Illegal Gambling Costs US States $15bn a Year, AGA Warns

⏱ 3 min read

Illegal gambling now accounts for nearly one-third of the entire US gaming market, according to a landmark analysis released this month by the American Gaming Association (AGA). The report, published August 13, 2025, estimates that unregulated and illegal operators generate $53.9 billion in annual revenue — a market that has expanded 22% since the AGA's previous sizing study in 2022.

The scale of the problem is stark: Americans wager an estimated $673.6 billion per year with offshore sportsbooks, illegal online casinos, and unregulated skill machines, stripping state governments of $15.3 billion in tax revenue that would otherwise fund education, infrastructure, and public safety. AGA President and CEO Bill Miller called for "a national crackdown on the pervasive illegal market that is draining state coffers and putting people at risk."

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The Three-Headed Threat

The AGA's "Sizing the Illegal and Unregulated Gaming Markets" report identifies three distinct segments driving the 31.9% illegal market share:

• Unregulated skill machines — the single largest segment, generating $30.3 billion in revenue from more than 625,000 machines deployed in bars, restaurants, and convenience stores nationwide.
• Illegal online casino games — slots and table games operated by unlicensed platforms produced $18.6 billion, up nearly 38% since 2022.
• Illegal sports betting — offshore bookmakers and illegal domestic bookies absorbed $84 billion in wagers, returning $5 billion in operator revenue and costing states $1 billion in lost taxes.

The combined 22% growth across all three segments since the last AGA study underscores that eight years of state-by-state legalization has not closed the black market — in many cases, it has grown alongside the legal one.

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Skill Machines: The Fastest-Growing Problem

The unregulated skill-machine sector is the report's most alarming finding. More than 625,000 machines are now active — a 7.7% increase since 2022 — operating under the legal grey area of "skill game" exemptions in states that have not explicitly banned them. These devices alone cost state governments $9.5 billion in annual tax receipts.

Courts in Missouri, Pennsylvania, and Virginia have already addressed the issue, while regulators in Florida, Michigan, Mississippi, and Tennessee have moved against illegal offshore sportsbooks and casinos. The AGA has pushed for further action, calling unregulated machines one of the most pressing gaming-policy concerns facing state legislators heading into 2026 session cycles.

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Illegal iGaming and Offshore Sports Betting

Illegal online casino activity is the fastest-growing segment by percentage. At $18.6 billion, it now dwarfs the combined legal iGaming revenue of $10.73 billion generated across all eight licensed US states in 2025 — meaning more money flows to unlicensed online casino operators than to every regulated online casino in America combined.

The offshore sports-betting market, though slower-growing, remains vast. The $84 billion wagered illegally compares with total legal sports-betting handle of roughly $120 billion projected for 2025 — implying illegal books still handle more than 40 cents of every sports-betting dollar in the country. Miller described these operators as entities that "operate in the shadows with zero consumer protections, no responsible gaming obligations, and no economic return to the communities they exploit."

A separate August 2026 analysis by Gaming Compliance International commissioned by the Campaign for Fairer Gambling puts total illegal US online gambling even higher — at $97.4 billion — though its methodology has not been independently verified and is funded by an advocacy group that opposes market expansion.

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What It Means for Legal Operators

The report lands at a pivotal moment for the regulated industry. Legal US commercial gaming posted a record $78.62 billion in gross gaming revenue for 2025, yet the AGA's data suggests the total addressable market is nearly twice that size if illegal activity is included. For licensed operators, the numbers support two competing arguments simultaneously: the opportunity case for expanding regulated iGaming to more states, and the enforcement case for tighter federal and state action against offshore platforms.

Illegal Segment	Annual Revenue	Tax Revenue Lost	Change Since 2022
Unregulated Skill Machines	$30.3 billion	$9.5 billion	+7.7% (device count)
Illegal Online Casino (iGaming)	$18.6 billion	Not separately itemised	+38%
Illegal Sports Betting	$5.0 billion	$1.0 billion	Persistent
Total Illegal / Unregulated	$53.9 billion	$15.3 billion	+22%

The AGA has simultaneously intensified pressure on prediction markets — which it categorises alongside offshore books and skill machines as unlicensed betting products — after 16 states took cease-and-desist or enforcement action against sports-event contracts in 2025. The trade body estimates prediction markets have already diverted more than $1 billion in revenue from state-licensed and tribal operators.

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Sources

Primary sources consulted for this report, in order of authority.

Illegal gambling operators are thriving at the expense of American consumers, siphoning billions in tax revenue from state governments, and undercutting the efforts of the legal market.

— Bill Miller, President & CEO, American Gaming Association · AGA Illegal Market Analysis, August 2025