Over the last few years, a group of advocates have sounded the alarm on the rise of sports gambling in America. Using both hard data and anecdotal evidence, critics — and I count myself among them — have argued that the rapid rise of online sports betting has resulted in financial harm and increased risk for gambling addiction, especially for young men.
To date, reformers have set their sights almost exclusively on legal, regulated operators. That should change. While the industry oversells the threat of illegal gambling, reformers are missing an opportunity to address the harm caused by offshore websites, bookies, and operators that are unlicensed in the United States, including so-called social sportsbooks and sweepstakes casinos.
The goal of reforming gambling should not be exclusively to rein in the legal industry. The goal should be to reduce the number of people who are negatively affected by gambling, wherever they might be betting.
It’s always been with us
Sports gambling was not invented in the aftermath of the Supreme Court’s 2018 PASPA decision. Before Murphy and since, a robust, easy-to-access illegal market has presented Americans with many options to bet.
Estimates of the size of the illegal market are notoriously unreliable. Understandably, anyone who thinks the industry needs more regulation might simply write off approximations of the illegal market as fantastical. The industry does itself few favors by constantly deploying what analyst Steve Ruddock calls the “black market bogeyman,” a political talking point used to fight off any new regulation or tax increase.
But even without a reliable estimate of the scale of the illegal market, unregulated operators are, for many users, more dangerous than their regulated counterparts.
The primary complaint about legal sites is their lack of friction: how easy they make it for Americans to access gambling and get carried away. Illegal sites can be just as frictionless, with similarly slick interfaces and fewer guardrails. Many illegal sites advertise heavily on social media, allow users to bet on credit, and don’t verify users’ age at sign-up.
On crypto-based casino platforms, children can sign up and start gambling in minutes. In an essay for Stop Predatory Gambling, one Massachusetts high school student explained that such sites have made gambling “part of everyday conversation for many students who are not old enough to legally gamble yet.”
Any protections are better than none
In no uncertain terms, legal providers do not offer enough consumer protections. But they offer some. And at least users can be assured that they will be paid their winnings and that the games they play are not rigged against them. The same cannot be said for unlicensed operators.
The illegal market, then, embodies everything reformers want to change about the legal market, and more.
It makes sense that reformers would focus on legal operators. Over the last eight years, these companies have driven a massive increase in the number of gamblers and the amount bet. Their advertisements, celebrity spokespeople, and league partnerships have normalized gambling.
Americans who might otherwise have only bet during a weekend jaunt to Las Vegas now have the most engaging sportsbook ever created in the palm of their hand. And the number of new gamblers means legal, mainstream platforms can, at the aggregate level, cause much more harm than illegal or niche platforms.
The other advantage of targeting legal sportsbooks is that they are actually subject to regulation. Notwithstanding a few incidents in the years since legalization, regulated operators follow the rules laid out by states. A regulator can call the CEO of a legal sportsbook to discuss a concern. That sportsbook’s counterpart based on an island in the Caribbean won’t answer the phone.
Industry critics should do a better job of acknowledging this fact — that more is asked of the legal market because it is reasonable to ask more of them. That however unsavory or distasteful critics like myself might find some actions by major operators, a legal, regulated market is better than illegal gambling run even more amok.
Illegal market is more than a talking point
In January, along with two colleagues at the American Institute for Boys and Men, I coauthored a policy framework documenting the harms associated with the rise of sports betting and laying out some ideas for reform. Nowhere in that report did we offer policies pertaining to illegal or unlicensed operators. I regret the oversight.
Anyone concerned about public health, financial harm, or (particularly for me) the state of America’s boys and men needs to have a policy portfolio that extends beyond the legal market to include enforcement against unregulated operators. Will this enforcement be easy? No. Will this effort entail a ground invasion of Antigua? Possibly. Will stamping out one offshore operator result in a game of whack-a-mole? Yes.
But the largest offshore sites have built sufficient name recognition that they are worthy targets. Last year, all 50 state attorneys general signed on to a letter asking for federal support in the fight against illegal gambling. Multiple states have banned sweepstakes sites and issued cease-and-desist letters to select offshore operators. These are the kinds of efforts reformers should be advocating for and encouraging.
A new slate of guardrails imposed on legal operators would go a long way. But many Americans — including high schoolers — would be unaffected by these restrictions, betting as they are on sites that operate outside of any U.S. government oversight. In fact, pairing illegal-market enforcement with tougher rules for legal operators would work to reformers’ advantage. Such a pairing would undercut the industry’s constant refrain that any measure to reduce advertising, slow deposits, or raise taxes will drive players to the illegal market.
My fellow critics may see this essay as a gift for the industry, a validation of its favorite talking point and, by extension, carte blanche for the legal market as the safer alternative. Make no mistake, there is unnecessary harm being caused by the legal market. But the illegal market should not be viewed as a mere talking point. It needs to be treated like the threat that it is, and to become central to the work of reforming American gambling.
Jonathan D. Cohen leads gambling policy at the American Institute for Boys and Men. He is the author of Losing Big: America’s Reckless Bet on Sports Gambling.
