Report Estimates $5.35 Billion In Revenue Lost From Illegal Gambling In New York

Written By Hill Kerby on June 13, 2024
Image of a hooded figure gambling online for a story on New York losing $5 billion to illegal online casinos and sportsbooks in 2023.

New York may feature the No. 1 legal sports betting industry in the country – and it could boast the top iGaming sector once lawmakers legalize it – but offshore sites continue to eat into the bottom line.

The Campaign for Fairer Gambling (CFG) published a new US online gambling marketplace report that examined the effects of black market gambling in three states, including the Empire State.

CFG contracted Yield Sec (YS) to prepare the report using its online marketplace analytics platform. In the report, YS estimated illegal gambling on unregulated sportsbooks and online casinos cost New York more than $5.35 billion in 2023 gross gaming revenue (GGR).

Even with the news, New York remains the nation’s top sports betting market by a wide margin. Since online sportsbooks went live in January 2022, New York sports betting has brought over $2 billion in state tax revenue.

However, NY online casinos remain illegal after momentum stalled to pass iGaming legislation in 2024. CFG’s report further illustrates what the state is missing out on by keeping online casinos in the dark.

Three states combine for over $9.5 billion in missed revenue

Unregulated offshore sites remain prevalent, and players continue to utilize these illegal sites even where legal options exist. The report focused on states with different online gambling laws: New York (legal sports betting, no iGaming), New Jersey (legal sports betting and iGaming), and Minnesota (both sports betting and online casinos are illegal).

The findings suggested that regulated online sports betting and casino gambling economies resulted in more GGR staying in those economies.

Despite their differences, the three states had more in common than not. They combined to generate over $9.5 billion in illegal online gambling GGR in 2023.

StateLegal GGRSports Betting/iGamingIllegal GGRSports betting/iGamingTotal GGR
New Jersey$2.856 billion$961 million/$1.895 billion$1.715 billion$996 million/$719 million$4.571 billion
New York$1.69 billion$1.69 billion/--$5.352 billion$1.906 billion/$3.446 billion$7.041 billion
Minnesota----/--$2.444 billion$929 million/$1.515 billion$2.444 billion

Regulation disincentivizes black markets doesn’t stop them from thriving

Each state’s breakdown of legal-to-illegal GGR correlates directly to its online gambling laws.

  • New Jersey: 62% legal vs. 38% illegal
  • New York: 24% legal to 76% illegal
  • Minnesota: 100% illegal

New York online casinos are illegal, like almost every other state in the US. Only six states, including New Jersey, have operational online casinos.

Interestingly, New Jersey is the only state of the three with lower illegal online casino GGR compared with illegal online sportsbook revenue.

New Jersey also has a favorable legal-to-illegal online casino GGR ratio ($1.9 billion to $719 million). Meanwhile, illegal sports betting operators still hold the upper hand over their regulated counterparts, even in two of the nation’s largest markets.

  • New York: $1.9 billion illegal online sports betting GGR (53%) vs. $1.69 billion legal sports betting GGR (47%)
  • New Jersey: $996 million illegal online sports betting GGR (51%) vs. $961 million legal sports betting GGR (49%)

Study calls for federal regulation and oversight

In addition to monetary totals, YS found 860 illegal sports betting and casino operators and 638 affiliates actively promoting illegal gambling sites in all three states. This was multiples more than the legal options in New York (9 operators, 119 affiliates) and New Jersey (43 operators, 119 affiliates).

Ismail Vali, founder and CEO of YS, emphasized the importance of cracking down on the offshore operators.

“This data and analysis exposes a stark reality: illegal gambling operators are brazenly stealing money from state and federal coffers and legitimate American industry. It’s time for the federal government to end this theft in broad daylight.”

Derek Webb, CFG’s founder, added:

“Sector-friendly legislation, regulation, and tax rates have not made much of a dent. Despite wildly different legal regimes, these three states continue to accommodate over 800 illegal operators who operate with zero regard for state law.

“This is one reason why we need federal involvement in the oversight of online gambling. We are eager to equip policymakers with real, reliable data, so that we can have more informed, balanced debate, and ultimately smarter gambling policy.”

Online casinos can bring billions to the state

New York amounted to more than half of the illegal online gambling activity among the three states in the report. Based on the report’s findings, New York is missing out on $1.9 billion in additional sports betting GGR and another $3.45 billion in online casino GGR.

New York sports betting operators are taxed at 51% of their GGR, which amounts to roughly $972 million more the state is missing out on from sports betting taxes.

The latest attempt to legalize online casinos in New York proposed a 30.5% tax rate. The state could collect $1.05 billion more in taxes based on the above number.

Add the two together, and you have more than $2 billion in new revenue. That could cover nearly half of the state’s $4.3 billion deficit.

Of course, the black market will always exist in some capacity. It’s unrealistic to expect all of that money to favor legal options.

On the other hand, the data only considers New Yorkers who want to gamble enough to partake on illegal sites. How many more would engage if it was legal?

There’s only one way to truly find out.

Photo by Shutterstock
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Hill Kerby

Hill Kerby is a contributing writer for PlayNY who, above al else, emphasizes safe and legal betting, all while remaining grateful to be able to contribute to growing the gambling industry. His background includes poker, sports and psychology, all of which he incorporates into his writing.

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