Is the U.S. Casino Industry Ready To Advocate For Legal Online Casino Gambling?

• A recent American Gaming Association survey estimates the illegal betting market at half a trillion dollars. A plurality of illegal wagers takes place at offshore online casinos. 
• The AGA is calling on the Department of Justice to crack down on illegal gambling but has stopped short of supporting legal online casinos because of differing views by AGA members.
• That could be changing. The AGA implicitly makes a case for legalization by highlighting lost revenue and consumer protections.

In its recent survey estimating the size of the illegal online gambling market, the American Gaming Association (AGA) placed the amount wagered through illegal channels at more than $500 billion. 

According to the AGA, that half-trillion dollars is taking a $44 billion bite out of the licensed gambling industry. Per the AGA, illegal gambling is costing states $13.3 billion in tax revenue.

The AGA’s willingness to engage in an online casinos (and, by extension, online poker) discussion represents a shift from its previous stance adopted in 2014 when the trade group took “no position” on online casino legalization to placate Sheldon Adelson and a small group of anti-online gambling members.

That stance is largely untenable, with online sports betting sites legal in half the country. Additionally, the ranks of the already small anti-online gambling crowd have been reduced, and its champion, Sheldon Adelson, died in January 2021.

The AGA is not lobbying for legalization, but it’s safe to say its attitude toward legalization has softened.  

In a statement to Gambling.com, Cait DeBaun, Vice President, Strategic Communications & Responsibility at the AGA, said, “Like any form of casino gaming, it’s up to each state to decide what’s right for their citizens. Our new research shows that Americans are engaging with iGaming regardless of its legal status. With this new information, policymakers should consider whether legalization is part of the solution to protect consumers while generating tax revenue.”

Inside the Numbers

The AGA survey numbers will not surprise anyone who follows the sector. What might surprise some is the channel breakdown.

Illegal Betting Handle:

• Sports betting: $63.8 billion
• Online casino: $337.9 billion
• Unregulated retail machines: $109.2 billion

Lost Revenue:

• Sports betting: $3.8 billion
• Online casino: $13.5 billion
• Unregulated retail machines: $26.9 billion

Lost Tax Revenue:

• Sports betting: $700 million
• Online casino: $3.9 billion
• Unregulated retail machines: $8.7 billion

Online Casino Is the Bigger Opportunity

The AGA numbers explicitly show that the U.S. gambling industry and states are losing far more money to offshore online casinos than sportsbooks – and even more to illegal betting machines like those found in bars and restaurants. 

The disparity between legal sports betting states (25) and legal online casino states (6) can partially explain the discrepancy. Still, only a third of the U.S. population can access licensed online sportsbooks. But even doubling revenue lost to illegal sportsbooks only brings it within half of the lost online casino revenue. 

As a recent Vixio report shows, the bigger opportunity for states is online casinos.

The Industry’s Stance Is Softening

Several years ago, the AGA would have avoided highlighting online casinos in the survey results. The group’s official position was “no position,” but it didn’t just ignore online casino debates. Much like Voldemort, the AGA avoided mentioning online casinos altogether, almost pretending it didn’t exist.

All signs point to the AGA (or, more precisely, certain AGA members) slowly thawing to online casinos. The group still isn’t advocating for legal online casinos (leaving that to a separate trade group, iDEA Growth). Still, by breaking out legal online casino revenue and analyzing the money states are leaving on the table, it is doing an excellent job of making a case for legalization. 

As the AGA stated in its survey findings, “With iGaming only legal in six states, nearly half of Americans (48%) that have played online slots or table games in the past year have played with illegal online casinos.”

And as DeBaun’s statement intimates, states are not only losing revenue, but they are also doing a disservice to their residents by leaving online casinos and poker sites unregulated. After all, why aren’t we extending the same consumer protections sports bettors receive to casino and poker players?