Despite the rapid growth of legal sports betting and online gaming, a new report from the American Gaming Association (AGA) finds that nearly one-third of all gambling in the U.S. still happens outside the law. Americans are funneling an estimated $673.6 billion a year into unregulated gambling, costing states billions in lost tax revenue and dragging down the legal industry.
Commissioned by the AGA and conducted by The Innovation Group, the report reveals that illegal gambling now accounts for 31.9% of the nation’s total gaming market, a sector that’s grown 22% since 2022.
According to AGA President and CEO Bill Miller, the scale of illegal play is draining local economies while exposing consumers to unchecked risks. “These shadow operators are profiting without paying a dime in taxes or offering any protections to the people they target,” said Miller. “We need a full-scale crackdown—now.”
Skill Machines Surge, Draining Billions from States
Among the biggest concerns is the unchecked rise of so-called “skill” machines, unregulated gambling terminals masquerading as games of skill. More than 625,000 are currently in use across bars, restaurants, and convenience stores, up nearly 8% since 2022.
These machines pulled in $30.3 billion in 2024 alone, while states missed out on $9.5 billion in potential tax revenue. With no oversight or safeguards, they pose serious risks to players and communities, and continue to expand faster than any other illegal segment.
Illegal iGaming Revenue Soars 38%
Unlicensed online casinos are also on the rise. The report estimates that illegal iGaming generates $18.6 billion in annual revenue—a 38% increase since 2022. Legal platforms are losing ground: only 24% of online players now stick to licensed sites, down from 52% just three years ago.
While enforcement and state-level legalization have curbed the illegal share of the overall iGaming market, unauthorized sites still see an eye-watering $466.2 billion in total wagers each year—more than any other form of illicit gambling.
Sports Betting Black Market Shrinks—But Still Significant
Illegal sports betting, while still a problem, has seen some progress. Wagers placed with offshore books and underground bookmakers totaled $84 billion last year, generating $5 billion in revenue for illegal operators and costing states around $1 billion in taxes.
Encouragingly, the portion of bettors using only illegal outlets has dropped by a third since 2022, and the black market’s share has fallen from 36% to 24%. Still, 1 in 10 bettors exclusively use unlicensed platforms, highlighting the difficulty in fully eliminating the underground market.
Call for Coordinated Enforcement
Miller emphasized that confronting illegal gambling requires more than domestic pressure. “These operators work in the dark, with no accountability,” he said. “Fighting them means ramping up enforcement here at home and working with global partners to go after offshore sites.”
The AGA’s findings paint a clear picture: While legal gambling continues to expand, illegal activity is still siphoning off a massive chunk of the market. Without stricter enforcement and broader cooperation, the underground economy will continue to thrive, at the expense of consumers and communities alike.
