 25 cents of every dollar wagered on them.
The numbers for sports betting and iGaming are similar to what we can confirm for the regulated market. However, a 75% return-to-player for gray machines would be much worse than even the stingiest slot machines. The manufacturers of these devices don’t publicly disclose the machines’ specifics, but was able to find anecdotal claims of returns as low as 65% to 70% for zero-chance devices.
Another bit of circumstantial evidence: an op-ed promoted by Pace-o-Matic, one of Pennsylvania’s leading manufacturers, which claims that requiring the machines to adhere to the same technical specifications as slots would amount to banning them. The writer points specifically to Pennsylvania’s minimum RTP requirement, which is 85%.
Estimating the Offshore Market is Difficult
Estimates for the size of the offshore market vary widely because the operators don’t directly report their revenue.
Different organizations trying to produce such estimates use differing methodologies, some better than others. Many are not fit to publish, either due to a lack of transparency or unfounded assumptions, like correlating sites’ betting volume to the frequency with which they appear in search results.
Although the AGA has an interest in portraying the offshore market as threatening, its methodology for this study is reasonable, as such things go. It relies on a survey of gamblers, but attempts to correct for the most important flaw in that approach. It’s well-known that gamblers systematically under-report how much they spend. However, the AGA has access to people’s actual spending on legal sites and can use that to calculate the degree by which the average gambler understates their spending.
The only assumption it makes is that offshore gamblers understate their spending by the same degree.
If anything, that might mean the offshore market is even bigger than it appears. Other studies have shown that players who use illegal sites are more likely to experience a gambling problem. Meanwhile, at-risk players also exhibit a worse-than-average ability to estimate their gambling losses. Given those correlations, it seems more likely that the AGA’s methods would underestimate the offshore market than overestimate it.
