The AGA's projection of $510 billion in illegal betting by Americans should be taken with a grain of salt
Illegal gambling exists. But to what extent?
The American Gaming Association wants you to believe it stands for something bigger than making money. In fact, it needs you to believe it has a noble purpose. Lest you mistake it for an organization whose sole responsibility is to make the rich heads of the gaming industry richer.
So, as the industry seeks to continue the expansion of legal sports betting across the United States, the AGA has positioned legalization as the solution to the threats posed by illegal gambling. It’s the best leverage the industry has in lobbying lawmakers.
The latest example is a report the AGA released Wednesday called Sizing the Illegal and Unregulated Gaming Markets in the United States. According to the report, Americans gamble a staggering amount of money with illegal and unregulated operators. And this illegal gambling costs the industry and state governments billions of dollars.
Based primarily on a survey of a more than 5,000 Americans and their gambling habits, as well as existing data on gaming participation rates and the known size of the legal market, the findings estimate that Americans bet more than $510 billion a year with illegal and unregulated operators. This costs the legal industry $44.2 billion in gaming revenue and state governments $13.3 in lost tax revenue.
While there’s no doubt an illegal market exists and keeps legal operators and states from gaining maximum profits, these numbers should be taken with a grain of salt.
Just a week ago, a New York Times investigation found that previous AGA projections of illicit bets by Americans — up to $400 billion each year — were unreliable. Now, the association’s estimate is up to over $510 billion, which also increases the projection of tax revenue states are missing out on.
“Illegal and unregulated gambling is a scourge on our society, taking advantage of vulnerable consumers, skirting regulatory obligations and robbing communities of critical tax revenue for infrastructure, education and more,” AGA President and CEO Bill Miller said in a release. “We have always known that the illegal and unregulated market is expansive, but this report illuminates just how pervasive it is.”
However, state tax revenues were also inflated in the past, according to The Times. In the 14 jurisdictions that allow mobile sports betting at tax rates in the range anticipated by the AGA, tax revenues over the last 12 months have been nearly $150 million below their combined $560 million projections.
Kansas was a state not included that group because the state’s lawmakers reportedly halved tax rates on gambling revenue…at the industry’s behest. The state collected just $271,000 in taxes on $350 million of bets this fall.
The AGA even includes a disclaimer in its report that some of the information contains projections based on the association’s expectations of future events that could turn out to be incorrect.
But bigger than any of that is this: the AGA isn’t a party without something to gain from the eradication of illegal gambling. That doesn’t automatically make its goal a negative one. But it does make it one with bias. And that’s why the report can’t be trusted as a single authority on the benefits of legalizing sports betting.