Illegal gambling costs industry and taxpayers billions, report says
Dana Gentry
(Nevada Current) Americans bet an estimated $511 billion each year with illegal and unregulated sportsbooks, iGaming websites and other games, at the expense of taxpayers and the legal gambing industry, according to a new report from the American Gaming Association, which wants the U.S. Department of Justice to crack down.
“This illegal wagering robs state governments of $13.3 billion in tax revenue annually, nearly $2.5 billion more than legal operators generated in 2021. It also costs the legal gaming industry $44.2 billion in annual revenue…” the report says.
Internet betting is thriving. Last year, 33 states had legal forms of sports betting available to anyone with a smartphone. Yet ads for offshore sports betting and casino sites, both off limits to bettors in the U.S., are ubiquitous, and appear regularly in publications and on websites.
“We’re certainly working hard, particularly in the media space, to make sure that none of these illegal channels get any kind of lift through publications or cited on TV,” says Chris Cylke of the AGA.
On Thanksgiving, the Las Vegas Review-Journal’s lvrj.com featured so-called “sponsored content” promoting the “6 Best Gambling Sites for real Money in 2023,” all of which are offshore and illegal for bettors in the U.S.
“We’ve reached out to the RJ, not on this particular ad, but in the past,” says Cylke, who says the AGA routinely notifies advertisers that they are aiding and abetting illegal gambling. “The reaction has been fairly positive and it’s been kind of an educational thing. … They’ve all kind of come around. I’m surprised that the Review-Journal did it.”
The Review-Journal is owned by Miriam Adelson, widow of former gaming licensee Sheldon Adelson, once a stalwart opponent of internet gambling.
Combating compulsive gambling, a byproduct of expanded gambling opportunities, is generally funded through fees and taxes imposed by state and local governments, which offshore sites don’t pay.
“These illegal sites also enjoy many competitive advantages that allow them to offer better odds and promotions and ignore any commitment to responsible gaming because they do not pay state and federal taxes or have comparable regulatory compliance costs and obligations,” the AGA wrote earlier this year to Attorney General Merrick Garland.
Before internet gambling became legal, websites paid tens of millions of dollars in settlements to avoid prosecution over their ads.
While the AGA wants the DOJ to take its muscle directly to the offshore sites, a strategy that poses jurisdictional challenges, it’s working to gain cooperation from advertisers and hasn’t ruled out the possibility of advocating for enforcement, Cylke says.
The RJ is not alleged by any authorities to have engaged in wrongdoing.
“We have a lot of traffic from places that are not in Clark County or even in the U.S.,” says RJ ad executive Chase Rankin, who declined to say whether the RJ is paid a flat rate by its client or has a participation agreement, in which it’s compensated in part or in whole by the number of bettors who sign up as a result.
Some experts suggest participation agreements open a publisher to more liability, given their direct interest in the venture’s success.
“Remember, gambling can be highly addictive, and it is not legal everywhere in the world,” says a disclaimer included in the RJ ad. “Make sure you know the laws of where you live, and seek help if you have a gambling addiction.”
Whether a disclaimer aimed at consumer behavior provides a viable defense for a publisher or a website in the event of prosecution is unclear.
Longtime gaming attorney Anthony Cabot, a distinguished fellow in gaming law at UNLV”s Boyd Law School, says it depends on the circumstances, and could ultimately prove harmful to a defense.
“When the advertisement is for a site that accepts wagers for an offshore site that is illegally accepting U.S. players, I don’t think a disclaimer will help,” says Cabot, adding the site hosting the ad would have to “specifically block people from the U.S. viewing the ads. It’s relatively simple, using software that identifies the user’s location. In this case, I don’t think a disclaimer has any benefit and may be detrimental because it shows the site carrying the ads knew the site was potentially violating U.S. law.”
The RJ did not respond to questions about whether it has an agreement with the sites to block players from the U.S., but says it’s “confident we are not in violation of any law.”
“The case is different if the gambling site is licensed in a state in the United States and blocks players from states where it is not licensed,” Cabot adds, in which case “the advertisement is likely protected under the U.S. Constitution. A state can not prohibit advertising for a service that is legal in another state. In this case, putting a disclaimer may support the constitutional argument.”
Cabot says he’s not aware of recent prosecutions directed at parties carrying advertisements.
“Our focus has been on working constructively with those who are doing it, probably because they’re uninformed or haven’t thought about it, versus those who are maybe kind of knowingly doing it,” said Cylke.