IMGL CONFERENCE PRE-FEATURE
These platforms actively target and accept wagers from US consumers, advertise in states that have not legalized sports betting or iGaming, and operate outside state and tribal regulatory frameworks. Illegal iGaming represents the largest segment of the illegal gaming market, generating an estimated US$18.6 billion annually, 9 up nearly 38 percent since 2022. This growth is particularly concerning given that regulated iGaming is authorized in only eight states. Offshore sportsbooks follow a similar pattern, frequently targeting US consumers, including minors. Prior to PASPA’s repeal, sports betting largely existed in the shadows, dominated by illegal bookies and offshore websites. Since 2018, the share of bettors using only illegal sites has declined – proving that consumers are shifting to the legal market. However, one in ten American sports bettors still wager through illegal sources with an estimated US$84 billion handle. 10 These platforms lack basic identity verification and responsible gaming safeguards. They pose heightened risks of money laundering, fraud, and identity theft and are not subject to anti-money laundering (AML) or know-your-customer (KYC) requirements. Federal and state officials have increasingly prioritized this threat. Over the past year, both the Senate Judiciary Committee 11 and a bipartisan coalition of 50 state attorneys general 12 urged the Department of Justice to prioritize enforcement. State regulators have also taken action. Following regulatory actions, offshore operator Bovada withdrew from 17 states and the District of Columbia, demonstrating that targeted regulatory pressure can curb illegal activity.
model while clearly offering casino-style games. These operators award virtual currency or gold coins redeemable for real money, creating an experience that mirrors real-money regulated iGaming – despite claiming they are not offering gambling. This model exploits legal ambiguity and creates consumer confusion. AGA research shows that 90 percent of users consider sweepstakes casinos to be gambling, and 69 percent describe them as places to wager real money. Addressing this issue requires lawmakers, regulators, and law enforcement to clarify definitions and close loopholes. More than 20 states have issued cease-and-desist orders, and several states have enacted new legislation 13 to prohibit or clarify illegality. California, Montana, Connecticut, and New Jersey have passed laws prohibiting and restricting these operations. States with sweepstakes bans have roughly half as many players, 14 demonstrating how regulation and enforcement weed out exploitation and protect consumers. The AGA encourages other states to follow their lead. Unregulated “skill games” and illegal machines One of the largest physical forms of illegal gaming is the proliferation of so-called “skill games.” These machines resemble traditional slot machines and are commonly found in bars, restaurants, and convenience stores, without gaming licenses. Legally, gambling is defined by three elements: consideration, chance, and prize. 15 Skill game operators claim outcomes are determined by player skill rather than chance. Courts and regulators increasingly reject this claim, finding that outcomes are predominantly chance based.
Sweepstakes casinos Some online platforms market themselves under a sweepstakes
The scale of this market underscores the regulatory challenge.
9 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/ 10 Id 11 Letter from U.S. Senate Committee on the Judiciary regarding youth sports betting (2025),https://www.britt.senate.gov/wp-content/up- loads/2025/10/FINAL-Youth-Sports-Betting-Letter1-1.pdf 12 National Association of Attorneys General, Letter on Illegal Offshore Gambling (2025), https://www.naag.org/wp-content/uploads/2025/08/ Multistate_Illegal-Offshore-Gambling_FINAL-corrected-003.pdf 13 See for example, California Gambling Control Act, A.B. 831 14 American Gaming Association, Sweepstakes Casino Player Profile & Advertising Trends , slide 7 (July 2025), https://americangaming.org/ wp-content/uploads/2025/07/AGA-Sweepstakes-Casino-Players.pdf 15 See Nelson Rose, “Gambling and the Law: The Three Elements of Gambling,” Gaming Law Review (1986)
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IMGL MAGAZINE | MARCH 2026
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