Increased Losses for Consumers: Report Highlights Impact of U.S. Gambling Legalization
Unveiling the Hidden Costs of U.S. Gambling Legalization
The Campaign for Fairer Gambling (CFG) recently unveiled a new report examining the impact of legal online betting and casino gambling across the States. Titled CFG State Supplement #1, this white paper complements the CFG's USA National Online Gambling Report 2024.
Criminals Thrive in a Legal Gambling Wild West
The report raises concerns about the surge in losses due to illegal gambling in states that have legalized online casinos and betting without addressing the issue head-on. All 50 U.S. states belong to one of three categories: states with no online gambling activities, states with restricted online gambling, and states with full online gambling legalization.
"Unregulated operators are giving legal operators a run for their money," says Ismail Vali, CEO of Yield Sec. These illicit gambling sites offer higher bonuses because they don't pay taxes, bypass licensing fees, and operate free of regulations. "It's a vicious cycle: failing to deal with crime causes loss from theft," he adds.
This territorial war between legal and illegal gambling operations is bad news for states, as it results in declining tax revenues, fewer legal revenues, and hundreds of millions of dollars staying in the pockets of criminals.
Rise in Gambling losses with Legalization
The CFG's report reveals that the total online gross gaming revenue (GGR) per capita of average income across the U.S. is 0.62%. Interestingly enough, states with no legal online gambling activities have a lower GGR per capita (0.31%) than states with legal online betting only (0.77%) and even lower than states with full online gambling legalization, which boasts an alarming 1.12% GGR per capita.
In states where all forms of gambling, including betting and casino, are legal, consumer losses surge by an astonishing 261% compared to states with no legal online gambling. Derek Webb, CFG's Founder, underscores this troubling trend, stating, "In states with full legalization, losses are now 261% higher than where there's no legal online gambling at all. This isn't progress, it's escalation."
Cases like Ohio, which legalized online sports betting and recorded GGR of 1.33% of average income per capita—more than double the national average—demonstrate the risks associated with gambling legalization without adequate controls.
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Enrichment Data:
While gambling legalization across the U.S. expands the market and provides opportunities for states to generate revenue, it inadvertently increases total consumer losses, elevates public health risks, complicates regulatory enforcement, and may perpetuate illegal gambling activities if proper safeguards aren't implemented. In this context, effective regulatory measures are critical to minimize harm, protect consumers, and ensure that legalization yields the intended economic benefits.
According to recent studies, there are several public health concerns associated with increased access to legalized online gambling, such as exacerbating problem gambling, addiction, and related social harms. Moreover, economic uncertainties loom large over projected tax revenues and the potential for social costs to outweigh the benefits.
The lack of a unified federal framework for online gambling regulation creates regulatory challenges and enforcement complexity. As states take varying approaches to online gambling legalization, efforts to clamp down on illegal operators become more complex, and compliance becomes fragmented. In states moving toward legalization, developing effective systems to oversee, tax, and protect players remains a work in progress.
By ignoring the effects of illegal gambling, legalization efforts risk perpetuating or even increasing illegal activity. Some illegal operators may leverage regulatory gaps, making it challenging for legal operators to compete and for states to collect taxes. The coexistence of legal and illegal gambling can confuse consumers, resulting in an unfair playing field. To mitigate these risks, gambling regulation and enforcement measures must undergo strict scrutiny to ensure they effectively protect consumers and impede illegal activity.
- The Campaign for Fairer Gambling's report, CFG State Supplement #1, highlights rising concerns about illegal gambling in states with online casinos and betting legalization, as unregulated operators often offer higher bonuses and bypass regulations, leading to increased losses and potential revenue losses for states.
- Derek Webb, the Founder of the Campaign for Fairer Gambling, emphasizes that in states with full online gambling legalization, consumer losses are 261% higher compared to states with no legal online gambling, pointing to an escalating issue rather than progress.
- The proliferation of legalized online gambling can exacerbate public health concerns, such as problem gambling and addiction, while economic uncertainties loom large over potential social costs outweighing the benefits. Moreover, the lack of a unified federal framework for online gambling regulation creates regulatory challenges and enforcement complexity, making it harder to clamp down on illegal operators and ensuring fair competition among legal operators.
