There is no doubt about it, the U.S iGaming industry is booming. Arriving late to the party, pivotal legal decisions and subsequent regulatory expansion have triggered an era of exponential growth for online gambling in the country, recording huge revenues that have quickly established the U.S market as the largest in the world.
With total revenues projected to reach $26.8 billion this year and a robust CAGR of 7.6% forecast between 2025 and 2033, this lucrative industry is showing no signs of slowing down. Yet, a recent report from the American Gaming Association (AGA) has found that nearly a third of all American gambling takes place through illegal channels. This alarming assessment has made waves through the sector with many demanding more be done to control illicit activities and redivert critical tax revenues back into the right hands.
The current regulatory landscape
Gambling has a complex history in the U.S, with the pastime existing in a state of extremes across the country. For example, Nevada and New Jersey have both long been known for their progressive approach to traditional gambling formats, with Las Vegas and Atlantic City well established as global casino capitals. Conversely, essentially all forms of gambling are illegal in the states of Utah and Hawaii – highlighting the fluctuating status of gambling across the nation.
Following the rising popularity of online gambling environments in recent years, many states have begun amending gambling legislation to better regulate the space. The repeal of PASPA in 2018 marked a watershed moment for U.S gambling policy, allowing states to legalize sports betting while also catalyzing the launch of online casino markets in states such as Pennsylvania and Connecticut. As of 2025, 34 states have legalized online sports betting, while seven states, all in the Northeastern region, have regulated online casinos. What’s more, players in these states can now head to review sites such as Casino.org to find the platforms in their burgeoning markets, showing that the market has grown so much that there is now space even for review sites within the vertical.
A staggering illicit market
Despite such regulatory expansion, the AGA’s recent analysis paints a stark picture of illegal gambling in the country. A monumental $674 billion a year has been wagered with unregulated operators, generating an estimated $54 billion in annual revenues for companies. In terms of tax, this reflects a loss to state governments of $15 billion a year.
An explosion in the number of illicit “skill” machines in hospitality venues is a key driver of this, with over 600,000 in operation up and down the country. While severely diminishing returns for the regulated market, these machines also pose a huge risk to players in the form of financial exploitation. The iGaming sector has also seen a sharp growth in unregulated activity, with the prevalence of online slots and table games up 38% since 2022.
The report shows an increasing number of players are heading to both legal and illegal platforms, though the legal market share has continued to grow, highlighting the impressive development of the regulated scene. In other encouraging news for the industry, illegal sports betting is down by a third compared to 2022, a positive step that illustrates how more universal regulation across the country can help diminish the shadow of black-market gambling.
The issue of fragmented governance
The patchwork legal structure of the U.S presents a clear challenge when it comes to effectively subduing illegal gambling operations. Each state has the authority to set its own rules and regulations with regard to gambling, ultimately creating inconsistencies across the country that make it difficult to coordinate nationwide efforts to curb illicit activities. This allows offshore operators to exploit gaps between jurisdictions, creating the space for illegal gambling to flourish. While several states have opened up their markets in recent years, providing a regulated option for their players, many have not, and this has caused an imbalance which is being taken advantage of. This issue is further amplified by the rapidly evolving nature of the online gambling landscape, with government agencies constantly playing catch-up to maintain safe environments. Without a unified regulatory strategy, it is difficult to see how lawmakers can overcome this ongoing issue.
Could smarter regulations help
Tackling the fragmented nature of gambling in the U.S presents a clear starting point to cut off illegal channels. Further legalization across more states will make regulated options available to a greater number of players, negating the need for many to search out illicit platforms. You are only as strong as your weakest link and when it comes to regulating gambling, states will need to cooperate and align their positions to overcome the challenge of illegal operators. There is a clear trend in the AGA’s report: more collective regulations lead to less traffic to illegal platforms. Sports betting has become more widely accepted across the U.S, and as a result, illegal wagers are significantly down. If more states begin regulating online casinos in the same way, would there not be a similar result?
The issue remains, though, that states differ widely in their cultural, economic, and religious attitudes toward gambling, and so it is unlikely that one regulatory framework will be applied everywhere. Those states that continue to prohibit gambling may have to work smarter to manage illicit activities. The latest technological innovations in AI and data analytics could prove powerful tools in tracking suspicious activity and identifying illegal operators, and it may be that significant investments in these areas will need to be made to truly control gambling. Another potential strategy is to better educate the public about the dangers of illegal gambling through informative campaigns. By improving people’s education on black market gambling, regulators can address the issue proactively, a tactic that could prove economical as well as effective.
Ultimately, more regulation only works with cooperation between various jurisdictions. Neither stricter restrictions nor more progressive policies on gambling will necessarily have a meaningful impact so long as there remain inconsistencies from state to state. While there continue to exist fragmented gambling laws in the U.S, it is hard to see how the black-market gambling scene can be completely eradicated. However, with careful collaboration, these potentially harmful gambling environments can surely be minimized.