Illegal gaming has potential to prey upon a variety of victims

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Mon, Jun 17, 2024 (2 a.m.)

Illegal gaming comes in many shapes and sizes, from offshore, online casinos and sportsbooks to unregulated slot machines and much more.

Chris Cylke, senior vice president of government relations at the American Gaming Association, said illegal gaming often lures users through brand recognition, generous promotions, better odds, the ability to gamble with cryptocurrency and more. Educating people on the risk of engaging with such illegal gaming, however, is a major part of combating it, he said.

“There’s a view by some that gambling is a victimless crime, if you go with some of these operators—which is certainly not the case,” Cylke said. “In truth, people are putting themselves at risk by sending their personal financial information to an unregulated entity. There’s no transparency around where the money that goes to these sites ultimately ends up.”

As the legal gaming marketplace has matured, a key source of frustration is that operators who have invested in paying the proper taxes, obtaining the necessary licensing and jumping through other bureaucratic hoops are having to compete alongside an extremely robust illegal market, Cylke said.

A 2022 report from the association estimates that bets exceeding $510 billion with illegal and unregulated gaming operators cost their legal counterparts more than $44 billion in gaming revenue.

Since the rapid legalization of sports betting in a slew of jurisdictions nationwide, illegal sports betting has gone down a significant amount, Cylke said. Online casino gaming, or iGaming, is the biggest vertical for illegal gambling, with more than $337 billion changing hands, per the AGA’s report.

There’s a level of consumer education that needs to take place, Cylke emphasized.

“Most people will only … have heard that, ‘Hey, sports betting (or) iGaming was just legalized in my state,’ ” he said. “And so, when they go online to a search engine like Google and say, ‘Hey, I want to bet on sports,’ a lot of times, the results that they get from their query will direct them toward illegal sites.”

While some people may accidentally utilize illegal sites—which can be hard to differentiate from legal sites—others may choose offshore gaming because they don’t want anyone to know what they’re doing, said Alan Feldman, director of strategic initiatives at the UNLV Gaming Institute.

One of the biggest issues with illegal gaming is that there is absolutely no mandate for operators to incorporate consumer protections, he said. Another is that it’s harmful at the state level, taking tax revenues that should be funneled into the local economy through legal gaming and sending them offshore instead.

Per the association’s 2022 report, state governments lost $13.3 billion in tax revenue due to illegal and unregulated sports wagering.

“I’m hoping that, at the very least, every state with legalized gambling is going to acknowledge that they are being harmed by this,” Feldman said. “Forget what it’s doing to Draft Kings or MGM or anybody else. If … you have legal sports betting, then the whole idea of that is to generate tax monies to be used for the public good. Every dollar that goes offshore generates zero.”

Additionally, consumers who may be harmed by illegal gaming are not likely to come forward, he said.

Ted Hartwell, executive director of the Nevada Council on Problem Gambling, cited illegal gaming among underage youth as a potent issue, pointing specifically to the number of young people being exposed to advertisements about sports betting, with its increasing legalization, and how it’s spurring interest in gaming among them.

“Anecdotally, I could tell you of several stories of younger people who have come into meetings who technically are not of legal age to gamble, who may have gotten involved with an offshore bookmaker of some kind … something online,” he said.

Working with legislators to enforce mechanisms against illegal gaming and building up public awareness and education around it are some of the ways Hartwell said industry leaders could counter its effects.

Feldman emphasized the need for the implementation of technology and software that can identify and block illegal gaming online.

“Nevada is leading the way already on this,” he said of combating illegal gaming, pointing to examples like GeoComply, a Vancouver, Canada-based fraud detection company whose U.S. headquarters are in Las Vegas. “There are Nevada-based companies that are working with us at UNLV and on their own in trying to develop systems that can be put into place to make this all a smoother, more regulated environment.”

Cylke echoed the sentiment that Nevada and the leaders of the Nevada Gaming Control Board’s role in the battle against legal gaming shouldn’t be discounted. He also lauded the state of Michigan, where a cease-and-desist letter was recently issued to a major illegal site.

“Across the ecosystem, whether it be regulators, state attorneys general, federal government—other platforms and businesses—our message is that there’s a role for everyone to play in solving what is a very big and challenging issue,” Cylke said. “And so having examples like what Michigan is doing to point to is very useful to prodding others to take similar steps.”

Despite legislative language that has directed the U.S. Department of Justice to make combating illegal gambling a priority—particularly offshore—Cylke said it’s disappointing there haven’t been more indictments and convictions of illegal gaming operations, or more robust efforts to shut down some of their sites.

“Our main thrust over the past couple years has been really prodding the Justice Department and the federal government to take a more aggressive stance toward the biggest online, offshore sportsbooks and casinos,” he said. “And I think we feel like we’re making progress, but we’re not going to be satisfied until we see indictments and other action being taken by the government.”

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This story appeared in Las Vegas Weekly.

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