IMGL CONFERENCE PRE-FEATURE
the established regulatory frameworks designed to protect consumers and uphold state policy choices. Illegal operators provide none of the safeguards required of licensed operators. 3 Consumers are exposed to platforms with no responsible gaming protections, weak or nonexistent data security, and heightened risks of financial crime and money laundering. At the same time, these operators deprive states and local communities of critical tax revenue. Illegal gambling also undermines state and tribal sovereignty by bypassing the regulatory frameworks lawmakers have deliberately established. Protecting the integrity of regulated gaming requires confronting illegal activity as a top enforcement and policy priority. The scope of the illegal gaming market in the US According to AGA research, Americans wager an estimated US$673.6 billion annually 4 with illegal and unregulated gambling operators – an amount equal to roughly one-third of the entire legal US gaming market. This massive diversion of activity carries significant consequences. States collectively lose an estimated US$15.3 billion each year in tax revenue, funds that would otherwise support education, infrastructure, public safety, and other essential services. Since 2022, illegal and unregulated gambling activity has grown by 22 percent. While market legalization has clearly shifted consumers toward regulated platforms, this parallel growth underscores a central challenge for regulators and lawmakers: legal market growth alone does not eliminate illegal activity without sustained enforcement and clear regulatory boundaries. Prediction markets offering sports event contracts One of the most significant threats to the legal gaming industry is the rise of prediction market platforms offering sports event contracts. Today, 39 states and Washington, D.C. permit
sports betting because voters and elected leaders chose that framework. In the states where sports betting remains illegal, that decision was equally deliberate. Prediction market platforms are bypassing these choices by offering unregulated nationwide sports betting under the guise of “event contracts,” avoiding compliance with state and tribal gaming laws. These platforms assert federal oversight by the Commodity Futures Trading Commission (CFTC), an agency established to regulate commodities and derivatives markets – such as agricultural futures created for farmers to hedge against economic volatility or natural disasters. The CFTC was not designed to regulate sports wagering, and regulatory gaps should not be exploited to override local authority. For years, Section 5c(c)(5)(C) of The Commodity Exchange Act 5 clearly identified event contracts involving “gaming” as contrary to the public interest. Nonetheless, prediction market platforms have continued to expand self-certified sports- related offerings, relying on agency inaction to justify their operations. Gaming policy has consistently preserved regulation as a state and tribal responsibility. The Indian Gaming Regulatory Act (IGRA) 6 affirms tribal authority, the repeal of PASPA 7 restored states’ rights, and the Wire Act and Dodd-Frank Act were never intended to authorize a nationwide gambling market. 8 Multiple states and tribes across several federal jurisdictions are engaged in litigation, challenging prediction market platforms. During prolonged regulatory uncertainty, consumers face increased risk of data exposure, lack of responsible gaming resources and financial safeguards, and heightened exposure to underage gambling. Offshore online gaming Another complex form of illegal gaming involves offshore operators claiming legitimacy based on foreign licensing.
3 See for example, American Gaming Association, Responsible Gaming Regulations and Guidelines, https://www.americangaming.org/resources/ responsible-gaming-regulations-and-statutes-guide/ 4 American Gaming Association, Sizing the Illegal and Unregulated Gaming Markets in the United States, https://www.americangaming.org/ resources/sizing-the-illegal-and-unregulated-gaming-markets/ 5 Commodity Exchange Act, 7 U.S.C. https://www.govinfo.gov/content/pkg/COMPS-10309/pdf/COMPS-10309.pdf 6 Indian Gaming Regulatory Act, Pub. L. No. 100-497, 102 Stat. 2467 (1988) 7 Murphy v National Collegiate Athletic Association, 584 U.S. (2018) 8 Wire Act, 18 U.S.C.; Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203 (2010)
IMGL MAGAZINE | MARCH 2026
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