The administrator of the Illinois Gaming Board is calling on the federal government to crack down on illegal offshore online gambling. Marcus Fruchter is joining top gaming regulators from six other states in asking the U.S. Attorney General to step in.
The regulators fear that the revenue generated by illegal sites may be used to bankroll other unlawful activities, such as human trafficking and the drug trade.
Letter sent to the Department of Justice
Fruchter sent a letter to US Attorney General Merrick Garland urging for a more significant push to combat illegal gambling. The letter was also signed by leaders of six other gaming regulatory bodies in Michigan, Colorado, Nevada, Louisiana, Mississippi and New Jersey.
The letter asks the Justice Department to prioritize investigations and prosecutions of offshore sportsbooks and online casinos. They say these sites pose significant dangers due to lacking guarantees for fair payouts, age verification processes and controls to prevent money laundering. They also argue that the sites represent a loss of tax revenue for states to fund important initiatives.
“We understand and appreciate the fact that the Department of Justice’s jurisdictional responsibilities are broad and, consequently, priorities vary over time,” the letter states. “However, the many significant threats posed by offshore illegal gambling cannot be addressed by states alone and, therefore, require heightened federal attention and engagement.”
The letter to Garland essentially asks for help investigating and prosecuting criminal activity outside the states’ borders.
”We strongly encourage the Department of Justice to prioritize the investigation and prosecution of these offshore sites, and stand ready to provide any assistance that we can as state gaming regulators,” the letter states.
$13.3 billion in tax revenue lost to illegal gambling
The American Gaming Association issued a report in November estimating the illegal and unregulated gaming market at $510.9 billion a year. This costs the legal online casino and iGaming markets in the United States an estimated $44.2 billion. That, in turn, prevents states from collecting an estimated $13.3 billion in tax revenue.
When the report was released, AGA president Bill Miller called the illegal betting market a major problem for the public.
“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,” said Miller. “We have always known that the illegal and unregulated market is expansive, but this report illuminates just how pervasive it is.”
According to the study, bookies and offshore operators take in $63.8 billion in illegal sports betting wagers. That accounts for only 12.4% of overall illegal gaming activity. Illegal online casino slots and table games take in the largest share of illegal igaming activity, with an estimated $338 billion per year spent.
“This is a fight we’re in for the long haul to protect consumers, support communities and defend the law-abiding members of our industry,” said Miller.
Online casino gambling is only legal in New Jersey, Delaware, Pennsylvania, Michigan and West Virginia. Online poker play is legal in Nevada.
Illinois is losing $105 million in taxes annually
A PlayIllinois study concluded Illinois could be losing out on as much as $105 million in tax revenue annually by not legalizing Illinois online casinos.
The AGA estimates some $91.8 billion is wagered annually through illegal online casinos by people living in the 12 midwestern states. That amounts to some $3.7 billion in revenue captured by the black market in the midwest alone.
The combined population of the midwest states is approximately 69 million. Illinois alone accounts for about 18% of the total number of people in the 12-state region.
An 18% share of $91.8 billion in handle wagered on illegal online casinos and $3.7 billion in lost revenue is:
- $1.65 billion in handle
- $660 million in revenue
In 2022, the average tax rate for Illinois online sports betting was 16% of revenue. Apply that same tax rate on the estimated lost revenue to illegal online casinos in Illinois alone of $660 million and it works out to approximately $105.6 million in taxes lost to the black market that could go into Illinois coffers.
A further PlayIllinois story suggested five ways that additional revenue could be put to good use to for the people of Illinois.